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Making the Case for Online Banking -- Developing a Winning Business Model

By Jim Bruene on June 1, 1997 8:37 PM | Comments

When was the last time you put together a business case for a project that promised to improve service levels while simultaneously cutting costs? Did that plan also include increased sales, new fee-income revenue streams, and virtually free communications with your customer base? Probably not. But if you’re putting together a business plan for online banking, you’ll need to consider all those angles, and then some, to get past the naysayers.

OnlineBankingProfitabilityMyth.jpg

First, you can, and will, profit from the Internet. If you consider the combined impact of service improvements, cost savings, new business development, cross sales, improved data mining, and potential new fee-income sources, online banking has an extremely promising business case. But with no historical numbers to plug into your spreadsheet, it takes a leap of faith to buy off on the speculative cash flows. In A Dozen Ways to Make the Case for Internet Banking we provide some ideas on quantifying the benefits.

Second, you can, and should, charge fees for value-added online services. But stay away from the unpopular notion of charging for services that could be obtained free over the phone or in a branch.

Finally, online banking isn’t just for propeller heads anymore. In the U.S. alone there’s nearly 100 million consumers that are already online users or interested in becoming one. With the coming wave of Internet TVs and e-mail phones we expect the majority of this group will follow through with their intentions to go online. You’ll want to be there when they do.

But first, you’ll have to win internal support by tackling the tricky issue of profitability. I can tell you from experience that this is not so easy to do. But in a world of low-cost wired connections, traditional notions of banking price/performance will be radically changed. Make sure your business model incorporates the online channel before it’s too late.

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