Consumers Crave More Advanced Digital Banking Features, But Who Will Deliver?

Expectations among digital banking consumers are growing exponentially, but satisfaction with the experience is sagging. There's a demand for more advanced features, but many financial institutions haven't even mastered online account opening yet. Who will rise to the challenge?

Two-thirds of consumers say they are “very satisfied” with the digital banking solutions they use today, but this is no time for banks and credit unions to pat themselves on the back.

Despite the myriad of digital banking solutions that financial institutions have rolled out in recent years, consumers are actually less satisfied than they were in the past.

According to a study by ath Power Consulting, high satisfaction scores with digital banking tools and services have dropped from 73% to 65%. That’s a significant decline.

What explains this phenomenon? Certainly consumers have raised the bar for digital excellence, but this only partly addresses the problem. Banks and credit unions have only scratched the surface, and are delivering the bare minimum.

“Part of the reason for this decline is undoubtedly heightened expectations among digital-savvy users,” notes ath Power Consulting in their analysis. “But much is due to financial institutions’ inability to capitalize on the foundation they have built with their digital solutions.”

Based on over 3,000 survey responses collected in early 2017, ath Power Consulting found that roughly four in five consumers consider digital channels their preferred way to bank.

ath Power’s “Consumer Digital Banking Study,” now in its fourth edition, looks at digital banking usage, offerings, delivery methods, and customer experiences at financial institutions nationwide. Of the 2,379 respondents who identified themselves as current mobile bankers, ath Power Consulting analyzed their current digital banking behaviors, the features they value, the functionality they would like to see added, and their assessment of the overall experience.

The report suggests that — for many retail financial institutions, and even their fintech partners — digital banking is still in its infancy. Meanwhile, consumers are eager to see digital channels do more. They are ready for mobile to grow beyond its self-service transactional roots, and emerge as a full-featured planning and action-oriented tool that serves a much wider range of financial needs. Unfortunately, many of today’s banks and credit unions are not delivering.

ath Power says there are plenty of financial institutions out there that are performing “quite poorly” when it comes to meeting people’s expectations.

“So much more needs to be done if they wish to be true digital banking champions,” the report notes. “This is a perplexing situation for financial institutions, as they have amassed so much data, and are considered the most trusted provider of banking services. And yet many have done relatively little to learn from this information and evolve their digital banking platform.”

Frank Aloi, ath Power Founder and CEO, believes the novelty of mobile banking has worn off, and the consumer honeymoon is over. He says banking providers must focus on advancing their digital solutions if they hope to reverse the trend in sagging satisfaction rates.

“Financial institutions must move beyond basic functionality and accelerate their pace of innovation,” urges Aloi. “Even among those already offering advanced capabilities, some solutions cause frustration and aren’t acceptable.”

In other words, you can’t just roll out a mobile banking app and call it a day. That’s only the first step in an ongoing journey. You have to roll up your sleeves and keep pushing toward the edges of the digital banking frontier.

Going Beyond the Basics

Consumers aren’t concerned about basic features any more — checking balances and transferring money within their institution both received an 80%+ satisfaction rating in the ath Power study. But satisfaction for higher-level features that promote deeper interaction and engagement often fall short.

“Advanced digital banking features are in demand, but most financial institutions are not ready,” says ath Power in their report. “Consumers want more than basic account information, and are craving extended digital features — capabilities beyond traditional online and mobile banking.”

Consumers gave low marks for some digital features that The Financial Brand has been discussing for years now, including ATM/branch locators, personal financial management (PFM) tools, mobile wallets and P2P payments.

“All too often, financial institutions’ views of advanced, higher-level features are well behind consumers’ appetite for new innovation, particularly in the United States,” the ath Power report says.

This is driving consumers — particularly Millennials — to flirt with alternative providers. For instance, 44% say they are already using P2P payments, but not all are taking advantage of this service through their core banking provider. Many are opting for solutions from by fintech firms like Venmo and Square Cash.

This isn’t for lack of interest either. The ath Power study found that 55% of consumers would prefer that their primary financial institution handle these types of payments, and another 37% have no preference as long as they can conduct the transaction via their mobile device. Only 8% said they prefer a non-banking provider.

As the report notes, consumers are clearly more trusting of their primary financial institution, but will still choose anyone who can remove friction and provide fast, free, user-friendly digital banking solutions.

The Disappointments of Online Account Opening

Online account opening is a white hot topic in the banking industry, but not without its challenges.

In its study, ath Power found that half of all digital banking users have attempted to open an account online at a financial institution — 57% of Millennials and Gen X respondents vs. 43% of Boomers.

Of those who completed the process, 85% did so on a computer and 12% used an institution’s website via their mobile device. A paltry 3% of applications were submitted via a mobile app.

Sadly, about three in ten abandoned their application at some point. An equal number did not fund their account during the initial opening process. Primary reasons for abandonment included the application process being too lengthy (42%) and too complex (39%).

Respondents in the ath Power study cited over 100 different reasons for abandoning their application — everything ranging from a poor user experience and device-specific issues to long, complex terms and conditions.

The encouraging news, according to ath Power, is that virtually all of these causes for application abandonment are within the control of the banking provider.

“If the process could be simplified, financial institutions would see higher rates of completion,” says ath Power.

It’s critical that financial institutions get online account opening right. In ath Power’s study, 81% of respondents said they would be likely to apply for a loan online, while 69% would open a checking account online… if the option was available.

But simply satisfying consumers’ demands for online account opening is only a part of the equation. If the process isn’t smooth and intuitive, what does that say about the financial institution? What will consumers assume about an institution’s level of overall digital sophistication? Just because someone abandons an online application doesn’t mean they will follow through in a branch. In fact, it’s more likely they will choose another institution — one that can deliver the digital experience they expect. And then you’re losing out on all the other future opportunities that relationship would have afforded (think: “opportunity cost” or “lost lifetime value”).

Reality Check: Financial institutions have little hope delivering more advanced digital banking solutions if they can’t even get past the online account opening process.

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The Digital Banking Imperative

Banks and credit unions simply must get their digital strategy ironed out; it is the most important component if any acquisition/growth initiative is to succeed.

Think about it… three in ten respondents in the ath Power study indicated a likelihood to leave their current financial institution, and most will be looking for a digtally-savvy provider. Add to this competition from fintech firms that offer robust digital banking suites can do so without any branches, and traditional banking providers must contend with some dangerous headwinds.

Ed O’Brien, ath Power’s EVP Research & Strategy and author of the report, warns that the risks are significant and the imperative is real.

“With this potential for attrition and competition from alternative solutions that rival traditional banks’ digital offerings, it has never been more critical for financial institutions to deliver advanced, well-designed digital platforms,” says O’Brien.

ath Power says banks and credit unions must rise to the challenge and deliver easy-to-use digital solutions that are well-designed and well-executed — something that many institutions currently lack.

“Digital solutions can be employed to more fully engage banking consumers, increase share-of-wallet, often across traditional geographic boundaries, and create a winning customer experience,” the ath Power report says. “A well-designed and implemented digital banking solution can be a key driver in fostering increased interaction and engagement, and an effective online account opening solution expands a banking provider’s geographic reach while driving account and revenue growth.”

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