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Do financial institutions really have to digitally innovate?

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Do financial institutions really have to digitally innovate?

In a nutshell, yes. We’ve touched on the topic of digital transformation needs in one of our previous articles (How Digital Experience Platforms Fulfill Digital Transformation Needs) and how customer experience has been and will continue overtaking price and product as the key brand differentiator. This shift is very much current for banks and credit unions as well, and the fact that physical branches will become less important is very apparent. “Online channels will increase in priority and financial institutions will focus on optimizing innovative and consistent experiences to increase market share.” A new financial ecosystem is being born in which banks have a chance to work together or compete with fintech companies. Will you go with the flow or fight the current?

As Lisa Joyce says, “Traditional banking providers need to combine digital speed and convenience with human interactions that are both thoughtful and caring at crucial moments in the customer journey.” These crucial moments can very easily turn into pain points that pretty much equal to bad customer experiences further down the line – if not addressed in time. According to Vision Critical, it takes only two bad experiences for 42% of Americans to stop shopping with a brand (or using a service) so as a financial institution with plenty of competition you certainly need to address any issues that can cost you loyal customers. To be able to do that, you have to be on the cutting edge of everything digital which requires you to know who your customers are and what kind of needs and expectations they have. Millennials are now the largest living generation of consumers so chances are that a big chunk of your clients is millennials as well. They are digital natives who rely on digital versus in-person experiences – this trend is called omni-digital. As The Financial Brand says, 46% of all consumers use only digital channels for their banking and, according to PwC’s recent survey, “online dominant consumers are becoming mobile dominant consumers - and everyone else is shifting that way, too”. Providing seamless experiences across all channels is simply not enough anymore, however, banks (and all businesses) that choose to embrace innovation and adopt new technologieshave unprecedented opportunities to change and improve how they provide financial services including offering the ability to”:

1. Collaborate with financial technology partners to develop digital products that are easier to use (think ‘one-click’)

2. Provide customers with seamless real-time, multichannel digital interactions on the channel they prefer

3. Simplify and optimize business processes through standardization, optimization, and adoption of cloud solutions

4. Build an open and agile platform that makes it easy to meet regulatory requirements

5. Innovate with disruptive technologies like artificial intelligence, IoT, and blockchain

6. Offer personalized products and services that are both timely and relevan

Does this mean that physical branches are not necessary anymore? Not quite! PwC’s survey shows that 65% of customers still feel that it is important for their bank to have local branches and 25% wouldn’t even open an account with a bank that doesn’t have at least one local branch in close proximity (within five miles). There are certain types of transactions that are still “branch dominant” – situations where customers value the ability to ask questions and be guided through the process, such as applying for a loan or a new investment account, opening a new checking or savings account, or using financial advisory services. However, “branches could soon refer to sophisticated ATMs or a small office providing virtual capabilities since the frequency of visits have dropped from a few times a month to a few times a year”.

Still not convinced that digital innovation is the way to go? Let’s see a few statistics that will show you how many potential customers you could use if you didn’t offer the required services through the proper channels.

1. Smartphone banking has gone mainstream – 60% of smartphone users report using mobile banking in some way, up from 36% four years ago. (The Financial Brand)

2. Only 66 percent of Millennials visited a brick-and-mortar branch within the past six months, compared to 81 percent of Baby Boomers and 80 percent of Traditionalists. (Gallup)

3. According to FICO, 43% of Millennials don’t think that their bank communicates with them through their preferred communication channels. If the information is time-sensitive, they expect to be communicated with in real-time via text messages and push notifications on their mobile devices, however, if the information isn’t time-sensitive, Millennials actually prefer to be notified via email. In fact, email is still the primary channel that all age groups rely on to receive notifications and communicate with their banks when information isn’t time-sensitive. (Telus International)

You can see that the omni-digital trend is on the rise and it won’t stop anytime soon. If you and your business are ready to take a step forward, you might find Liferay helpful in your journey. Request a free demo today and start innovating tomorrow.