What survival mantra are banks chanting today? Customer experience? Inclusivity? Agility? Cost optimisation? Efficiency? Done right, channel innovation can enhance all of these to become a means of competitive differentiation.

Since most banks hold a similar portfolio of products and services, customers tell them apart through usage experience. That is why it is crucial to deliver banking experience that is personalised to their tastes as far as possible. Channel innovations such as online and mobile banking facilitate this by providing the option of setting “favourites”, requesting transaction alerts, customising the landing page and so on.

Banks can leverage channel innovation to win market share – while direct banking has enabled entry into new geographies without the fuss of brick and mortar infrastructure, a channel innovation combining technology with a local correspondent network has helped spread financial inclusion. That said, the real allure of both these innovations lies in the fact that they can be deployed quickly, at low cost.

Innovative channel management in the form of outsourced contracts can bring down the burden of fixed costs. Similarly, the sharing of ATM and Internet banking channels hosted on a cloud, with other banks, further relieves cost pressures as each bank bears only a part of the expenditure. But even when distribution remains in-house, self-service channels contribute significantly to productivity.

Social channel innovations such as online forums, communities, blogs and discussion groups bring down marketing and communication costs besides improving the speed and efficiency of customer interaction.
Most banks already have the channel tools; by exploiting these to the fullest, they can wrest the advantage from their competitors by being more customer oriented, agile and efficient.

Also read:
Competitive Advantage from Innovative Management Strategies
Strategy 1: Incremental Innovation, big bang advantage!