At the Commonwealth Bank Group, retail banking is out from behind marble counters and glass teller cages, and into a customer-driven future of made-to-order financial products and swifter Internet-based services.

Take away their sophisticated IT systems and the banking industry as we know it would cease to exist. In the financial world, global market activities continue around the clock, opportunities are fleeting and survival is of the swiftest. Just as technology has shaped the modern world of banking, so technology is the only way for banks to survive.

The most rapid growth is occurring in online, or Internet, banking. Australia is right up there with the US when it comes to online banking adoption rates, but behind North European countries like Finland.

It is all happening at a time when banks in Australia are on the nose, under fire from customers who see them as concentrating on shareholder value at the expense of customer service and staff relations. With bank branches closing all around them, not all Australians are receptive to moves to get them to do more of their banking online.

The good news for banks like the Commonwealth Bank Group, says general manager of eComm Bernadette Fifield, is that the more consumers use online banking to handle their banking tasks, the more satisfied they are with their bank. That would seemingly give banks at least one avenue to help salvage their tarnished reputations.

"The growth in customers since we introduced online banking in February 1997 is fantastic," Fifield says. "It confirms our belief we are responding to the changing lifestyles and needs of customers.

"Customers need the utmost in convenience - with the choice to bank anywhere, any time and on any device. We are committed to giving customers the banking options to suit their needs and be able to do their banking 24 hours a day, seven days a week. Speed, ease and portability are crucial to the banking mix; and these latest results reflect the success of this customer-centric approach."

That result was the group's cracking, in early February, of the barrier to online financial services, having notched up its one-millionth online customer - a 330 per cent increase since January 2000.

The million customers ran across all of its online finance offerings, including NetBank, ComSec, HomePath, MobileBank and QuickLine. NetBank is the group's Internet transaction banking service, launched in February 1997 to allow customers to view and print statement and credit card account balance and transaction details, link and transfer money between accounts, pay bills via BPAY and order cheque books and statements. NetBank alone had experienced growth of more than 66 per cent during the six months from June 2000 to December 2000. The impressive customer growth rate coincided with a huge advance in the total value of NetBank transactions, increasing from more than $395 million in June 2000 to more than $674 million in December 2000.

By the end of May, Commonwealth Bank had 1.4 million online customers, more than 850,000 of them NetBank customers banking online. Altogether, the group already offers 27 online services across personal banking, business banking and institutional and corporate banking and boasts 1,312,145 online customers as of May 2001.

Fifield is predicting at least one-third of mortgages will be initiated or researched online within four years.

"On our personal customer side, our customers are able to originate most of our personal products online. On our business side, we're actually extending the suite of products that our customers can look at. Quite recently we put our leasing product online so that our business customers can get leasing quotes and have information about leasing online, and we're continually increasing the span."

Fifield says the Internet is already delivering considerable benefits to the group and its customers. For customers, online banking introduces a new era of convenience and control over their finances. For the group, online financial services provide a brand new way to deliver banking products for all customers. That in turn lets the group leverage its long experience processing online payments securely into new businesses that evolve with emerging electronic marketplaces.

The ultimate outcome, she says, is a more comprehensive and flexible set of offerings, giving the group another way to attract and retain customers - and that increases shareholder value.

Fifield says the rapid increase in online take-up can be ascribed to several factors. First, the growth over the last 12 to 18 months mirrors the growth of Internet take-up in the community in general. For instance, the group has found more than 40 per cent of its Internet banking transactions come from people at work.

However, she also says word of mouth is helping to drive adoption of Internet banking. "People who use Internet banking are very open and very forthright about the level of convenience and how easy it is," she says, "and that generates take-up in the community.

"Second, we have been more overt in our branches, in our branch network, in terms of having illustrations of Internet banking and actually showing customers how Internet banking works in our branches, so that helps customers understand what the concept is and to be able to use it," she says.

The group has a team of dedicated instructors who move around its branch network training staff on how to use NetBank so that they, in turn, can explain it to customers.

Putting Effort into the Relationship.

When it comes to online banking, meeting customer expectations is key, Fifield says. Key to meeting those customer expectations is not just providing customers with choice, but managing the relationship and fully understanding exactly how the Internet is changing those relationships.

Online technologies and the way customers use these technologies, Fifield points out, are not just changing people's relationships with financial services companies but also changing their relationships with everyone around them. Take children. The Commonwealth Bank has been the long-time provider of school banking to most of Australia's schools. It tailors the school banking system to provide school children with an understanding of the benefits of saving and the value of money, while helping schools with their fundraising through payment of transaction related commissions. The Commonwealth Bank imposes no bank fees on such accounts.

So naturally the youth market is of particular interest to eComm because of its rapid adoption of new technologies. The group has more than three million customers under 25. Fifield says eventually they will access the group's services from a cell phone, car or a PDA, and the group has to be ready for that.

With such a giant share of the child customer base, the group puts a lot of work and effort into understanding children, and that now extends to understanding how technology is changing those children's lives.

"If you think about children and their use of mobile phones and SMS messaging between peers, it becomes a totally different way of communicating on a person-to-person basis," Fifield says. "That then needs to be understood in terms of the financial services relationship and how that relationship will change over time. Similarly, with a number of customers using Internet banking as their primary way of transacting with the group, then we have to understand how that relationship changes. It means that e-mail communication becomes much more important for some of our customers than telephone communication."

Indeed, research with the group's youth market makes it clear the mobile phone is so important a lifestyle device for young consumers that they see it not as their communication piece but virtually as their bank.

"Understanding that, and understanding how that technology will evolve, and how that customer segment will actually use that device, is critical for us. That's one of the interesting challenges that we face," Fifield says. "So it's about understanding how the Internet is changing customer behaviour, and therefore changing their relationship with us, and how we have to change to actually make the relationship work in the future.

"It involves making sure that online is part of that relationship management and that our customers have the choice of being able to do their banking on the Internet, do their banking over the phone, or go into the branch. Providing that choice means we manage the relationship better and we give them better service," Fifield says.

Getting to Know You.

For the Commonwealth Bank, providing the choices customers want means involving lots of customers in market research and taking the trouble to thoroughly understand - from the customer's perspective as much as from the technology perspective - the behaviour that technology will actually generate. Psychologists are actively involved in all areas of market research, but they are especially important when the bank is looking to launch a new product or service, Fifield says.

Take aggregation. Big-name banks, brokerages, and other financial institutions are all racing to hook customers on to account-aggregation services that could change the way banking is done.

The aggregation technology that creates a single view of multiple services involves specialised data aggregators trawling the servers of financial institutions to access account information. Aggregation technology ultimately will move from merely scooping up and displaying account information for consumers to allowing users to make quick decisions and move money around electronically.

Fifield cites aggregation as a good example of the need to include psychologists in customer research. "Six or 12 months ago, if we had said Â'we're going to provide you with aggregation', customers would have said Â'oh, that's interesting, I wonder what that is'."

In view of that, part of the bank's market research involved finding ways to communicate what aggregation was in simple language, and in a way that showed how it would change a relationship or change the way a customer managed their wealth or finances. Then it was a matter of understanding how customers might use aggregation and how, if they did, their behaviour would change.

"I think those are the kinds of things that pose challenges for us," Fifield says.

That Vision Thing.

Commonwealth Bank Group's strategic vision is to help customers manage and build their wealth. At the core of this vision is its goal to be the leading global provider of online financial services information. The appetite for such information is already huge, and is growing.

The group established its eComm centre of excellence in May 1999 to drive and leverage its leadership position in the online financial services market. eComm develops the group's online financial services delivery strategy, working with many other members of the group to refine and develop online services, currently delivered via the Internet and by telephone.

According to the National Office for the Information Economy (NOIE), customer-based electronic banking over the Internet, as one of the fastest growing applications of e-commerce in Australia, is being driven by four interlinked factors:

Accelerating customer demand, which has seen the growth of a new kind of footloose customer seeking electronic services from their bank so they are able to transact their banking business at times of their choice and with greater convenience.

Increased competition between banks and new entrants has led to increased development of new mainstream and niche products and services. This is driving banks to intensify and strengthen their relationships with their customers and to offer new low-cost delivery and marketing tools via the Internet.

The relentless drive by the banks to reduce costs and achieve new levels of efficiency has increasingly drawn banks towards electronic transaction opportunities.

Worldwide deregulation of the financial services market.

But increased Internet use does not equate to exclusive Internet use. Fifield says customers are increasingly using online for their transaction banking and to gather information about some of the more complex products and services. They will typically then use other channels, such as a branch, a relationship manager or a mobile banker to actually help them complete that transaction, financial plan or other desired outcome.

She says that, as a result, the group has positioned itself as a relationship manager to its personal and business customers, with online playing an increasingly important role in that relationship management.

"What CBA does is it enables its customers to be in control of their finances anywhere, any time, so that customers have more time to do the things they want to do. And online is a critical component of that, because it does enable anywhere, any time," Fifield says.

"Our vision is to develop the online capabilities that help our customers manage their financial services and integrate online as a key part of the relationship with our customers. And why I talk about it being a key part of the relationship is that for us, online is not something that is a separate entity or a separate piece of the group. Online is very much part of the relationship with our customers."

Fifield claims this remains a major difference between the Commonwealth Bank Group and other Australian banks. All banks probably share a similar vision of online services, she says. The Commonwealth differs in the way it executes that vision, aiming to put most of its products and services online, and making definite links between online and offline offerings.

"The real difference is that what we're doing is making sure that our customers - looking across all of their needs in terms of their financial planning, their reporting and feedback, their transacting, their products and services and so on, and the decision support that goes around that - have [all] that as part of our online capabilities. And then it's having very strong links back from online into our other channels - into the telephone and into our relationship management network as well.

"The critical piece is how you actually execute that, and the customer experience that comes out of it."

For example, Fifield says the group's market research, plus e-mails from customers, shows the group's customers don't necessarily feel totally comfortable doing complex financial management totally online.

"What we found is that customers do their transaction banking online and that's very much a self-service aspect," she says. "Then there's other aspects, such as wealth management and financial planning, that have a strong mix of online and offline. We have a site called Making Money Happen, and Making Money Happen provides information about managed funds, superannuation, those kinds of things. Customers can actually look up their current balances on their managed funds and the like. So the site provides information, provides transactions, and it also has a link back to our financial planners. Having used the site, the customer organises an appointment with the financial planner to actually take that information and work through a full financial plan."

Designed for the Customer.

Customer feedback is equally important to determining the look of the sites, she says. That's why NetBank will never win a design award. Customers have shown they want a site that is functional, quick, secure and fit for the purpose. That is exactly what the group has delivered.

Every time NetBank is updated, customers e-mail the group to tell them exactly what they think of the update. "We will get feedback from our customers via e-mail saying Â'yes, I liked this, what I'd like next is such and such'. And that's great feedback for us," she says.

However, there is another challenge, and that is ensuring capabilities are developed in synch with customer demand. Develop the capabilities too early and customers won't be ready for them. Develop them too late and risk your competitive edge. Getting the timing right means plenty more market research and continually updating strategy, Fifield says.

"We tend to do a lot of market research talking to customers who currently use our services and customers who don't currently use our services, but are thinking about it, so we can get an idea of where they are in terms of their predisposition to use new services.

"Then we will pick a time when we think it's right for us to go into the market. I guess in all of these things there's going to be some final decision that you make based on the knowledge that you have at that time, and sometimes you're wrong about it.

"Luckily for us, most of the time we have been right," she says.