The COVID-19 pandemic certainly ushered in challenges for banks, credit unions and their users. Most notably, many Americans were forced to use mobile and digital banking apps — even if that wasn’t their preference. However, mobile and digital banking is nothing new, and its usage continues to soar. According to Statista, there are now 57 million mobile banking users in the U.S. representing 43% of all mobile users in the country.
If anything, the pandemic lockdowns have accelerated digital banking access, and in many ways, have forever changed the relationship between financial institutions and their users. Some might say that the future of digital banking has arrived a bit earlier than expected. Here are five trends we’ve seen thus far.
Increased Need for Digital and Mobile Engagement Tools
Financial institutions have long-standing pride in providing a high level of user service. This often included the opportunity for in-person, face-to-face interactions during which transactions, credit applications, bill payments and financial advice would be carried out. However, these interactions have largely vanished, forcing small banks, credit unions and large banks to invest more heavily and strategically in tools to engage — and retain — end users.
In the past, a consumer would select a banking or credit union brand based on the proximity to a branch location. In today’s “new normal” physical banking locations are evolving while financial institutions are concurrently focusing on the need to compete digitally on ease of use, convenience, features and overall digital experience.
Thanks to social distancing mandates — and certainly with the closure or reduced hours of several brick-and-mortar bank and credit union branches — contactless forms of payments have become more popular. J.P. Morgan Chase observed that transactions using the instant pay platform Zelle across the entire network of its participating banks in the U.S. totaled more than one billion payment transactions between September 2019–2020. In Q3 2020, this represented 323 million transactions — an increase of 17% quarter-over-quarter.
This year 2021 will most likely see increased use of real-time personal payments as both users and businesses find it easier to rely on their smartphones or personal computers to make these instant transactions. Additional authentication measures including the use of one-time passcodes have also added a level of security — and peace of mind — to these transactions.
Automation and Machine Learning
Technology promises more convenience and efficiency. As such, end users want to save time and avoid performing manual tasks. They fully expect their apps to remind them to carry out jobs such as paying bills.
Automation, based on machine learning algorithms and data captured from users’ app usage, can find its way into other banking services. For example, marketing offers for credit cards or loans can be based on that end user’s other digital behaviors. These tools can also keep account of how often that user has responded to marketing offers in the past. This personalization in the flow of the end user’s app usage will seem to them more natural and non-intrusive, thereby encouraging further engagement and hopefully conversions.
End users can expect automation to become even more prevalent in the new year. This will improve the overall digital user experience.
Credit Scores and Credit Monitoring
It stands to reason that in an economic downturn, credit scores plummet. Users might miss payments, max out credit cards and struggle to pay bills. However, during the COVID-19 pandemic, the reverse actually occurred. The average FICO credit score increased and hit a record high of 711 (out of 850) in July 2020.
How could this happen? One explanation is that federal relief packages — including stimulus payments, student loan forbearance programs and extended unemployment benefits — have been helping borrowers stay financially afloat. Additionally, credit card companies and other creditors have been more understanding with users due to the grave health consequences of COVID-19 and its effect on households and the workplace.
Despite influence by the government shoring up credit scores, end users are focused more than ever on maintaining good credit as economic uncertainty continues. Banks and credit unions have begun to offer free credit monitoring services in their digital banking platforms to help users determine how their scores may have changed. Some more sophisticated — previously only enterprise-grade — credit modeling services have emerged, helping users understand how their scores might improve given certain behaviors such as paying off a credit card in full.
Younger people are among those affected most strongly by COVID-19’s economic damage, but many were already becoming much more conscious of their credit, notes The Financial Brand. “Both millennials and Gen Z have focused on their credit scores more than earlier generations.”
With employees and students working and studying from home, cyber attacks have been on the rise. This is because attackers realize that the attack surface has increased — employees and students are most likely using personal devices connected to corporate or school networks. Without IT staff nearby, many of these devices and networks might be unsecured, or not secured to the level they would normally be in the office or school environments.
As such, banks and credit unions are pouring resources into digital security to protect users’ information from misuse or compromise. Banking end users want to know that their data and transactions are secure, though they still want the convenience of a mobile or digital app.
Cybersecurity is vital to customer acquisition, retention and satisfaction. Financial institutions can continue to communicate trust by giving users more control over their settings and data, and making it easier for them to make adjustments. Frequent security and privacy messages — though not a bombardment — can continue to allay any fears.
Partner With a Digital Pro
Creating a more robust, engaging, innovative banking experience for users has been well underway by financial institutions of all sizes for quite some time, long before the COVID-19 pandemic began. Working with a partner with experience in creating and launching personalized experiences for banks and credit unions can help. Lumin Digital is ready to develop solutions that your users will find engaging, convenient and intuitive. Contact us today to see how we can help your small bank or credit union navigate the digital landscape.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, he covers such topics as security, mobility, e-commerce and IoT.
The Financial Brand – 2021 Google Search Trends in Digital Banking, Payments & Fintech
JP Morgan Chase – 2021 Digital Banking Trends