or wait 15 seconds
or wait 15 seconds
By Doug Brown, SVP & GM of NCR Digital Banking
Banks and credit unions have faced unprecedented levels of competition over the past year. Challenger banks and technology companies have attempted to disrupt traditional banking relationships and gain deposit share, threatening institutions'roles in their customers'and businesses'financial lives. As institutions look to adjust their operating models and business strategies to better align with shifting consumer behaviors and expectations, they should take notice of the trends and activities that are expected to impact the digital banking space in the coming years.
Over the past several years, neobanks like Chime targeted millennials, fintechs like Kabbage focused on business liquidity and major tech companies such as Apple and Google have infiltrated the financial services landscape. In response to these disruptors, more banks and credit unions will deploy digital brands next year to help attract new customers and members. Digital is now the preferred touchpoint for most consumers, making this approach an effective way to gain deposits and expand an institution’s geographic reach — if done correctly. For digital banks to be successful, institutions must ensure the digital experience is convenient, intuitive and delivers a significant differentiator.
Small businesses account for 99% of business in the U.S. Despite being a trusted local partner for many small businesses across the U.S., most banks and credit unions fail to offer a solution built specifically for them, forcing small businesses to rely on modified, ill-fitting versions of commercial or retail solutions. Better serving these organizations now can lead to increased revenue opportunities in the future as small businesses grow.
The gig economy will continue to rise in 2020. Last year, the Bureau of Labor Statistics reported that more than 35% of the U.S. workforce are gig workers, and that number is expected to grow to 43% next year. This segment presents an unprecedented opportunity. Any financial institution that can provide the right tools for these customers to effectively manage their financial health in the gig economy will attract new relationships and expand existing ones.
However, institutions must act fast. Small businesses and gig workers will not simply wait around for banks and credit unions to offer the capabilities they desire, especially as fintechs and nontraditional competitors like Uber Money are aggressively pursuing them. Institutions must quickly deliver digitally optimized, intuitive experience small business owners and gig workers want or they risk losing these relationships and opportunities to grow revenue.
The recent trend toward digital first banking represents a major shift in thinking. Traditionally, institutions have operated in silos, creating complexities and additional expense in the back office and inconsistent, frustrating customer experiences. Legacy technology impedes institutions ability to quickly innovate, making it difficult to keep up with new competitors. Now, technology has the power to 'de-channel' disparate systems within an institution. As the race for deposits and new account relationships intensifies, the customer or member experience will supersede channel supremacy.
Next year, more institutions will simplify and streamline channels by leveraging tools such as API layers to connect customer and member profiles, ultimately reducing costs and enabling a more comprehensive, consistent banking experience. Such an approach allows banks and credit unions to seamlessly unify the digital and physical experiences, providing a personalized, intuitive experience regardless of touchpoint.
This year’s introduction of services such as the Apple Card and Uber Money shows how critical the customer experience is in the battle to attract, retain and expand customer relationships. Apple Card allows customers to apply within minutes and requires minimal data entry, making the interaction highly simple, easy and quick for customers. This experience has established a new standard against which all banks and credit unions will be judged in 2020 and beyond.
However, banks and credit unions have trust equity that Apple and other alternative providers lack. CareerBuilder recently reported that 78% of Americans live paycheck to paycheck; consumers simply can’t afford to take risks regarding their financial health. This trust represents a significant opportunity for traditional institutions to maintain and even win market share over these nontraditional competitors, but they won’t be able to do so with poor digital experiences.
In 2020 and beyond, it will critical for banks and credit unions to reevaluate their digital strategies, including their approach to channels, to prioritize, modernize and enhance the customer and member experience if they want to maintain relevance. Such efforts will help institutions vie for deposits and compete against not only the bank or credit union down the street, but emerging disruptors as well.
Cover image: iStock