Change is inevitable. Growth is optional. And the consumer shift to digital banking, contactless payments and hybrid branch services is real. The worldwide coronavirus pandemic only accelerated that digital trend. Most banks and credit unions aren’t synonymous with cutting-edge technologies, but that’s why some fintech companies are bridging the gap between what consumers want and what your financial institution can offer. Making strategic moves toward new digital banking technology will yield competitive and economic results.
Conversely, failure or delay in implementing improved digital experiences for your users has real consequences. The maintenance and capacity limits of outdated, legacy banking technologies can limit your growth, pose security risks and erode consumer loyalty. Covid-19 has drastically affected revenues and behaviors globally. It can be daunting to rationalize a spend on digital banking solution upgrades. However, strategic fintech upgrades or replacements will continue to serve your bank or credit union well past the pandemic.
By the Numbers
How financial institutions focus on digital-first solutions, according to The Financial Brand:
- 44% of companies have already moved to a digital-first approach for customer experience
- 56% of financial institution CEOs said digital improvements have led to growth
- 79% of millennials are more willing to buy from brands with mobile customer service portals
- 53% of people will abandon a mobile site if it takes longer than three seconds to load
- 15% of all customer service interactions will be handled solely by AI in 2021, a 400% increase from 2017
- 9 in 10 global Financial Service Institutions believe in the need for transformational digital change.
Digital banking is already a mainstream trend. According to Business Insider Intelligence’s Mobile Banking Competitive Edged Study, 89% of survey respondents said they use mobile banking, up from 83% in 2017.
- 97% of Millennials use it, an increase from 92% in 2017
- 91% of Gen-Xers, up from 86% in 2017
- 79% of Baby Boomers, up from 69% in 2017
- 64% of mobile banking users said they would research a financial institution’s digital capabilities before opening an account
- 61% of digital banking users said they would change banks if their bank offered a poor mobile banking experience
- 45% of Baby Boomers are shopping online more due to the pandemic
- 80% of consumers will engage in banking activity at least once a week, if not more frequently
Having a mobile app simply isn’t enough to keep and grow your consumer base anymore. End users are actively seeking additional tools and features that engage and elevate their experience with you. Not convinced it matters? Fidelity National Information Services saw a 200% increase in new mobile banking registrations.
AI ROI and Cost Savings
Strategic artificial intelligence (AI) improves your user experience and bottom line. The business value of AI in global banking will reach $300 billion by 2030, according to a 2019 report from IHS Markit. North America is expected to become the largest AI market between 2019 and 2023, reaching $79 billion.
According to a report from Juniper Research, the cost savings from financial institutions’ chatbot usage alone will reach $7.3 billion worldwide by 2023, up from an estimated $209 million in 2019.
ROI of Quality Digital Banking Tech
Quality digital banking technology holds promise for a substantial payoff. Implementing a smart digital banking platform will increase efficiencies, reduce costs and improve revenue. Digitalization in finance is a top business priority for many financial institutions, and those that deploy agile digital banking solutions can anticipate high revenue and profitability returns.
Lower middle-market companies, banks and credit unions, anticipate the most significant increase in revenue and profitability — 10% or more over the next three years. As such, your bank could do very well by increasing your digital banking spend by a similar percentage.
The Future of the Banking Industry
As Wells Fargo Securities analyst Mike Mayo told American Banker in June 2020: “What we’re seeing is the greatest acceleration of digital banking in history… What’s taken place over the last few months may have taken place over two to 10 years (if the pandemic had not come along).” As a result of these ever-growing digital trends, financial institutions are making significant investments in digital solution sets.
Consumers demand an intuitive online experience with zero downtime. And even older populations are embracing agile fintech solutions. According to a Boston Consulting Group survey conducted in June, online banking perceptions are shifting, with 69% of respondents saying fintech was a “financial lifeline” during the pandemic. Forty-four percent of 18-34 year-olds enrolled in online or mobile banking for the first time during the coronavirus pandemic.
Banks and credit unions now have to compete with all-digital fintech startups and mega-cap companies like Chime and Amazon, in addition to their traditional peers. Unfortunately, they won’t be limited by conventional brick-and-mortar thinking. But they also don’t have the perks that come brick-and-mortar spaces. Traditional financial institutions can compete by creating a customer experience that merges the best of both worlds, leveraging the modernity and convenience of next-level financial services products and tools.
The future is digital. Your consumers are online, and you should be there with them. If you procrastinate your digital banking spend because you’re dreading the initial costs (that will pay future dividends), you risk being left behind.
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 we can help you build on strong relationships with members.
Marty Aquino has been a passionate writer on venture capital, technology, forecasting, risk mitigation, wealth, 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.
EMarketer – The State of Digital Banking in 2020
Forbes – Banks Have Thrown $1 Trillion at Digital. Do Shareholders Care?
Axxiome – Embracing Digital Banking; Why now is the time to invest in your digital strategy
Euromoney – Investments in digital banking are cost cutting in disguise
The Financial Brand – The Rise of Digital-First Banking and Where It Will Lead
Business Insider – Banking Industry 2021: Overview, Trends & Analysis of Banking Sector
EMarketer – Business Value of AI to the Banking Industry in North America, 2018 & 2030
Juniper Research – Technology Market Research, Trends and Data
ABA Banking Journal – How Digital Experience Platforms Are Transforming Financial Institutions
BDO Insights – Digital Transformation in Financial Services
Reuters – Digital banks gain U.S. customers during pandemic, thanks to early deposits
Fintech Magazine – How is Amazon disrupting the financial services sector?