Advancements in digital banking provide some of the most exciting opportunities in a generation of financial services. The questions will be how ready are banks and credit unions for these changes?
From the internet of things (IoT) to the explosion in fintech apps, financial services are evolving beyond traditional channels. People want to be able to easily manage and move money in real time, whether that means a tap on their phones, asking Alexa or going online.
All of this has important implications for financial institutions. Navigating the digital transformation requires new strategies and priorities for the coming year. And while most financial professionals acknowledge the value of digital engagement, 2016 provided ample evidence that delivering these financial experiences when and where people want them can have quantifiable bottom-line results.
For instance, this year Fiserv found enrollment in online banking, mobile banking, online bill pay, person-to-person payments and account-to-account transfers had a positive effect on digital engagement, attrition and transactions. A similar aggregated analysis of mobile banking customers saw an increase in product holdings and the number and value of debit and credit card, ATM and ACH transactions in the three months after mobile banking enrollment.
With digital banking users among a financial institution’s most valuable customers, keeping an eye on what’s next in digital banking is important for enterprise-wide growth. Here are four trends to watch.
1. The Internet of Things (IoT)
Comprised of physical devices that can collect and exchange data, the internet of things (IoT) includes everything from connected cars to smart appliances – with the number of these devices is growing exponentially. Such connections can lead to delivery of financial information and insights wherever, whenever and however people need it. The always on, always connected world can bring financial management to every corner of people’s lives, but it also brings with it new considerations for how information is accessed and secured.
Securing transactions across the internet of things will require a multi-layered approach that includes securing the device and apps on the device, and creating layers of security beyond the device – such as in the cloud. The internet of things will have implications for delivery of a seamless, 24/7 banking experience, and as it matures, will influence authentication and sending of secure customer information.
2. Open API Banking
The explosion of internet connected devices highlights how quickly features and functions are coming to market – and the need to move quickly to securely and reliably meet consumer demand. There’s an evolution in financial services software development, and integration that enables faster, less disruptive modular updates, which facilitates more nimble delivery of innovations.
For innovation from outside the bank’s IT department, there’s a movement toward application program interfaces (APIs) that enable integration with third-party services. These are private, more secure versions of the public APIs that enable connections between internet-based services, but give banking providers more control over how customer information is accessed and used. This idea will continue to gain steam as banks look to scale innovation through credible, approved third parties.
3. Fintech Partnerships
Both of these previous trends are at play when thinking about fintech partnerships. The prevailing idea has been that fintech and traditional financial services were at odds. However, rather than going directly to banking consumers, more fintech firms are looking at banks as their partners, and vice versa.
In areas like budgeting, payments and wealth management, innovators are creating apps that solve specific problems people have with their finances. Helping bring those innovations to scale is one of the reasons firms like Fiserv have partnered with fintech accelerators that match nimble startups with traditional financial institutions.
Partnerships like these help make innovations work within existing industry infrastructure and regulations. Even when they don’t result in direct partnerships or products, these collaborations are successful as banks are eager to tap the IT talent and creativity that fintech providers bring to the equation.
4. Faster Integrated Payments
Mobile capabilities and other technological advances are changing the payment process and fueling consumer demand for real-time payments. The Federal Reserve’s faster payments initiative is one example of the industry efforts focused on enabling safer, more efficient and faster payments – capabilities more and more consumers are clamoring for.
Momentum continues to build for faster money movement and a more integrated payments experience that brings together capabilities like bill pay, person-to-person payments and external transfers. In addition, look for more consumers to ask for contextual, anticipatory guidance within the payment experience.
Most people don’t need hand-holding, but they do appreciate a partner. If someone is scheduling a payment, for instance, and there are other liabilities that will leave a low balance, the solution should recognize it, alert the user and recommend ways to solve the problem.
Great Chages, Greater Opportunities
The digital transformation has changed how we live and work – and how we bank. Moving money in real time and paying bills on a smartphone were unheard of not that long ago, yet are now commonplace (and expected). We are likely just on the edge of an era of rapid change.
Although 86 percent of Millennials already use mobile banking, 71% of this generation believe mobile banking will continue to transform their banking experience. Great changes are happening in digital banking – innovations that will likely take shape in ways we may not expect or be able to plan for.
To take advantage of coming innovation, we all must be ready to move quickly.