Adoption of online banking by U.S. consumers is going strong, outpacing growth rates for every other method of retail banking delivery. New research from TowerGroup finds that online banking is becoming the most powerful retail channel banks have ever deployed, outpacing everything from ATM to call centers and increasing in use at an annual rate of 27 percent. The long touted promise of online banking is now hitting its stride.

TowerGroup also finds that overall, consumers are interacting with their bank more than in previous years. It predicts the growth in overall U.S. delivery channel transactions will be strong between 2006 to 2010 - increasing at an average rate of 10 percent across all channels (bank branch, ATM, online banking, and call centers).

With ATMs and bank branches showing signs of flattening transaction volume, TowerGroup believes the Internet represents the future of bank delivery. "Customer preferences are evolving from waiting in line for the teller, to going online for more and more of their needs," said Jerry Silva, research director in the Retail Banking Delivery Channels practiceto TowerGroup and author of the research. "The call center is also becoming extremely popular in light of the penetration of mobile phone use in the U.S. However, unless banks improve the technological capabilities and complexity of their call centers, much of this channel's growth will not convert into business opportunity for institutions."

TowerGroup believes the real strength of bank delivery will occur with the increased collaboration between channels, to create a more synergistic environment for both customers and banks. Channel collaboration will allow the bank to better leverage growing numbers of transactions to increase brand awareness, market and sell products, and enhance household penetration over the next five years.