Banking has fundamentally changed this year. COVID-19 has put a spotlight on the need for comprehensive digital services, catapulting many expected roadmaps years ahead of their original trajectories.
What came as an impressive surprise was the record-breaking speed in which financial services organizations responded, finding meaningful ways to serve their customers and meet their digital expectations.
Financial services leaders have proven their ability to innovate quickly. Now they face the pressure to maintain this momentum beyond the pandemic.
Earlier this year, BAI surveyed 600 consumers and more than 200 financial services leaders on their impressions of digital experiences. We found that 13 percent of financial services organizations plan to increase digital spending this year over last year.
This BAI Banking Outlook research was conducted in January, but this spending increase likely will be greater given the reliance on digital channels because of the pandemic.
Colorado-based High Plains is a great example. The bank has roughly tripled their spend on digital technology since 2016, including moving its core operating system to Jack Henry, and the bank has plans to continue expanding its digital footprint and technologies.
To understand the magnitude of how far digital experiences have come, it’s important to reflect on how the industry has evolved. Banks were built on paper-based processes. As technology developed, branch structures inevitably changed with drive-up windows and ATMs. Start to layer in online and mobile banking, and now financial services organizations have more customer touchpoints and can deliver services virtually anywhere, anytime.
It took decades to build this foundation and create technology that supports it. But now organizations are making massive changes in weeks or even days, challenging traditional banking models. The good news is these changes have become so comprehensive and convenient that their acceptance is widespread.
Gen Z may still use digital platforms the most, but their access per week is not much more than Boomers (8.6 vs. 8.1 times). However, while more than two-thirds (69 percent) of all consumers agree their primary financial services organization understands their digital experience, community banks and credit unions lagged competitively.
Only 57 percent of respondents said community banks and credit unions understand their needs. Community financial services organizations must change this perspective - and fast.
Thankfully, we have seen great strides this year. These institutions are finding ways to merge their personal service differentiators into digital experiences. This is the ideal approach, since BAI’s research shows that consumers want both – a personal experience and access to digital services.
Customers want more digital tools and services, and they want it to come easy. Financial services organizations should be available at their moment of need until the resolution, preferably with a human they know and trust at the other side.
High Plains Bank is an example of an institution that bridged the gap between branch banking and self-service with technology assisted relationship banking. The bank had the digital infrastructure in place to make an agile transition to digital services and relationships.
They opened more accounts during six weeks of the pandemic than they did in all of 2019 without a single person walking into their lobby. Plus, they immediately started initiating conversations via a core-integrated digital chat service to help customers turn off paper statements, turn on mobile deposits, and introduce them to a new way of digitally managing their banking. They said they wouldn’t have been able to give customers this level of quality service any other way.
COVID-19 has only heightened the need for speed and convenience as well as customer expectations. Today’s and tomorrow’s dollars will be spent on digital technology.
And financial services leaders that have already made digital a priority are a step ahead. While most customers believe their financial institution understands their digital experience, that doesn’t mean they wouldn’t switch if another offered better digital tools. Regional and community banks are working quickly to tighten the competition; we expect digital investments to continue growing as the unequivocal path to a successful future.
More information on customers’ digital banking experiences and expectations can be found in our BAI Banking Outlook Special Report.
About the author – Karl Dahlgren is managing director for BAI, a nonprofit, independent organization that helps financial services leaders make smart decisions. With more than 20 years in banking, payments and software industries, he leads the BAI Research and Analytics business. Karl’s background includes leadership roles with ABN AMRO North America and a technology start-up in the payments industry.