How Better Technology Helps Banks Boost User Retention

banking user retention

The once-upon-a-time novelty of digital banking is now a mainstream expectation of users. Innovative digital banking is now a must-do user retention strategy in the credit union and banking industry. Nearly four out of five Americans (78%) were concerned about going to their local bank, according to a recent study by Lightico. More than half (55%) of the respondents said they would visit branches less often. The study also revealed that about one in four respondents (26%) would avoid face-to-face banking altogether. And the overwhelming majority (76%) believe that digital banking will be a lasting trend even after the COVID-19 pandemic. Finally, 68% expect businesses to increase their ability to serve users remotely. 

Effective banks and credit unions have more robust digital solutions. End users expect their banks or credit unions to understand their needs. If not, the growing number of fintechs, mega-cap companies and large commercial banks will actively poach your less-than-satisfied users. According to a Vya study, almost one-third (31%) of users of mid-sized banks and credit unions are open or actively seeking to switch banks. The study also showcases how innovation, mobile app and online banking solutions play critical roles in your user’s overall satisfaction with your financial institution. Consumers want to feel secure with you. Therefore, since branch foot traffic has diminished significantly, successful branches will need to be able to engage users remotely.

Touching Base — Virtually

Credit unions and banks that improve user experiences through advanced digital banking platforms will have an advantage in the increasingly competitive future. User retention can be more advantageous than seeking new consumers alone because loss-leader cash incentive campaigns tend to be expensive. Additionally, they can have the unwanted byproduct of attracting a less loyal consumer base, placing increased pressure on you to outdo your competitors — or risk losing them when it’s your competitor’s turn to return the favor. An easier, more effective approach is to stay up-to-date with your end users by elevating their experiences in real-time.

Instant Gratification
Modern users want and need instant gratification. The digital space is becoming the new frontlines of your financial institution. The pandemic merely accelerated this phenomenon. According to the Ipsos-Forbes Advisor U.S. Weekly Consumer Confidence Survey, approximately three out of four (76%) Americans used their primary financial institution’s mobile app for everyday banking tasks like depositing checks and viewing statements and account balances. Approximately, 90% of those respondents said they’ll continue to use digital technology to make life easier — even after the economy fully reopens. 

Your Digital Platform Is Emblematic of Your Values

Your digital banking technology is your organization’s biggest brand ambassador. Upstart fintechs and behemoth banks are counting on slower tech adoption rates of regional banks and credit unions. You can safeguard your established position of trust with existing users by continually adding value through your digital banking platform. 

Technology + Local Bank Brand Advantage
A survey found 67% of Generation Zers had some type of bank account. Most Gen Zers hold accounts with large commercial banks. However, it isn’t for the obvious reason of size. Bill Handel, vice president of research at Raddon Research, told American Banker, “Gen Zers have this notion of hating big banks — they don’t like what they stand for — but they like the technology and location convenience they offer.” 

David Poole, head of Merrill Edge Advisory added that 88% of Gen Zers said they only want to invest in companies that share their values, compared to 79% of millennials, 77% of Generation Xers and 69% of baby boomers. Given the choice, it seems that the majority of end-users would prefer to bank with a value-driven organization, but only if their technology is compelling enough.

Strong Digital Banking Platforms Equals Strong User Retention

Many legacy banking systems have been operating for decades. Most are upgraded painfully and slowly because there is so much money relying on these systems — the perceived risk is daunting. This “don’t fix it if it isn’t broken” approach has kept many banks and credit unions from growing. Worse yet, this stagnant growth invited startup fintechs and digital-only banks to pick off their established users hungry for customized and agile digital solutions.

“There’s a wealth of unlocked value to be extracted from banks’ operational systems, but releasing and optimizing that value depends on the bank’s ability to use digital technologies,” said Alan McIntyre, senior managing director at Accenture and head of its global banking practice. The most common reason consumers switch from a traditional bank or credit union to a competitor is convenience, according to research from Bank Administration Institute. Filling out applications, waiting for loan decisions and opening new accounts were among the top requested activities to be made more convenient.

According to a Cornerstone survey of U.S. residents, across every income level, consumers cited “digital banking tools” as one of the most critical factors influencing their choice of banks or credit unions. Strong digital banking solutions are vital to an improved user experience, deepening relationships through insightful data and predictive analytics. You can put your best foot forward and improve your user retention rate by implementing an optimal digital banking experience. 

The quality and responsiveness of your digital banking platform directly impact your loyalty which, in turn, ultimately impacts your revenue. Let us show you how we can partner with your financial institution to provide the tools and advice you need to give your users the digital experience they crave. Request a demo today

Marty Aquino has been a passionate writer on venture capital, technology, forecasting, risk mitigation, wealth and entrepreneurial topics since 2009. He is the founder of Carbonwolf Energy, a venture-capital firm specializing in world-changing and status-quo-defying technologies and people. 

Sources

Vya Systems – Mid-Size Bank Customer Retention Research Study: THANK YOU (vyasystems.com)

Lightico – Covid-19 Survey: Consumers Demand A New Digital Banking Normal (lightico.com)

Forbes – Digital Banking Survey: Most And Least Valuable Mobile Features – Forbes Advisor

ABA Journal – Defeating The Myth That Bank Challengers Own Digital | ABA Banking Journal

American Banker – 8 things banks need to know about Gen Z | American Banker

International Banker – Addressing the Problems of Legacy Banking Systems (internationalbanker.com)

BusinessWire – BAI Banking Outlook Survey: Consumers Moving to Direct Banks for Convenience, Better Rates and Lower Fees

Crnrstone – Who Wants to Bank With a Digital Bank?