Why Self-Service Banking Is a Necessity in 2021

secure self service banking

by Marty Aquino

Banking behaviors fundamentally changed during the pandemic. Although many megabanks are pushing higher and higher market capitalizations, there are fewer physical branches. For example, three major banks, Huntington Bancshares, Wells Fargo and Sierra Bancorp, all announced physical branch closures in 2021 — citing the meteoric rise of digital banking during the COVID-19 pandemic.

Additional shrinking branch footprint facts:

  • The U.S. bank branch network declined from 3,000 in 2019 to just over 2,400 at the end of 2020.
  • According to the National Community Reinvestment Coalition, the number of American bank branches dropped from 85,993 to 81,586, a 5.1% decline, or a loss of 4,407 bank branches, between 2017 and 2020.
  • More than 4,000 bank branches in the U.K. have closed in the past six years, according to S&P Global Market Intelligence.

A report from fintech firm Self Financial had an “eyebrow-raising” forecast that U.S. bank branches might become extinct by 2034. This prediction is based on the fact that bank closures have been doubling every three years. Self said the number of bank branches could fall to 40,000 by 2027 and then plunge to as low as 16,000 by 2030, the same level as in 1965. By 2034, Self warned, all branches may be gone.

To be sure, that prediction is very much an outlier. However, the implications are quite tangible. The physical branch contractions are largely due to the sharp rise in digital banking and the related embracing of self-service technologies by multigenerational users. 

What Is Self-Service Banking?

Self-service banking is a suite of solutions centered around the user as the interaction-driver. Sought-after solutions could include: cardless transactions, mobile banking, support services, biometrics and accurate personalization.

The majority of users are now content to perform many financial transactions online and with customized, purpose-built apps. Changes like that force banks and credit unions to stress-test their business model to make sure it includes robust digital and self-service banking solutions. Having your business model defined by “in-person only” transactions is becoming increasingly dangerous, especially as banking and payment are becoming more and more digitized.

Best Practices and Benefits

During the pandemic, users turned to website or in-app chat to resolve banking problems — however, more than 25% of the time they were “dissatisfied” or “very dissatisfied” based on resolution time. Users “are happy to use self-service — if the experience doesn’t leave them with negative feelings,” according to a Gartner report. But they’ll abandon self-service when they lose confidence in their own ability to resolve a problem without the help of another person. 

End users are looking to you as their bank or credit union to provide a strong sense of assurance, trust and guidance. Robust self-service banking solutions will help make or break the future of your financial organization. Some best practices are to focus on user outcomes, manage users’ perception of the outcome and stay ahead of foreseeable issues.

More specifically, Gartner’s research found that the top three factors impacting customers’ confidence in self-service are:

  • Clarity: how easy it is to understand or act on given information.
  • Confirmation: assurance that indicates resolution.
  • Credibility: the utility or relevance of information.

Interestingly, consumer effort is 40% more accurate at predicting consumer loyalty than consumer satisfaction, according to Gartner. Ninety-six percent of users with a high-effort service interaction become more disloyal compared to just 9% who have a low-effort experience. Indicators of high-effort experiences include channel switching, repetition of information, generic service, transfers and repeat interactions. By reducing consumer effort, service organizations can deliver higher-quality interactions and lower costs.

Leading organizations have a user engagement strategy to foster loyalty with a focus on self-service banking that prioritizes faster resolution. With a lower-effort interaction than live channels, self-service is also the biggest opportunity to reduce your costs.

The Future of Self-Service Banking

The pandemic continues to drive innovation in self-service banking. Here are a few trends to keep an eye on:

  • Video Banking and Interactive Teller Machines (ITM). ITMs enable face-to-face communication users prefer through video, providing both employees and users a safe, interactive and engaging environment. ITMs can provide more choices for your users and give banks and credit unions benefits of migrating more transactions to your digital platform.
  • Digital Payments. The growth of digital payments has accelerated during 2020 and that’s likely going to continue. Meanwhile, cash withdrawals fell significantly with lockdowns. With falling branch numbers, your bank or credit union can no longer restrict access to services or expect users to come to you. You have to be ready to meet users wherever they want to be.
  • User Hyper-Personalization. Self-service, from mobile banking to ATMs and ITMs, provides a wealth of data you can use to understand your end users’ behavior and better position your suite of services and products to meet their needs and deepen user loyalty.  

The process and implementation of impactful self-service banking solutions for your bank or credit union can be time-consuming and potentially resource-draining — if you don’t have a strategic trusted partner as your guide. 

Consider partnering with Lumin Digital to help alleviate the stress of implementing self-serve automation solutions. Lumin’s digital banking solution is a comprehensive, integrated suite of capabilities built from cutting-edge technologies. Its proprietary engagement model allows your bank or credit union to execute highly targeted and personalized strategies, freeing you and your team to focus efforts on your users directly.

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. 

References:

Forbes – 3 Major Banks Plan More Branch Closings as Thousands Shutter — in U.S. and U.K. — Amid Covid, Digital Growth

S&P Global – UK Banks Speed Up Plans To Ax Branches and Switch Focus to Digital

Banking Dive – US Has Lost 4,407 Bank Branches Since 2017, Study Finds

Self – Section 1: Historical Banking Trends Across the US

Gartner – Gartner Says Only 9% of Customers Report Solving Their Issues Completely via Self-Service

Twilio – Study Finds Consumers Expect Better Customer Support in the “New Normal”

Gartner – What’s Your Customer Effort Score?

NCR – Top 10 Self-Service Banking Trends for 2021