How Digital Banking Can Be a Gateway to Deeper Consumer Engagement

Experiential factors and personalization are what build consumer loyalty now. The increasing use of digital banking underscores the need for the personal touch, but also can be the means to provide it. Banks and credit unions can create deeper relationships with customers through a give and take of data enabled by digital tools.

Bankers are consumers, too, so they should be familiar with the impact that social media and the increasing use of personal data has had on the shopping experience — in-person, online or mobile. Digital technologies have caused a seismic shift in retail interactions and expectations. People view their needs and interests as personal and unique, and expect the merchants they frequent to realize that too. And while retailers are increasingly getting it right, after going through some tough times, the same expectations apply to financial institutions.

Research supports this. PwC’s Consumer Digital Banking Survey reveals a 21% increase in the number of consumers who base loyalty to their financial institution on experiential factors rather than rates. For 61% of the experience-driven individuals, access to a physical branch is essential to a positive experience, even as nearly three quarters (73%) of Americans are accessing bank accounts via online or mobile channels.

Consumer emphasis on experiences and in-branch services underscores a growing need for the personal touch in a rapidly escalating digital environment. Financial institutions must simplify access to the information consumers need and want — primarily through use of digital technology — while also using those digital experiences as a starting point for deeper and more engaged interactions.

Use Digital to Engage and Personalize the Banking Experience

When it comes to engaging with consumers, community banks and credit unions need to respect the power of digital banking. Even as recently as 2019, the number of consumers who bank via laptop or PC channels grew significantly. Mobile banking likewise.

With such strong preferences for digital banking, it is no surprise that an institution’s digital capabilities play a strong role in account holder acquisition and retention. According to a study released by New Jersey-based Provident Bank, more than four out of five consumers (82%) say they are less likely to switch financial institutions once they have become accustomed to their bank’s or credit union’s digital banking services. Digital banking is the proverbial “sticky” product that institutions are seeking.

Findings like these emphasize the importance of smooth and efficient online resources, covering an ever-increasing array of transactions. At the beginning, consumers were delighted with simple services, such as checking account balances. Then, they began to expect more complex transactions, such as paying bills or applying for a loan, to be handled digitally.

“Digital banking should be a starting point for community banks and credit unions to engage with consumers, rather than an end point.”
— Allan Brown, Malauzai

Now, consumers are demanding “experiences” from their banking applications. For example, the simple act of paying a bill morphed with the Instagram mentality to create mobile photo bill pay. Or, consider how a digital payment combined with social media can create a company, and a verb, like Venmo.

However, digital tools and online banking should be a starting point for community banks and credit unions to engage with account holders, rather than an end point, as consumers continue to crave a more personal touch. Focus groups conducted for a Federal Reserve survey revealed that the loss of a physical branch in rural communities had a deleterious effect on residents. Account holders mourned intangibles of the personal touch, such as having a place to go for advice, personal relationships with bank representatives and the symbol of civic leadership the institution provided.

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Build a Reciprocal Data Relationship

In today’s digital world, community banks and credit unions can still foster these intangible connections by using digital as a gateway to deeper engagement.

For example, when it comes to seeking financial guidance, banks and credit unions remain a top-three source of information for younger generations. But here is the catch: Millennials and Gen Z like to be prepared for the conversations they have about money, and often start their research online.

Offering the personal touch for this generation begins through digital channels, by answering some of the basic questions younger adults have. This can be as simple as creating content aligned to important topics, such as how to save for a car or how to apply for a car loan. Given the digital preferences of younger generations, calculators and other online tools can elicit higher levels of engagement. An app designed to personally determine how fast an individual’s savings account will grow towards purchase of a new car, provides a starting point for building more personal relationships.

“Partnering with fintechs can enable community institutions to provide niche services that would otherwise be difficult and costly to deliver.”

Even older Americans still look to their financial institution for guidance. Half of Baby Boomers have over $100,000 in investable assets, and one in five report having more than half a million dollars ready to invest, according to Gallup. Members of this age group continue to actively borrow, spend and invest making them prime customers for community banks and credit unions.

Using a digital-first approach, community banks and credit unions can provide tools that help Boomers calculate retirement savings and how much they will need in order to live comfortably in their post-working years.

This is a reciprocal relationship. As account holders engage with online tools and services, banks and credit unions gain valuable data. Taking advantage of information gathered through digital transactions, institutions can personalize outreach and service offerings, deepening the customer connection.

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Preparing for a More Open Banking World

Beyond engagement, consumers are anticipating a world where banks and credit unions personalize service at a deeper level. According to Accenture, one in two retail customers would like to receive personalized advice from their financial institution that is tied to their behavior or interests. Even more, they would like to see their bank offer more of the financial services they need, including tools for money management and person-to-person payment services, to name two.

In the emerging world of open banking, this becomes a reality as banks and credit unions package third-party products with core banking services to meet consumer needs. Partnering with fintechs can enable community institutions to provide niche services that would otherwise be difficult and costly to deliver.

Let’s take the car-buying example. Instead of simply showing a consumer how much they need to save for a car through a calculator tool, fintechs, like Monotto, can use artificial intelligence and open APIs (application programming interfaces) to automate the savings for the end user. This makes saving both easier and specifically tailored to each person.

To compete in an open banking environment, community banks and credit unions need to learn how to use digital applications to initiate and grow personal connections. Using this approach, the loyal checking account holder of today could easily become a loyal user of multiple products in the future.

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