If you’re unsure of the need to stay on top of digital transformation, just think of Blockbuster Video. Renting movies was big business in 2000, when Blockbuster turned down an offer to buy Netflix for $50 million. Today? Blockbuster is on the verge of extinction, while Netflix is one of the most valuable media companies in the world.
Digital transformation is now reshaping customer experience (CX) in banking. Financial institutions that don’t keep pace face far more than a struggle to succeed – they face a Blockbuster-like future.
Consumers Bank Digitally
FIS’ 2018 PACE US consumer banking report provides fresh insights into how American consumers bank today and what they expect from their financial institutions.
Consumers bank digitally – nearly three-quarters of their contacts with banks, on average, are digital, either online or mobile – and the exciting news from PACE is that mobile phones have overtaken online banking as the preferred channel overall and across multiple generations.
Millennials are leading the transformation to mobile. Nearly two-thirds (63 percent) of banking provider contacts by young millennials’ (18 – 26 years old), on average, are through their mobile phones.
Mobile banking app usage continues to climb. Mobile third-party P2P usage grew by more than 60 percent year-over-year, according to PACE. During the same time period, 42 percent of consumers increased usage of their financial institution’s mobile app.
Rising levels of activity around mobile banking apps set expectations higher among consumers. Regardless of their bank’s or credit union’s size, consumers expect their financial institutions to meet increasing demand for digital capabilities in banking and payments.
What Consumers Value Most: Trust, Simplicity and Digital Self-Service
The top three factors that consumers value in a banking relationship are:
1. Trust – defined in the PACE study as “does what it promises and does what is right for me.”
2. Simplicity – defined in the PACE study as “offers the right products/services for my lifestyle that are easy to understand and simple to use.”
3. Digital Self-Service – defined in the PACE study as “allows me to do things for myself anywhere, anytime through digital channels.”
The outstanding news for banks and credit unions is that the majority of banked consumers view their financial institutions as trusted sources – far more trusted than third-party providers – and 96 percent of consumers believe their banking transactions are safe and secure. Banks and credit unions need to capitalize on that critical finding.
Banks and credit unions can leverage trust to become the advisors that younger consumers need. Significant wealth transfer from baby boomers is on the horizon, but younger consumers don’t typically have access to financial advisors. Delivery of prescriptive financial advice through traditional channels to millennials, however, may not be as welcomed as it has been with baby boomers. Instead, delivery of financial advice in the form of videos, websites and mobile apps – standard ways in which millennials consume information – can offload the cost burden of face-to-face meetings and open communications with millennials on their terms.
Digital transformation also enhances security and reduces fraud, thereby retaining trust and reducing the likelihood of switching to another financial institution. That’s important because FIS’ PACE study reports a far higher risk of attrition among consumers experiencing some type of banking fraud – one in four consumers experiencing fraud have switched or plan to switch banks after that event.
Digital Transformation Is Not a “One and Done”
Every financial institution needs a digital strategy – one that’s dynamic, not a “one and done” static plan. Some companies are hiring chief digital officers whose jobs are to ensure that digital considerations are integrated into the culture and decision-making process.
That’s because digital transformation is reshaping customers’ experiences – and, thus, their expectations – in almost every area. If a financial institution doesn’t keep pace with those expectations, consumers will look elsewhere.
Financial institutions should focus on the digital products that enhance consumer engagement. The “ideal” product meets expectations around the three major factors that consumers most value – Trust, Simplicity and Digital Self-service. Used to preorder cash withdrawals from ATMs with a mobile banking app, Cardless Cash™ for example, reduces skimming, is simple to use and eliminates the need to stand in line or carry around a debit card.
Consider products that can quickly improve bank performance, including:
• Top line growth by expanding the customer base and share of wallet – P2P solutions such as People Pay, Zelle®, and mobile wallets to attract and retain millennials, for example.
• Bottom line growth by reducing the expense associated with fraud – card controls, tokenization associated with mobile wallets, for example.
Choose a small number of solutions initially that prove to produce the best payback – P2P, for example. Bank-sponsored P2P solutions can now be rolled out quickly and affordably.
Work with a partner that has sufficient scale to accelerate the creation of innovative solutions that perform well in the marketplace.