If banks don't develop a second generation digital channels strategy, they won't be around in 10 years time.

It sounds like a bold statement, but it is a pretty safe bet. Customer behaviours, right around the world, are changing at an unprecedented pace. The effect of these changes is starting to drive a sea-change in bank strategies. Banks need 'second generation' digital propositions that deliver a more retail-focus - and will generate revenue.

When banks began implementing internet banking back in the late 1990s, it was all about cost reduction through activity migration. The dream of self-servicing customers and widened profit margins seemed within reach. However, there were unexpected consequences. The earliest adopters of internet banking were the high value customers.

No surprise really - they were most likely to own a computer. As a result of their new internet service, these customers were able to stop transacting in-branch. Whereas before, face-to-face conversations with tellers and relationship managers had provided a rich source of leads, now banks found it much harder to reach these customers and identify their financial needs.

The efficient new digital transaction service was actually diminishing sales. Banks responded to this shift by adding new sales functionality to their webpages. They started with advertisements and moved to adding online application forms. Banks began to learn from retail businesses and evolved their online revenue generation to the next level.

Some banks have been extremely successful. Lloyds Banking Group in the UK currently achieves 25% of its retail sales by volume through digital channels - this has accelerated by 35% in the last two years. This is a very significant proportion of the bank's revenue generation. However in many markets, banks are well behind this curve - generating only between 1% and 5% of their sales online.

Banks need to address how they define and differentiate their brands, how they understand customers and their financial needs, how they provide timely product information and how to deliver slick sales processes.