Banking channels will determine the future growth
A sector-wide disruption happened in banking. It happened in the banking channels. Banking channels are modes used by customers to access their bank and fulfill their banking needs. Earlier, the only mode of banking was branch banking. Technology reshaped how we access banks. Many newer platforms—online banking, ATM, and mobile banking—are now available.
This is been brought about by better technologies and faster internet access speeds. More consumers are using and accessing these technology platforms. Now, customers prefer to use these online or alternate platforms. This is an important change. Banks need to adapt to the change faster. If banks don’t adapt, the addition of younger and newer customers could be difficult. Technology also helps a bank cut down on its costs of transaction and customer acquisition.
Capital One is an early mover in alternate banking channels
Capital One (COF) acquired ING Direct, a pure online bank, in 2012. This helped the bank build a significant online presence. Online banking has four distinct advantages. First, it isn’t led by price. So, banks can focus on customer satisfaction without worrying about costs. Second, it helps build long-term relationships. Customers become used to a particular website and platform. Third, online banks help in consistent balance builds over a period of time. Fourth, most online accounts have a low average balance. This is better for a bank.
Capital One has advantages over other banks in this area. It has a much better online platform than Wells Fargo (WFC), U.S. Bank (USB), and PNC Bank (PNC). It compares favorably with other good online platforms—like Bank of America and JPMorgan Chase. All of these banks are a part of the Financial Select Sector SPDR (XLF).