Overnight the COVID-19 pandemic forced the banking industry to rethink behaviors and priorities. Banks and credit unions were forced to learn quick lessons to survive during lockdown periods and focus on enhancing end user relationships without the benefit of in-person visits. Fortunately, there were several key shifts from 2020 that have become competitive advantages for the banks and credit unions that understood there would likely be no return to normal. As we move forward, the organizations that thrive will have to embrace digital banking strategies to adapt and succeed under the new normal. You will need to hyper-personalize consumer experiences, provide security and foster innovation with an adaptive digital banking platform in real-time to be successful.
Not all financial organizations flourished during the lockdowns, however. According to a study by Cornerstone Advisors, credit union membership growth fell 1.5% in 2020 and is expected to climb back up to just 2% in 2021 and 2022 — half the growth rate credit unions achieved from 2016 to 2018. It gets worse. In January 2020, 14% of U.S. consumers started the year with a credit union as their primary financial provider. A follow-up in mid-December showed that number fell to just 10%, according to a consumer study by Cornerstone Advisors. In a survey conducted by Foresight Research where nearly 11,000 bank and credit union users in 44 markets were interviewed, 22% of them reported that they are “extremely or very likely” to switch their primary financial institution in the next year or two.
The Digital Bandwagon
Most banks and credit unions understand that they need to transform digitally — 75% of financial organizations worldwide cited “digital banking transformation” as a top priority for 2020 and into 2021. Improving the end user experience (51%) and cost management (47%) were the other two top priorities in the study by Digital Banking Report.
Digital Banking Champions
In a comprehensive study conducted by Deloitte, 318 banks from 39 countries were evaluated on their “Digital Banking Maturity.” Those that outperformed their peers — defined as the top 10% of banks or credit unions — were classified as “digital champions.” According to the Deloitte study, digital champions not only lead the industry in the number of digital offerings for the user, but they also outperform their peers on the basis of cost/income and ROE. COVID-19-related restrictions forced some banks and credit unions to pivot better than their competitors. Some key takeaways from these outperformers include:
- Digital champions offer a wider range of digital offerings and compelling user experiences.
- Digital champions set key digital trends and have leading market practices — making them examples to learn from.
- Digital champions know UX is a key differentiator driving user satisfaction.
The world changed in 2020. So did people’s lifestyles. Naturally, their banking behaviors shifted, as well. It’s obvious that the COVID-19 pandemic changed banking behaviors, but some of the digital changes are likely to continue. It’s important to understand the shift in user expectations. Consumers want blazing-fast convenience, enhanced digital offerings and to trust their bank “a lot” to look after their long-term financial well-being.
Become a Digital Banking Leader Post-Pandemic
According to a Digital Banking Report “Innovation in Retail Banking,” there are seven key components of digital banking transformation success:
- Become a data and analytics leader.
- Enhance user experiences.
- Foster innovation.
- Leverage modern technologies.
- Upgrade systems and processes.
- Reskill your workforce.
- Align leadership and culture for the digital future.
For your digital banking transformation to be successful, you will need to align your organization around these components. This process requires regular engagement because there isn’t a fixed endpoint.
Digital Banking After the Reopenings
Many users are looking forward to putting the COVID-19 pandemic in their proverbial rearview mirrors. Interestingly, digital banking solutions are very likely to continue post-pandemic. Intuitive digital banking platforms can enable users to engage more frequently through mobile apps, cloud computing, automation and artificial intelligence. The risk is thinking that reopening your physical doors means you can ignore or put-off enhancing your digital solutions.
Bank and credit union users’ overall satisfaction is impacted by the quality of their digital experiences. More and more end users are demanding frictionless digital banking experiences with intuitive solutions for them. In-person consultations and branch visits will always have appeal with end users. However, it’s this type of legacy thinking that stunts your digital transformation success. Without a doubt, local branch transactions — especially complex ones — will garner hard-to-replace utility. Consequently, effective digital banking strategies are meant to complement your organization’s strengths while looking to the future. Moving to that future is crucial if your bank or credit union wants to remain competitive over the near-term. Otherwise, risk being existentially irrelevant in the not-so-distant digital future.
Partnering with a third-party expert that can provide you with the relevant resources and advice you need is an important part of your digital strategy. Request a demo to see how Lumin Digital can help.
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.
Digital Banking Report – Innovation in Retail Banking 2020
CUNA Mutual Group – Economic and Credit Union Update
The Financial Brand – Expect a Post-COVID Spike in Consumers Switching Banking Providers
Deloitte – Digital Banking Maturity 2020