A Look At Omnichannel Banking

Omnichannel banking delivers opportunities in financial services. Consumers have the ability to research offers online, discuss information with a remote expert from the branch and set up automated payments using their mobile banking app. The current economic climate has resulted in increased pressure for these banks to retain loyal customers. Securing greater customer loyalty in banking can be substantial.

Omnichannel reduces cost and enhances customer experience. Asian Banks have started to introduce more varied formats into the branch network, ranging from large hub branches in high-traffic urban crossroads to small, low-cost spoke branches, to fast-service kiosks in supermarkets or metro stations, to sales and service specialty branches in affluent suburbs.

According to Bain, mobile banking via smartphone or tablet is coming on strong in many countries. In the US, mobile usage jumped to 32% of customers from 21% in 2011. Usage in 2012 ranges from 47% of respondents in South Korea to 37% in India to 16% in Germany.

Omnichannel is ready for the finance market. The question is, are banks ready, too?

Citigroup Inc. (C) annual cost savings are projected to surpass $1.1 billion beginning 2014. The bank recently entered into a deal with DenizBank, the Turkish unit of Sberbank, Russia’s largest lender to vend its consumer banking unit in Turkey. Price for the transaction was undisclosed. Moreover, the deal awaits regulatory approval and is expected to be completed in third quarter 2013.

Citibank is developing high technology omnichannel intensive branches at high-traffic locations in Asia to rely on touch-screen walls, iPads and teleconference facilities. The bank aims to increase customer engagement with advisory services, while providing faster self-service for routine transactions through Internet kiosks.

M&T Bank Corporation (MTB) M&T Bank has fallen short of consensus EPS estimates in half of the past six quarters. The earnings miss from the fourth quarter was by about two cents per share. M&T Bank has a long-term EPS growth forecast of about 11 percent, and its price-to-earnings (P/E) ratio is lower than the industry average. The operating margin is greater than the industry average, but the return on equity is less than 11 percent. The current dividend yield is about 2.8 percent.

Customer priorities in omnichannel is important to M&T Bank. The bank has chosen to compete mainly in second-tier cities and supported small businesses in these communities during the financial crisis and recent recession. Giving local branch managers strong decision rights has helped M&T to maintain relatively high customer loyalty scores. The bank develops customer loyalty rewards and a loyalty system.

HSBC Holdings PLC ADS HBC (HBC) HSBC’s long-term strategy to revamp its operations for stabilizing the capital levels and improve efficiency. Since 2011, the company has been resorting to aggressive restructuring, having sold more than 45 non-core or unprofitable assets globally.

HSBC’s new omnichannel offering turns smart phones and tablets into a mobile card payments terminal, allowing merchants and retailers of all sizes. The eMerit device is fully EMV, PCI DSS and major card scheme compliant.

Susan McPartlin, PwC’s US Retail & Consumer Sector leader stated the following “As we enter an increasingly complex retail landscape with accelerating competitive pressures and digital shopping options, retailers will need to prepare for a wall-less omnichannel retail world, one where shoppers will come to expect a seamless brand experience online, in-store and across multimedia touch points. This multi-format portfolio combined with the proliferation of small, urban, alternative retail formats will pave the way for future growth, dismantling the mass homogenization and scale assumptions that propelled two decades of retail growth.”

Similar to retail, omnichannel also brings challenges to the banking. Banks face a big job of managing customer expectations as they start to build an omnichannel approach. The challenge is to integrate seamlessly, not simply substitute to reduce costs.

For investors, it is clear that customers are ready for omnichannel banking and banks are developing omnichannel growth strategies worldwide. Customer loyalty is the key to profitable growth. Channel redesign reduces costs. A successful omnichannel distribution and service strategy should deliver lower costs and a better experience for customers. Investors should look forward to more M&A and channel innovations in the coming year among banks.