Tapping into Net Assets
Concerned with maintaining a strong brick-and-mortar presence, many Kentucky banks are just beginning to explore the potential for online services

IF the much-heralded television advertising shown during commercial breaks in the Super Bowl was any indication, "dot com" marketing is on the rise. Advertising designed to draw attention to Web products and services has become commonplace and is a key component to getting and keeping a competitive edge in industries from job boards to investment companies.

Concerned about maintaining a strong bricks-and-mortar presence and sensitive to their customer’s concern for privacy, many of the state’s top banks are just beginning to tap into the potential markets for online banking services.

Another point of access

National City Bank of Kentucky, Kentucky’s top bank in terms of deposits, has positioned its online services as another point of access for customers seeking convenience.

"We see it as one of various channels through which to service our customers, along with ATMs and branches," said Les London, executive vice president of retail banking in Kentucky for National City.

This is a perspective shared by many of National City’s competitors.

Sharon Robbins, director of marketing for Bankone.Com, said Bank One views online banking as another point of access for customers, along with banking centers, ATMs and telephone banking services.

Many area banks are promoting the online services to their current customers, with whom they have established a relationship, rather than focusing on the Internet as a primary point of entry for new customers.

Banks surveyed for this article said their marketing for online services has included adding descriptions of the services to brochures, putting Web addresses on collateral materials and billboards, including it in radio and television ads and inserting information about online banking into monthly statements mailed to customers.

Republic Bank has placed banner ads on Web sites such as Louisville.com, Kentucky.com and the WHAS and Courier Journal Web sites.

"Currently, we are leveraging our relationship with the customer to get them to use online banking," said Robbins.

Community Trust Bank, which is based in Pikeville and serves customers in Kentucky and West Virginia, will take a similar approach when it introduces online banking services at the end of this month.

"We will promote the services to our own customers within our market. We have not planned any major advertising campaigns," explained Dennis J. Hillen, senior vice president and director of marketing and sales for Community Trust.

Bank of Louisville also plans a "soft rollout" when it introduces its online banking services late in the second quarter of this year.

Bob Rigney, senior vice president of retail banking for Bank of Louisville, said the bank’s initial task is "to create an offering to meet the needs" of their existing customer base.

Finding a comfort zone

Many banks have maintained modest expectations of online usage and see the early years of online banking as an opportunity to fine tune the banking services in anticipation of its widespread usage at a later date.

Bank One’s Robbins observed, "Our customers’ willingness to go online with us relates to their comfort level with the Web overall." She noted that customer’s comfort level varies across the nation and even within a given market.

Nationally, 10 percent of Bank One customers who have a savings or checking account with the bank use the bank’s online services.

Stacy Yee, assistant corporate communications manager for Fifth Third Bancorp, said 10 percent of the Fifth Third’s checking customers use online banking services.

Seventeen percent of Republic Bank’s checking clients use online banking services, according to spokesman Michael Sandofsky.

Sandofsky added that he expects that number to grow and cited a Bluegrass poll that said only 42 percent of Kentuckians now have Internet access.

Community Trust, which serves a large rural population, is keeping expectations in check when it comes to the number of current customers who will adopt the new technology. Hillen noted that he has not set a target for users of online services, saying "it is up to the market and will be customer driven."

Rigney said Bank of Louisville has "modest expectations" when it comes to customers using online banking services in a "vigorous way" in the next year to two years.

"It is hard to anticipate what the acceptance rates will be beyond two years," added Rigney.

The first phase of Bank of Louisville’s online services will be focused on establishing basic transactional functions and content. The bank is developing more advanced versions of its Web site for rollout at a later date.

Bank One has surveyed customers online to improve the sites features and functionality. "We are trying to answer the question, ‘Is what we have what they need?’ said Robbins.

National City has also conducted surveys related to online services.

Rigney observed all the banks are on a "learning curve" in this field, but added that Kentucky banks can learn from banks such as Wells Fargo and Bank America, which saw that marketing "can create financial challenges to Web banks if a large number of people subscribe but don’t (regularly) use the channel."

Bricks and clicks

Banks are sensitive to customers’ reluctance to adopt new technologies and concerns that technology may replace traditional brick and mortar banks.

"We are a community bank and we are here to stay. We try to be convenient in everything we do, whether you want bricks and mortar or technology," said Jackie Griffith, marketing manager for Fifth Third Bank in Lexington.

At National City, online banking is simply another means of providing services through various channels, said London, adding that ATMs and branches would continue to play an important role.

"When the banking industry first introduced plastic, people said we would have a checkless society. The bank clears both paper checks and plastic now," noted London.

Hillen emphasized that good customer service is the key to whatever method of delivery is used and said Community Trust will have support mechanisms and customer service personnel in place to address questions about Internet banking.

Dr. Martha Rogers, Ph.D., co-author of Enterprise One to One: Tools for Competing in the Interactive Age, has cautioned that it is wrong to assume that customers always need high-touch experiences, such as face-to-face service from a teller.

"Twenty years ago, the trade press was full of dire predictions about these new ATM machines, how they’d never fly because people needed that teller experience," said Rogers in a 1999 interview. "I don’t even need to finish telling how that story turned out."

London believes that as was the case with ATMs, the number of users will grow as customers get more educated about online services.

Bank One plans to roll out a "feet on the street" program this year that will allow customers to sample online banking in a "safe environment."

The program was tested in Lexington last November when a "technology van" visited branch banks. A van equipped with computers was parked outside the bank, staffed with personnel who led customers through demonstrations of online banking.

"We had customers who had never been on a personal computer and those who were very adept at using them.

"They gained an understanding that online banking was simple, easy to use, and free," Robbins noted.
Personalization versus privacy

Many banks have started to send marketing messages through e-mail to customers who have granted them permission.

However, technology has advanced to the point where it is possible for companies to track customers’ buying habits on the Internet and custom market directly to individual users with messages targeted to each individual’s lifestyle – for example, suggesting a home equity loan to a young couple who recently married.

Because of widespread concern about privacy issues, area banks have not yet taken advantage of the custom marketing potential of the Internet.

"We are not yet connecting Web site users with what we know about them," explained Robbins. "The unique capabilities offered by the Web are young. We are letting (other companies) play with this before we use it."

The Bank of Louisville doesn’t yet plan to track click streams to determine business opportunities, noted Rigney. "We will have our hands full getting the Web bank up and running. We have to be sensitive to customer privacy on the front end and work up a policy and procedure before we embark on that."

Sandofsky said Republic was also considering profiling customers and sending them personalized ads on a permission-only basis, but was unsure when this approach would be in place.

A new frontier

While most area banks are maintaining a "wait and see" attitude when it comes to aggressively marketing online services, they are optimistic about the growth potential created by online banking.

Jupiter Communication, a market research firm, has predicted that the number of households banking online could rise to more than 18 million by 2002, up from the current six million households nationally that say they do a significant amount of banking online.

"We have not hit the growth phase yet. We will see a proliferation of growth in online banking users," observed London.

Hillen was also optimistic.

"Online banking is a whole new frontier. It is a great time to be offering services."

Ellen B. Morris is a staff writer

ALSO: Kentucky Bank Deposit – Market Share Report

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