The COVID-19 pandemic is forcing successful banks and credit unions to go digital. Lockdowns, social distancing and limited indoor gatherings — these widespread actions have accelerated the need for contactless banking solutions by leaps and bounds. More bank and credit union members want personalized interactions without in-person branch visits and consumer behavior has fundamentally changed due to the pandemic.
Interestingly, the digital disruption is being welcomed and is likely to grow at scale in the months and years to come. Furthermore, financial competition is no longer limited to just banks and credit unions. Mega-tech and fintech companies are driving even more market disruption by offering consumers improved user experiences and lower prices. Smart financial institutions need to anticipate their users’ needs and deliver solutions faster than ever — or risk being left behind.
1. The Best Offense is a Great Cyberdefense
The massive digital push in banking also attracts unsavory types in droves — more specifically, cybercriminals. As more businesses adopt digital banking solutions, the criminal appetite to compromise your bank’s or credit union’s security has also grown. Hackers are targeting user banking credentials because of the high value of the financial data.
As more and more members demand more convenient banking solutions, more and more financial institutions are implementing mobile banking applications which increases the vulnerabilities for cybercriminals to exploit. That means, while digital banking solutions are necessary to stay competitive, you should only work with technology partners that use strong encryption to keep data safe.
Malware, social engineering and data manipulation are just a few of the serious cyber risks. Malware infects vulnerable end-user devices giving hackers access to, in some cases, entire banking networks. In 2019, malware was responsible for 75% of all data breaches in the banking sector. Data manipulation hacks occur when a threat actor gains access and makes undetected changes to the financial institution’s data for their own nefarious gain. This often means transactions will appear legitimate. The longer the manipulation goes unknown, the more damage will occur.
2. Keeping Up With a Cashless World
The business and consumer appetite for cash alternative payments is immense. According to a report by Accenture, “Nearly 2.7 trillion transactions, worth $48 trillion, are expected to shift from cash to cards and digital payments in the next decade.” The Fortune Global 500 multinational company goes on to say, “Banks can differentiate established products by innovating the user experience.”
The continued displacement of cash and checks over the next three years will create even more opportunities for disruption in cashless payments. This will be helped along by customers’ voracious digital shopping and their increased desire to avoid contact with physical infrastructure and objects.
3. The In-Store Branches’ Second Wind
Banking ecosystem players have been trying to solve a major user pain point — managing all of their financial products, accounts and protections. Fintech companies have been chipping away at this system for several years by unbundling certain services into standalone relationships such as payments and lending. In a post-COVID-19 era, tomorrow’s financial leaders will “rebundle” and offer customers various benefits from a single platform.
Credit unions and banks can use this tailwind because they already have what the fintechs and even the mega-techs do not — existing brick-and-mortar infrastructure and longstanding trust. With modernization, branches will be able to deliver a variety of bundled or rebundled services including non-financial offerings. More than half of customers interviewed for the World FinTech Report 2020 said their banking experiences were not integrated.
Traditional financial institutions that become service hubs that are already trusted partners with the customer will be able to develop new sources of revenue while also gathering insights into their behavior even outside of financial services. For example, Citibank is trialing a program to offer user incentives such as links to entertainment accounts like Hulu, Amazon or Spotify, considering a shift from cash rewards to value-adding incentives like these.
4. Using Privacy to Build Loyalty
Most financial institutions view data privacy as a required chore. However, it also represents a major opportunity for marketers to build loyalty and grow business. Privacy seems like a common compliance task, but there’s more to this topic. While a new federal privacy law seems unlikely (though not impossible) individual states are imposing their own regulations. Seventy-one percent of consumers agree that they “need new consumer privacy regulations/protections” regarding financial data privacy.
In spite of customers’ sensitivity regarding data privacy, collection and security, many of those users would still be willing to provide access to more information — under the right circumstances. Redesigning privacy programs can enable differentiation, says Deloitte. To accomplish this, financial institutions should consider:
- Communicating more frequently and interactively with consumers
- Being clearer about the data being collected and why
- Offering customers more control in deciding what to share
The financial industry is still dealing with pandemic-related issues. So, now may be the ideal time to re-engineer user privacy programs to enable value exchange.
The Future of Branch Banking
Digital banking solutions will accelerate growth for brick-and-mortar banks and credit unions that realize the financial world has changed. The human element shouldn’t be ignored or underestimated. However, new banking solutions with enhanced user experiences at the front-end, as well as multiple, interwoven, trusted providers in support roles will become the new benchmark of excellence in the not-so-distant future.
With only a few, high-quality innovations, an old “traditional” financial branch could easily be a major competitor because it will be able to do what many fintech companies aren’t yet able to do — be a true “one-stop-shop” for everything remotely financial. It’s no secret that customers are seeking this out. Post-COVID-19, the most successful bank and credit union branches will be those that deeply engage users at a profoundly customized level.
At Lumin Digital, we provide customized client solutions in the digital banking space so you and your members can take advantage of the latest fintech innovations. We work closely with your financial institution to personalize your user experience based on unique needs and help you build on strong relationships with members. In addition, our cloud-native platform lets you avoid any downtime. The future of banking has to be seamless. Look no further than Lumin Digital to take you there.
Marty Aquino has been a passionate writer on venture capital, technology, forecasting, risk mitigation, finance 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.
- Why Data Privacy Could Be Banks’ Next Big Competitive Battleground (thefinancialbrand.com)