Changes in the banking landscape continue at a dizzying pace. The deep and broad impact of this progression on traditional banks and credit unions is confirmed by the latest iteration of Fiserv’s quarterly consumer trends survey. The research identified three important competitive developments:
- The upward growth of digital banking continues unabated, and is helping to cement loyalty.
- An emerging technology to watch is voice-activated banking, where a relatively small number of early adopters have significantly increased usage.
- A looming competitive threat comes in the form of technology companies and other non-banks increasingly providing bank-like services.
We have now reached the point — long anticipated — where slightly more than half of clients (56%) say they prefer interacting with their financial institution via laptop or desktop computer, smartphone, tablet, or wearable.
The preference for remote banking overall is even greater, however, because 10% prefer other forms of remote access, such as banking by phone or ATM banking. All told, only 34% of consumers prefer interacting with humans in a traditional branch. Put another way, nearly twice as many consumers prefer remote banking as opposed to branch banking — and the vast majority of those prefer digital channels. Clearly, banks and credit unions that continue to make a commitment to digital banking are wise to do so. The importance of digital banking is only increasing in the daily life of consumers.
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As expected, Millennials (ages 18-37) still rank highest in terms of being quick to embrace digital banking. But don’t write off older generations as irrelevant. Once they opt in, older generations access digital banking services with nearly the same frequency and loyalty as Millennials.
Across all age groups, looking up account balances remains the primary reason for logging in. The Fiserv study reports:
The vast majority of consumers have accessed online banking (90%) and mobile banking (70%). Most users are fairly active. For example, 69% of online users and 74% of mobile users logged into their banking sites in the week prior to the survey.
Despite these strong preference for remote banking, buildings still matter. More than half of respondents reported visiting a physical branch in the month prior to the survey. Over a six-month period, that figure jumps to 80%.
The most common reasons for visiting a branch include depositing checks (61%) or cash (40%) and withdrawing cash (44%).
It is notable that none of these transactions requires a branch visit. There appears to be either an emotional component (comfort in a face-to-face meeting) or an educational gap around digital capabilities that keeps people visiting physical structures.
Voice-Activated Banking: A Sleeper Technology?
Voice-activated banking has yet to catch on in a big way, but to dismiss it as unimportant may be premature.
Asked to rate the importance of voice-activated banking on a scale of one to ten, only 15% of respondents gave this technology eight or more points. Perhaps more telling, 44% gave voice banking no more than two points. Reservations about using the feature ranged from “I don’t see the need,” to “I prefer speaking with a human.” There were also security concerns and misgivings arguably grouped under “just because.”
But in terms of increased activity, voice-activated banking users are in fact voice-activated banking enthusiasts. The Fiserv study found that consumers who already perform banking functions by voice have significantly increased frequency of transactions. In 2017, voice banking users estimated performing an average of 7.7 functions using a voice-activated device in the prior 30 days. That figure rose to 11.2 in the 2018 survey.
Millennials in particular are most likely to value benefits of speed, hands-free convenience, easier-than-keypad use, and simplification of tasks. Voice-activated banking may well turn out to be something of a “sleeper” — a service garnering little attention now that may leap suddenly to the forefront in the not-distant future.
Threat From Non-Banks Grows Larger
A few decades ago, traditional financial institutions worried about non-bank incursions from stock brokerages. More recently, the concern was around small start-up fintech firms that combined digital technology with vastly improved customer experiences. Nowadays, the concern around non-banks includes Walmart, Apple, Amazon, Google, PayPal, Square, Intuit, and even the impact of Starbucks on daily behaviors. Ironically, the very technology that allows banks to provide the convenience of digital banking also enables competition from outside the traditional banking arena to meet consumer needs.
People favor banking with traditional financial institutions, but reticence to bank with other types of organizations is eroding. Sobering enough was the result from the 2017 survey, in which 40% of respondents said they would be “comfortable” using a technology company to pay bills. This year that figure has risen to 55%. Thirty-nine percent would consider a tech company for a loan, 43% for money management, 54% for budget tracking, and 52% for transferring money to others.
The gauntlet has been thrown. The concept of “traditional” in “traditional banking” is losing its punch. Financial institutions can no longer rely on their legacy status to retain clients, much less win new ones. In fact, this historical benefit may actually become a hindrance in the future.
Matt Wilcox is the SVP of Marketing Strategy and Innovation for Financial Services at Fiserv. Wilcox is a recognized industry expert on channels and payments, and is a frequent speaker at industry conferences on topics including payments, digital channels, marketing, multi-channel integration, social media and risk management. Follow Matt on Twitter.