Understanding Digital Banking and the Customer Experience

Shifting consumer expectations are pushing financial service providers deeper into the digital realm. Making way for mobile is just a part of improving the overall customer experience, along with streamlined experience and heightened security.

Consumer expectations are affecting a major shift in banking and traditional financial services. This shift is aided by a changing regulatory landscape that favors innovation and customer-centricity. The PSD2 in the EU has already fostered change in the banking industry, opening up banks’ treasure troves of customer data to third-parties who now have the ability to layer financial products and services on top of banks’ customer data.

Shifting consumer preferences are largely being driven by the millennial generation—one that is approaching $1.4 trillion in purchasing power. This segment is particular about what they look for in a banking power, and the proof is in the data: traditional banks aren’t meeting expectations. Statistics from the American Banking Association illustrate this reality:

  • Almost three-quarters (71%) prefer going to the dentist than listening to what banks are saying
  • 53% don’t think that their bank offer anything unique
  • 68% say they believe the way we access money will be completely different in 5 years
  • Nearly a quarter say not having a mobile app as the main barrier to bank engagement

These stats are sobering, but millennials are not the only group with these expectations. Digital transformation is the norm and consumers demand the ability to bank online and via mobile for everything including making deposits, opening accounts, making payments, and transferring funds. This expectation runs across the board—from massive incumbents to smaller credit unions.
The writing on the wall is clear; banks must evolve into more customer-centric business models or die.

Mobile is Table Stakes
One of the biggest drivers of digital banking is mobile, with millennials leading the pack. An FIS Consumer Banking Report notes that 72% of all bank interactions are digital, and digital self-service is a top priority for consumers under the age of 53. Smartphones and tablets are the preferring banking channels, eclipsing desktops, physical bank branches, and ATMs.
This growing trend towards mobile has replaced the importance of branches in favor of mobile interfaces. In fact, 42% of consumers say they use their mobile banking app more now than a year ago. It’s a significant reality that banks must strategically face as personnel and physical locations are replaced with apps. Lack of a mobile app—or a poorly designed or functioning one—can cost banks dearly in lost customers and inability to acquire new ones.

Ease and Simplicity Rule
According to a 2018 consumer banking report by FIS, trust and simplicity are generation-neutral expectations across the board. Trust is ranked as the #1 attribute valued by every generation, with simplicity ranking in the top four factors across generations. Millennials value digital (most notably, P2P) payments more than any other generation. As noted in the section above, digital self-service is also an important factor.

On-the-go access and top notch security enable customers to conduct banking activities seamlessly without having to plan their day around a bank visit. Offering seamless digital banking platforms is more complex than simply launching a mobile app; technical difficulties and other delays can turn customers away.

Security is Paramount
As banks head in the “mobile first” direction, the threat landscape broadens. It’s estimated that
60% of mobile malware is targeting financial information on mobile devices specifically. Any vulnerabilities spell disaster for both banks and customers. As important as it is to open digital banking channels to customers, financial institutions must do this without opening them up to threats. One quarter of consumers who experience fraud either plan to or actually do switch banks.
Banks should implement multilayered security protocols in addition to educating consumers about protecting sensitive information. Two-factor authentication that leverages biometric technology (fingerprint sensors or facial recognition) is becoming a popular mechanism to prevent fraud without obstructing a positive customer experience. Advanced technology like machine learning and big data can significantly improve security and fraud monitoring in real-time, allowing banks to prevent attacks before they happen rather than reacting after the fact.

Digital banking requires a healthy balance of customer experience considerations, security, and streamlined features. Meeting customer expectations head-on requires a mobile platform that is always-on and easily accessible. It also requires an eye toward a frictionless and simplistic experience that does not sacrifice security. Advancements in AI and machine learning will help catapult banks and their wealth of data into the digital transformation required to properly serve customers; however, their focus will need to remain customer-centric to retain customers amid fintech disruption.

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