Today, retail banking channel preferences are shifting toward digital, due in part to COVID-19. While many Americans preferred in-person banking channels prior to the pandemic, temporary branch closures and ongoing fear of high-contact exposures have pushed them further toward online or mobile banking, according to a Deloitte report.
This acceleration toward digital will create long-term industry impacts as digital-only banks invest in technologies and the existing banking ecosystem adjusts to meet evolving consumer needs. Now, more than ever, banks have greater incentive to reorganize around digital experiences.
Prior to the emergence of COVID-19, the U.S. retail banking landscape was already seeing a dramatic shift in channel preferences. According to Deloitte surveys, Americans’ retail bank branch usage declined an average of 35% from 2015 to 2020, while the number of digital interactions increased by 15%. Among 18- to 24-year-olds, branch usage dropped by nearly half.
This shift toward digital accelerated during the pandemic. Across all age groups, the share of Americans who did not use online financial services decreased by more than 30%. From conducting simple payment transactions to taking out loans or mortgages, many Americans began to use online banking services for the first time during the pandemic, according to Deloitte research.
As they use more digital services, customers are paying close attention to the online experience, which influences their selection of banking providers. In fact, digital experience is now the primary driver of attrition. According to a 2020 Deloitte survey of 2,000 Americans, the most important factor influencing a client’s likelihood of switching banks during COVID-19 is a poorly designed mobile platform, compared with other traditional reasons such as poor customer service or high prices. Furthermore, more than half of Americans surveyed indicate that a well-designed banking app is a primary consideration when choosing a bank, Deloitte research shows.
Designing Meaningful Experiences
Over the past decade, banks have focused on making in-person purchasing and servicing available through digital channels to deliver both convenience and cost efficiencies. This approach has enabled experiences that replicate branch interactions. Yet in contrast to other industries, many banks have not put as much effort into using digital to reimagine the customer experience—and customers are taking note. Asked to compare their banking experience to their experiences with other industries such as tech, fitness, and mobility, customers report the following pain points, according to Deloitte research:
Inconvenient self-administration options. Often, customers can’t update or manage their personal information without calling or visiting a branch and don’t have the tools to delegate permissions to others.
Out-of-sync information. When transactions don’t update in real time, customers can misspend and risk overdraft fees.
Disorganized personal finances. Some Americans continue to manage their money on spreadsheets, since many banking apps don’t make it easy to visualize savings or track financial goals.
Rudimentary notifications. Many customers would prefer to be notified whenever they make a transaction or when offers are suited to them.
Generic insights lacking guidance. Banks don’t always offer experiences and solutions that are customized to individuals.
Fragmented experience across channels. Often, financial institutions fail to make the necessary connections between user self-service and employee platforms.
Many incumbents and fintech competitors recognize these pain points and are working to address them. This is particularly true of digital-only challenger banks that are accelerating the pace of innovation. For example, one fintech has developed a robust cybersecurity system that offers biometric ID if customers cannot recall their passwords, while another provides real-time tracking of account balances after each transaction. Thanks to continued innovation to provide more convenient and personalized banking experiences, the following product features may become table stakes over the next 12 months:
Quick and seamless onboarding driven by touchless technologies, including face scanning and document recognition.
Real-time spend notifications as transactions occur that can be personalized as needed.
Integrated management tools on web and mobile apps, giving a full view of customers’ finances.
Goal-based segmentation of finances that allows customers to organize their money as they wish.
Basic spending insights offered via analytics dashboards that are intuitive, customizable, and easy to use.
Advanced access and security to help prevent lockouts and aid in easy recovery via biometric login features.
Differentiating Digital Banking
To continue to win customers through compelling digital experiences in 2021 and beyond, banks can provide deeper solutions to top-of-mind issues. These could include helping customers set and achieve financial goals, customizing pricing and rewards, providing insights on how individuals can change their spending patterns and save more, allowing customers to initiate a task on their app and finish it in a branch, and providing customers with personalized financial recommendations. Already, banks are testing multiple product features to address the following customer needs:
Learning what to do with money and how to pick the right products and services. To address this challenge, the digital experience could include collaborative goal setting, AI-powered financial coaches, community boards, educational materials, omnichannel onboarding, customizable products and rewards, easy alert and funding setup, and credit profile building and history.
Planning budgets wisely and tracking progress toward goals. Products that meet this need might feature customizable sub-accounts, spending and budgeting insights, premium financial assessments, scenario planning, integration with product affordability tools, event- and location-based nudges, progress trackers, real-time notifications on goal progress, customizable dashboards, and milestone benefits.
Managing bill paying and celebrating successes. To improve this element of the customer experience, banks could develop automated cash sweeps, digital invoice and bill management, omnichannel servicing, real-time fund movement, rules engines, dynamic relationship pricing, seamless account graduation, rewards based on achieving milestones, and third-party partnership offers.
Feeling safe from fraud and giving back to social causes. To address these challenges, banks may want to offer customizable notifications when purchases are made, emergency savings accounts, fraud insurance, connections to causes that matter, impact tracking for donations, and auto-generated donation tax forms.
In 2021, banks have the unique opportunity to reimagine their retail banking offerings to build trust and loyalty through frictionless digital experiences. This will require banks to move beyond thinking of digital channels as simply tools for reducing costs. Instead, banking leaders can reframe the digital experience as a medium for delivering more personalized and useful customer interactions. As digital capabilities increasingly become table stakes for the industry, banks can differentiate themselves by finding innovative ways to serve customer needs.
—by Peter Pearce, growth strategy leader and senior manager; and Malte Borkenhagen, growth strategy leader and senior manager, Deloitte Consulting LLP
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