What Traditional Banks Can Learn From Fintech Apps’ Explosive Growth

For banks and credit unions, the surging downloads of fintech and neobank apps means having a data-driven, user-centric, mobile-first strategy is more critical than ever. Consumers' sharply higher interest in mobile finance challenges financial marketers but also provides a unique opportunity to rethink their digital campaigns and product strategies.

A huge shift took place in consumers’ mobile app usage patterns and habits beginning in 2020. The pronounced changes to people’s lives as a result of the pandemic led to an increase in how many apps consumers installed and how long they used them.

Fintechs were a big winner, seeing the largest increase across the board. Adjust’s Mobile App Trends 2021 Report found that fintech app installs grew by 51% from 2019 to 2020, and are already up by another 23% so far this year.

The average mobile user has 2.5 finance apps installed — between the pandemic and wider exposure to personal finance, users are diversifying and exploring other finance management sources now more than ever. Adobe’s Digital Trends Report shows that toward the midpoint of 2020, a quarter of banking app downloads were digital banks in contrast with just 2% in 2017. These trends show no signs of slowing down as we move into the second half of 2021.

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Spotlight on User Journey and Experience

Most banks and credit unions have online and mobile banking channels, and more and more are partnering with fintechs. But given that consumers have quickly come to expect a digital experience equal to what the best providers are offering, just how effective are banking’s efforts? It’s up to legacy banks to adopt a mobile-first mentality to meet their users’ needs in order to stay competitive.

Over 45% of consumers in a survey by FIS stated that they’ve “permanently changed” how they do their banking since the pandemic, and 31% have also expressed interest in using more mobile banking apps in future. It’s clear that the traditional banks need to revamp their digital experience to be the ‘go-to’ for financial advice and provide assistance to their users for every step of their journey.

By benchmarking fintech apps against the industry standards and expectations, marketers and product developers for traditional banks can better understand, develop and tweak their strategies and their approaches to user acquisition and retention.

Pain points for legacy banks traditionally include onboarding and providing convenient service access around the clock. With mobile, consumers have unparalleled, instant access to just about everything — why not finance, too? Insights about these pain points highlight the moments in which users could potentially churn, or drop off the app.

Benchmark Your App:

One of the best ways for financial institutions to retain customers is to carefully track their mobile app’s performance against fintech apps.

Data from Adjust’s global app trends report show that fintech app sessions grew by an impressive 85% year-over-year in 2020 — and they’re continuing to surge in 2021, reaching 49% growth already. The average session length for banking-related apps increased from 4.95 minutes per session in 2019 to 5.5 minutes in 2020. In the first half of 2021, session times decreased slightly to 5.2 minutes, although they are still well above the 2019 average.

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It’s no accident that user sessions are reaching new highs. Fintechs are constantly innovating and working on offering their users better experiences. As long as they can maintain this, they will continue to grow. User experience research and development is crucial for any legacy bank considering branching out digitally.

But success means developing a digital-only mindset. Here’s what Christopher Young, Director of Industry Strategy and Marketing, Financial Services, at Adobe says about this:

“We work with some of the largest financial institutions that offer a range of digital and traditional channels. The discussions have been around shifting to a digital-first, but not a digital-only mindset. The reality is that they are competing with disruptive companies that are mobile only. This needs to push the industry to focus more on the mobile experience and evolve it beyond purely transactional interactions.”

Need for More Flexibility and Adaptability

Entirely mobile-first businesses offer their users increased control and better understanding of their money. Consumers today can open a bank account and use their digital wallet in a matter of minutes. Rapid innovation via microservice architecture and APIs gives digital-first banks great flexibility, which is what consumers expect. By contrast, legacy banking platforms are normally built on complex, stacked systems.

These systems are less agile than digital-first banking services, but, more importantly, far more costly to run. If legacy banks wish to compete with the digital-only banks and fintechs shaping the finance industry, monitoring and adapting systems is crucial.

Read More: Can Traditional Banks Keep Pace With Fintech Challengers?

Understanding consumers’ needs, expectations and in-app habits is more important than ever as digital banking continues to grow. Features like account fee plans, international purchases, instant payments, insightful interfaces and capabilities are the new norm. Traditional banks can look at these models to craft user-centric, data-driven strategies.

As Adobe’s Young says, “Coming out of the pandemic, the focus of the financial services industry is to create more meaningful digital experiences that improve the financial health and well being of their customers. As mobile becomes the primary channel for customer interactions, the mobile experience needs to shift from money movement to helping consumers make smarter financial decisions.”

Growth Opportunity Is Massive

By 2026, the global mobile banking market is expected to grow to $1.82 billion with a compound annual growth rate of 12.2% from 2019 to 2026. The time is now to analyze and learn from consumers’ habits. From onboarding to user journeys and user experience, insights and data points can be used to segment users and paint a clear picture of your company’s needs as customers adapt.

If you’re struggling with retention in your institution’s mobile app, take the time to understand how users are behaving in-app, when they’re returning and why. By putting a spotlight on your retention rates, you can troubleshoot onboarding issues, work out whether you’re providing enough fresh content to keep users engaged, and test the success of referral/onboarding offers.

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