Is Your Digital Banking Vendor Hurting Adoption Rates?

In an effort to find the best partner for each specific digital banking need, financial institutions can actually increase costs, decrease adoption and negatively impact engagement and the overall customer experience.

Today’s consumers have witnessed rapid technological advancements in recent years from the likes of Apple, Amazon, Google and Netflix. This has paved the way for heightened consumer expectations in nearly every aspect of life, including banking. Successful innovations by the big tech firms have driven financial institutions to reevaluate traditional product and service offerings, and ultimately modernize their processes to deliver a better customer experience.

Much of the innovation done by banks and credit unions has centered on online and mobile banking solutions, which quickly gained popularity with consumers in the early 2000s. In fact, Bank of America made history in 2001 as the first financial institution with more than 3 million online banking customers, approximately 20% of its customer base. Today, the bank has 34 million active digital accounts, both online and mobile, with more than 21 million of those being active mobile users. Online and mobile banking has become so widespread that many banks are closing branch locations altogether, operating more and more through digital channels.

At first glance, this digital migration seems like a win-win for both financial institutions and consumers, as digital channels reduce overhead costs and promote higher profit margins for the bank, while consumers enjoy the ability to access their bank account from any location at any time. To illustrate the cost savings, JP Morgan Chase has indicated that it costs $0.65 to process a deposit transaction in the branch, $0.08 per ATM transaction and just $0.03 per mobile deposit.

However, to provide the digital banking experience today’s consumers demand, banks typically license multiple products from an assortment of vendors – one for online banking, one for mobile banking and another for mobile deposit. Some even find different providers for solutions within a specific channel.

Unfortunately, contracting separate vendors for each channel or specific solution can be inefficient and costly, often resulting in unforeseen expenses and wasted time spent managing multiple vendors. This makes it difficult for banks and credit unions to truly benefit from the cost savings associated with digital banking.

One of the biggest burdens with using multiple vendors for digital banking is meeting the requirements for due diligence. This involves determining which vendors to monitor, how often, and to what extent in order to mitigate any security, compliance, operational and business continuity risks.

Why Adding New Features and Functionalities is Often Cost Prohibitive

To add to these challenges, banks are tasked with monitoring various contract term dates for renewal and determining how one expiring contract may impact solutions from other vendors. Similarly, multiple vendors require multiple system integrations – so adding a new product or service with a new vendor is often difficult and costly. While compatibility among software solutions has become more prevalent, most existing legacy systems were not built with common underlying software architectures.

Eliminating the need for numerous vendors and consolidating multiple channels into one system may resolve many of these issues. With a single, unified digital banking platform, banks can reduce their due diligence redundancies and can more quickly adapt to changing technology and demands from today’s consumers. Systems that leverage open architecture, like application programming interfaces (APIs), enable banks to easily take advantage of the latest applications on the market without the headache and cost of new product development.

Disparate Channels Mean Disparate Data

Beyond due diligence requirements, and the difficulties associated with adding new product offerings, using separate vendors for various solutions also create silos of data. This hinders the collection and comparison of data from different channels, making it nearly impossible to form overarching digital banking decisions backed by data.

Likewise, evaluating performance based on data from one system reveals only a fraction of the story, delivering incomplete insight at best and inaccurate insight at worst. This inefficient use of data limits financial services organizations’ ability to fine-tune marketing strategies and identify opportunities for revenue growth.

Conversely, by consolidating channels into one system, banks can leverage aggregated data to gain more accurate and comprehensive insight on account holders, resulting in more effective marketing campaigns. Analyzing data on each customer across their account, product and channel usage heightens visibility for the bank and strengthens the bank’s understanding of its target customers.

This empowers institutions to determine the next best product that will offer the most value for customers. From there, the bank can develop focused marketing messages to deepen its relationship with account holders and boost the institution’s bottom line.

Expectations of an Amazon-esque Experience

From the customer perspective, using multiple vendors for digital banking causes a disjointed user experience. Today’s consumers seek a unified, frictionless experience, similar to Amazon or Netflix, where their account can be accessed quickly and easily from their preferred device.

Additionally, each device or channel should provide the same functionalities, design and layout. Just as Netflix allows customers to begin watching a show on one device and finish on another, account holders should be able to start a transaction on one device and complete it from another device with ease.

Companies like Netflix and Amazon have set consumer expectations higher than ever before, and banks should take note. With one system to manage multiple channels, banks can deliver a more simplified, frictionless digital banking experience that today’s consumers crave, while reducing operational inefficiencies and unnecessary costs.

Are Your Digital Banking Vendors Holding You Back?

Licensing several products through separate vendors for digital banking inhibits financial institutions from taking advantage of the maximized cost savings that these offerings provide. As banks strive to increase adoption and usage rates across channels with new product development, updates and marketing campaigns, banks are often penalized by their vendors with added costs or the headache of time-consuming integrations.

However, even when financial institutions utilize online and mobile banking services from the same vendor, customers may still have a fragmented experience. This is because vendors sometimes acquire the product rather than developing the technology with a focus on creating a seamless experience across channels. In short, make sure that multiple solutions from a single vendor work seamlessly together.

Addressing this issue will take time, but banks and credit unions can get a head start on the process by assessing their core systems. Ideally, an organization’s core platform is an online, real-time system that functions on any browser or operating system. Reviewing underlying technology is crucial, as today’s technology has a much shorter shelf life, meaning a system from seven or eight years ago could already be outdated.

Additionally, when replacing or updating systems, banks and credit unions should start leveraging flexible technology, like APIs and HTML5, which is a markup language used for structuring and presenting content on the web.

HTML5 supports interoperability between devices and is browser-independent, meaning it is well-suited for serving as the underlying technology for digital banking solutions. These open architecture technologies support several feature functionalities, including biometrics, online account opening, video chat and more, across all channels and devices, promoting a consistent customer experience. This also empowers financial institutions to benefit from the latest innovations and keep up with heightened customer expectations.

To stay competitive and ahead of shifting customer expectations, banks and credit unions should evaluate investing in one scalable digital banking platform that consolidates systems and runs on flexible technology. Such a platform can deliver a better user experience and empowers financial institutions to take advantage of the latest applications on the market in a more efficient, cost-effective way.

Ultimately, the flexibility of a unified platform can support the needs of the financial institution and its account holders for years to come. Given today’s competitive market, it may be time to ask – are your digital banking vendors holding your institution back?

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