In the era of social distancing, getting digital right is no longer a nice-to-have capability to connect with emerging generations of tech-savvy consumers. It is a survival imperative that may re-draw the financial services landscape.
This is especially true as fintechs flood the market with new products and services that are singularly focused on providing consumers with an unprecedented level of convenience, independence and control over their financial lives. Many financial institutions have stepped up their digital involvement accordingly.
There is an interesting paradox, however, that leaders in the traditional financial services sector will have to resolve. According to the J.D. Power 2020 U.S. Retail Banking Satisfaction Study, overall customer satisfaction with retail banks tends to decline as customers transition away from the branch and to digital-only banking relationships. The overall satisfaction score of 824 (on a 1,000-point scale) for bank customers classified as “branch dependent” drops an average of 23 points for digital-only customers. Of significant concern is the fact that the satisfaction gap is widest (31 points) among consumers born between 1977-1994, which includes all Millennials. A similar pattern was seen in the 2019 study.
The relatively lower satisfaction score among digital-only consumers may be an indication that mobile and online services are viewed as commoditized features that make institutions more interchangeable. It certainly reflects on the loss of advice and personalized service that consumers were previously getting from the branch experience and consequently the progress that still needs to be made by banks and credit unions to improve their digital game.
4 Action Items for a Hybrid Banking Future
The good news is that banks are well positioned to address the end-to-end financial needs of consumers, especially as they age and their requirements grow more complex. An effective path forward lies not in segmenting digital and physical customers, but in developing a holistic approach to integrating and expanding customer relationships across engagement channels — including those that have been temporarily de-emphasized.
There are several steps banks and credit unions can take to address the current and emerging needs of consumers.
1. Get the digital basics right
While there are no shortage of digital bells and whistles competing for attention, there are a core set of features that people tend to use — and count on — for the overwhelming majority of their banking needs. These include the ability to conveniently and intuitively see balances, make transfers and payments and deposit checks. While the technologies to support these basic features have been available for a long time, some institutions still have clumsy and outdated interfaces.
For instance, most implementations of mobile check deposit wouldn’t have been considered easy or intuitive until very recently even though the technology was introduced by USAA in 2009.
2. Focus on user interface and back office integration
Banks and credit unions have history and infrastructure, which can be an asset or a liability. Most traditional institutions have established relationships with customers that work across a broad set of customer needs including checking, savings and, in some cases, investment accounts. The institutions that use mobile apps and online services to offer consumers secure access to these powerful back-office resources are in a position to unlock new levels of integrated services that can empower and engage their digital customers.
ATMs represent another available infrastructure resource. Integrating mobile applications with ATMs to enable touchless withdrawals and deposits offers an opportunity to digitally enhance physical services — a good fit in a safety-focused world.
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3. Emphasize intuitive, user-friendly mobile experiences
The key to harvesting all the potential of full-service banks in the digital era will revolve around optimizing the three- to five-inch piece of real estate on consumers’ mobile devices. This will require investments in sophisticated user-experience and interface-design expertise. Determining how to make dozens of services available through the window of mobile devices and computer screens represents both a challenge and opportunity for banks and credit unions.
Addressing this point successfully, however, can help institutions differentiate and optimize revenue. This is especially true since most fintechs deliver specific point solutions that address a current niche and/or narrow dimension of consumers’ financial lives.
4. Make sure innovation and trust are balanced
While digital-native fintechs tend to value iteration and innovation as organizing principles, traditional institutions are typically built around mature, secure processes. Banks and credit unions, in short, have spent decades earning trust by being methodical and risk averse.
Financial institutions that can balance innovation, security and customer responsiveness will be best positioned to resonate with the emerging generation of consumers looking for a long-term relationship with financial services providers.
In the final analysis, trust remains the coin of the realm when it comes to the relationship that consumers want to have with their financial institution. While there is an element of excitement and adventure associated with the insurgent fintechs, J.D. Power has consistently measured a powerful correlation between the trust and confidence that is developed as a result of the relatively conservative approach of incumbent institutions and elevated levels of customer satisfaction.