Over the past decade, both consumers and business owners have adopted mobile as a key component to how they interact with their financial services provider. In 2018, a Citi Financial study found that 31% of respondents used their mobile banking app the most, behind only apps for social media (55%) and weather (33%). This means people are getting comfortable interacting with everything on their phone, and their finances are no different.
Adoption of mobile, especially smartphones, continues to grow. As of February 2019, over 81% of U.S. adults owned a smartphone, and over 75% of households owned at least one. Worldwide, the projections for 2020 are that over 4.6 billion people will own one — more than half the world’s population. People clearly prefer the smartphone as platform of choice.
Today’s hyperfocus on COVID-19 and the need for social separation is drawing people to digital more than ever, cementing their dependence on these channels.
With any crisis comes large opportunities. Now is the time for community banks and credit unions to think differently and to take bold, calculated risks. However, this must be with a firm grasp of the overall situation and an eye on strategy.
More’s Going on Than the Coronavirus Effect on Bank Technology
As significant as COVID-19’s influence on digital is, this major trend arrived amidst other societal trends:
• People are living longer and, as a result, working longer.
In 2019 the average life expectancy was 78.9 years, up from 69.9 back in 1960. US. Census data projects that in 2020, the 65.5+ age group will pass 550 million. This group of 65+ — Baby Boomers — happen to be the fastest-growing segment of U.S. mobile banking users in the U.S. Boomers have been adopting technology that wasn’t built for them. They now use their phones to not only stay engaged with their friends and loved ones, but to bank, handle retirement and interact with healthcare providers.
• Traditional views of geographic borders are shifting.
Amid the globalization and virtualization of our world, communicating, buying, selling and paying people are now global activities.
This rings true in almost all interactions. Social media channels have the lead, as platforms like Twitter have a global audience of over 330 million, 80% of them living outside of the U.S.
• Technology has become ubiquitous.
While smartphones are generally what’s meant when discussing digitization, we see technology everywhere now, from advanced TVs to kitchen appliances. COVID has underscored that digital capabilities have become a “must have.”
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How Smaller Institutions Can Up Their Digital Game
Many financial institutions have recognized and responded to these changes. Community banks and credit unions have worked for over 20 years to meet the needs of consumers and businesses to access financial information remotely. The availability of new technologies, and innovative approaches to improve the customer experience, have enabled this effort.
But adequate isn’t even table stakes anymore. The resulting service for many institutions has been digital platforms which are functionally adequate, providing an adequate customer experience.
Unfortunately, while those institutions have assembled out-of-the-box solutions, regional and national banks have increased their tech investments. They shifted digital from being a product to a key strategy. At the same time, fintechs and nonbanks made digital their only strategy.
It is imperative that smaller banks and credit unions prioritize digital now and hold themselves accountable for its performance and ROI.
Easy to say — how can credit unions and community banks get started?
• Start with a plan.
Often the response in a crisis is to react immediately without having a strategy. But for the long term, credit unions and community banks must have a plan in place regarding how digitization supports their overall business. The strategy must be based on a solid understanding of their customer base and their prospects. The sharper the view on this, the better the institution can select and assemble out-of-the-box components or go with more of a platform on which to build unique capabilities.
• Focus on the solution, not on accumulating product components.
Many products available can solve mobile banking objectives. It is easy to catch “shiny object syndrome,” and keep grasping for the next cool thing. Unfortunately, an accumulation of products does not necessarily make for a good solution, especially when there’s no strategy. Financial institutions must consider many aspects of the problem, including the core processing platform, non-core integration requirements, vendor capability and internal capability. Selecting the right partners is critical, from creating to executing on the plan.
• Culture, culture, culture.
Typically people think of culture as a soft, mushy thing, of negligible importance in planning for the future. Yet culture impacts every aspect of the banking business. Far too many digital strategies have failed for human reasons and the emotional aspects that seep in — such as worries about job security.
Banks and credit unions must identify what type of a firm they want to be five to ten years from now and what their risk tolerance looks like along the way and get the entire team working together. Successful projects create an inclusive environment with a focused effort where everyone understands the goal.
• Return on Investment in digital technology.
A case can be made that implementing ROI measurement too early in a digital journey can stifle innovation. However, the importance of measuring progress must be remembered. Ultimately, demonstrating ROI is one of the most important components for pushing digital and mobile efforts forward. Real traction occurs once the team is held accountable with the appropriate metrics.
At the outset of setting a digital strategy, it is crucial to establish targets which track when part of the effort is succeeding, and when it’s the right time to pull the plug.
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Mobile Will Dominate Going Forward
The next generation of mobile banking will be even more embedded in people’s lives than what we have today.
While contactless payments have been around for some time, they were about convenience, mostly. Now, in the era of coronavirus, they have become a necessity.
Offerings such as Zelle and Venmo have become required offerings because consumers are demanding P2P payments and, as such, banks and credit unions are willing to pay the high price tag to appease their customers. Many other factors like customer service, personal financial management and chat capabilities are also seen as more crucial than ever before and are viewed as differentiators. People considering creating new financial relationships value these components.
Winning the next generation of digital banking starts now. Are you ready?