The first years of the 2020s have proven that stagnation is death for any industry. The rapid technological and social change that has already taken root this decade — the effects of which have rippled through consumer behavior and sentiment — has sent every industry reeling to adapt.
Banking stands to gain traction in this new landscape — or lose it in a big way. The global digital banking industry is expected to grow to $30.1 billion by 2026, driven in part by pandemic trends and in part by ongoing digital adoption. Even Baby Boomers (traditionally some of the slowest consumers to adapt to change) are now more likely to use websites, chatbots and apps to do their digital banking business, per Mobiquity.
Every organization that connects with consumers has a new host of challenges and opportunities to contend with — and most financial institutions aren’t changing fast enough to keep up.
Why Banking Is So Far Behind the Pack
By most estimates, the business world moved years ahead in digitization thanks to the Covid-19 crisis. One of the metrics of change most relevant to banking is the average share of digital customer interactions, which grew by about 20% globally from 2019 to 2020, after several years of only incremental increase, according to McKinsey.
That influx of new and more active digital banking consumers is driving the most drastic change. Digital banking has seen a marked increase in online banking usage. One report saw a 72% jump in mobile banking and app usage in just a week during the pandemic — and the trend is expected to continue in every major market across the globe, reaching more than 2.5 billion active digital banking users worldwide by 2024.
Broader economic trends incited by the pandemic also put banking in the spotlight. Most consumers expect their monthly costs to go up and consumption to go down as a result of forces unleashed by the pandemic, and as stewards of their finances, banks are pressured to help them manage their money on their terms.
Uneven signals for digital banking experiences
- Half of global consumers interact with their bank through apps or websites at least weekly (Accenture).
- Many banks feel they’re not seeing a positive impact from their digital transformation (Forbes).
- Less than 30% of EU bank apps allow customers to start a mortgage application (D-Rating).
To that end, consumers haven’t abandoned in-person banking quite yet, but they’ve proven they’re less dependent on branch visits. In 2021, PwC found 25% of U.S. consumers identified their banking habits as “phygital“, in that they use both digital and physical channels for interacting with their bank (up from 17% in 2020), while those who identified as branch-dependent dropped from 42% to 35% in just a year.
The Bottom Line:
Banks need to be ready to serve their customers whenever and wherever they like.
Many banks think they already do that — or are close. In response to that growing call for comprehensive digital experiences, a healthy percentage of banks feel like they’re well on the way to complete digital transformation.
But by their own admission, they’re largely not seeing the results: Among banks who believe that they’re at least three-quarters done with their digital transformation, fewer than one in five say it’s helped them generate significant increases in non-interest income like payments revenue, according to Cornerstone Advisors. Among those who believe they’re just one-quarter done, only four in ten say that they’ve seen more than a 10% impact on loan productivity.
The hamstrung results of digital transformation in banking aren’t because of a lack of demand. It’s because banks are learning the wrong lessons from digital transformation.
3 Digital Success Factors Banks Must Focus On
Digital transformation in the banking space has been limited in scope. A 2020 study by European digital performance rating agency D-Rating found that 48% of Europe’s leading banks offered chatbots to customers, but that they had low effectiveness in solving customer problems. Less than 60% let customers take out a loan through their app. Less than 30% of bank apps allowed customers to start a mortgage application or open pension savings accounts.
As the gap between digital and physical experiences shrinks, banking customers expect features like simple loan applications or account opening. Polishing your website and tightening the screws on your app are only the first steps toward creating the brand experience that consumers cherish.
Financial institutions can’t control every aspect of their destinies (banking will always be subject to larger economic fluctuations in spending and saving), but they can lead by differentiating their digital presence in a few key ways.
1. Enhance the customer experience
Give consumers who choose your bank a frictionless digital experience they love and find truly useful. That means knowing their needs and experiences at a deep level, from how they interact with your brand digitally to the points of their journey at which you can have the greatest impact.
2. Enrich customer connections
Listen to feedback to improve your digital experience for consumers. Their feedback might come in the ways you expect, like contact forms, error logs and a spike in customer representative calls. But it may also be in far more contextual ways – like how long they spend on your site, what tasks they choose to perform in your app over your mobile webpage and the fact that certain users never seem to make it past a certain page or prompt. Every data point is another signpost that can help you plan, design and appeal to visitors and customers better.
3. Provide omnichannel experiences
Cater to phygital bankers, introduce digital natives to your in-person banking experience and familiarize traditional consumers to the convenience of your digital options. Just ensure you’re providing consistent experiences, messaging and opportunities to interact across every channel.
Insights That Empower Banks to Truly Evolve
In a 2020 report on digitization in the banking sector, Ernst & Young experts laid out their predictions for the most impactful actions banks could take for their digital experience. Unsurprisingly, responsiveness led the pack: “The ability to spot and quickly smooth over any bumps will be key to making the experience better for customers and avoid reputational damage,” said the report.
They also noted that providing personalization and robust, targeted communication through web channels will be key to meeting the demands of an increasing audience of digital banking consumers. Traditional web analytics can help establish a baseline, but they’re not enough to build better digital experiences — ones that leverage information about the ways customers already interact with the brand to create more user-aware, lucrative and profitable engagements.
Whether digital, physical or a combination of both, the future of banking is in personalized experiences that show an understanding of consumers as individuals. From friction points that jack up abandonment rates to the reasons a longtime customer declines a tailored offer, the right platform gives banks visibility into their customers’ digital interactions across the entire customer journey. Using those insights, financial institutions can create the brand experiences that make consumers stick around.