There is no doubt the banks are changing. I debated this the other night with friends, courtesy of one of the big High Street names. No, the bank wasn't paying. We were sitting in a brasserie in Wandsworth that, until recently, was a branch of one of the major banks.
Branch closures have been made possible by automation. It has brought welcome developments, such as the cash dispenser, as well as very unwelcome ones, such as call centres.
Millions of pounds have been spent to address what the banks know is a serious image problem. The online banks have tried to counter the image of stuffiness with bright and breezy names - Smile, Cahoot, IF - to convey friendliness and intimacy alien to most people's experience of banks.
It is too late to return to some rose-tinted mythical high street institution peopled with polite, helpful tellers and avuncular managers, but not too late to bring back customer service.
Unlike other forms of automation that the banks embraced to save money, the internet is different. Here is technology that could help re-introduce the personal touch, and support new and improved services. The key word is "could" because there is no sign that the banks understand what the net can do for them.
The banks are making no money from the internet. This is partly because of the huge sums invested in new online services. More fundamentally, it is because they are applying accounting principles to a problem that demands fresh thinking.
A study by Booz-Allen and Hamilton showed that a transaction conducted in the branch costs $1.07 while the same transaction on the net costs 1 cent.
Internet banking hasn't been conceived for the benefit of the customer at all, that's just what it says in the press release. You don't need to heat and light branches, pay staff or print statements. Just build a website, give it a nice appealing name, sit back and watch the profits roll in.
Customers are not stupid. If the internet allows banks to deliver their services at lower cost, then customers will expect to get something out of it - a better service, a cheaper service, or both.
No strategic thinking has been applied; all the banks have done is to web-enable the services they already offer, making the internet branch a pale reflection of the dismal service customers have come to expect on the high street.
Most customers would welcome services that allow them to manage all their financial affairs in one place, view consolidated balances, find expert advice about pensions and investments, pay their home or car insurance, and so on. Elements of these services (called "wealth management") are already available in piecemeal form, but the banks are perfectly positioned to take the high ground and offer the lot via a single website.
Developing such services will not come cheap. Banks need to think about how their internet services work with existing back-office systems, how to make better use of all the data they hold on customers, and how to translate visits to the website into sales of related products.
The integration of online services with the banks' IT infrastructures is crucial - because the real added value for the customer will be provided by opening up applications that are already running. To take a simple example, where customers are ringing a call centre for an account balance today, why not simply send the information on the operator's screen directly to the customer's PC? It's quicker and more convenient for the customer and it saves on labour costs for the bank.
The banks will need to be more creative than this, however, if they are to use the internet to reassert the long-lost customer service ethos. The reactive style of account management will be challenged by services that anticipate the customers' needs. If an account is about to go into the red, for instance, the customer could be sent a warning message. Or, if authorised to do so, the bank's systems could automatically transfer funds from the customer's savings to cover the shortfall.
Even more fundamental things will need to be addressed. Clearing time on transactions is already an anachronism. On the internet, it's a scandal.
In future, all transactions will take place in real time. The 40 pieces of plastic most people carry around will be reduced to something a bit bigger than a credit card with all the functions of one of a new generation of handheld computers, including the ability to run all our finances.
Who will provide these services? The banks, with their enormous customer bases and years of experience are prime candidates, but it is not a foregone conclusion. These days, banking services are available from all sorts of businesses, even supermarkets. People will always need banking, but the internet makes it more possible than ever for them to do without banks.
So long as the banks regard the internet as just another delivery channel, all the money spent on image makeovers will be wasted. This could be the last big opportunity for the banks to reinvent themselves. So far, few have even grasped this point, and even fewer have done anything about it.
