July 24, 2020
There’s never been a better time to embrace digital banking to improve your competitiveness and your customer experience.
The trend towards widespread adoption of mobile and online banking is increasing rapidly because of COVID-19, and will last well after the pandemic is over. For banks, credit unions and other financial institutions, it’s an opportunity to embrace the benefits of digital banking and give their customers the ability to bank, transact and move money any way they want.
As many financial institutions around the world temporarily closed branches while customers distanced in their homes, the use of digital wallets, contactless payments and mobile apps have become the preferred way to pay. But there’s a reason digital banking was on the rise even before the pandemic: the benefits it provides customers are undeniable—especially in an increasingly fast-paced world.
Digital banking is always open. Complaining about banking hours is a thing of the past for your customers. With digital banking, customers gain constant, 24/7 access to their money and more ways to use and spend it. For people who can’t seem to find an extra hour (when there isn't a pandemic happening), that means not needing to take time off of work to go to a branch or plan a Saturday morning around it.
Convenience is queen. Offering the ability to access, use and move money via mobile devices, digital banking apps lets your customers see their account balances, pay bills, transfer money, apply for loans and make purchases on the go. There's no need to sit in front of a computer to make online payments or come into a branch. They'll still want those options, just much less frequently. (Although, with the right digital banking platform, you can make 1:1 appointment scheduling possible, or offer the ability to live chat with a banker, all from your bank’s mobile app.)
Faster is better. Another way that mobile banking helps your customers save time is that it's just a much faster option. No longer do your customers have to set aside a chunk of time each day to make payments or deposit checks. With the push of a few buttons on their mobile device, they can accomplish more than they can with keystrokes on their computer or talking to a call center rep.
More options to pay. Digital banking gives customers a lot of payment options. They can choose to use their mobile device to pay when payments are enabled with a banking app or they can decide to use their debit card. If a customer is already working on their computer, they may choose to go the online banking route, and if they want to use a mobile payment like Zelle® to send money or split a bill, they can. And if they want an in-person experience they can come to your branch. Digital banking delivers on what many of the millennials and Gen Zs are demanding (more pay options, more convenience) so they get what they want.
Save money. Banks and credit unions that adopt digital banking can spend less money on IT and even HR infrastructure, which can be a big way to save money. Automation allows banks to reduce operating costs, including hiring fewer people, streamlining their back-end processes and reducing mistakes. The right partner can also offer the benefit of continuous innovation, helping speed time to market with new features (i.e., shorter development time and easier upgrades) further saving costs and stress.
Be more competitive. You’ve heard these words over and over by now: “Uncertainty.” “Challenging times.” “Unprecedented.” No matter what word you use for the times—let's go with “disruptive”—staying competitive is crucial. Increasing digitization that enables all the ways your customers want to bank and pay will go a long way in retaining and attracting customers, especially the next, rising generations. And working with fintech companies to provide customers with a more digitized banking solution will place your bank in a stronger position as well. Learn how Stockman Bank multiplied their digital banking and mobile app users by implementing a new digital banking solution.
Customers were already demanding digital banking, such as banking apps. But COVID-19 has caused a huge spike in consumers’ desire for contactless and mobile payments, too. As reported by CNBC, in April there was a 200% increase in new mobile banking registrations and mobile banking traffic rose 85 percent.
The pandemic is also driving open banking forward. Open banking uses application programming interfaces (APIs) to allow third parties to access customer data (with their permission) to create mobile solutions for financial institutions. This takes digital to a new level and before COVID-19, was already being adopted. In the U.K. open banking became mandated in January 2018 to address a number of factors, including competition, innovation and reducing overdraft fees. Now, with the pandemic, open banking is being embraced as a way to give people contactless payment options.
All of this is good news for banks that were slow to adopt digital banking solutions. Because challenger banks have been disrupting traditional banking and making it harder for banks and credit unions to retain customers, open banking helps make financial institutions more competitive. After all, which would you choose: a relatively new challenger bank or a tried-and -trusted bank to deliver the exact same digital service?
A digital transformation that improves the customer experience has many features to consider, including the following:
Online banking. Digital banking began when the internet allowed people to do their banking online. Suddenly customers had 24/7 access to do most of what they had to do at one of their bank's branches—account services like paying bills, checking their statements, transferring money, arranging loans, financing loans and ordering checks. Today's online banking does that and a lot more.
Now customers can use bill pay, which allows them to receive eBills and set up monthly payments that the bank automatically makes for them. That helps eliminate late fees, improves credit scores and saves time—so there's no need to visit a company's website, login and pay a bill; the financial institution can do all of that for customers. People can also direct their bank or credit union to take a specific portion of their payroll checks out each month and put it into their savings account, which they can check conveniently from home.
Digital banking as it's known today revolves more around the technology of mobile phones and what they make possible. For starters, it allows people to deposit checks using their mobile phones by taking pictures of the front of the check and the back of the signed check. There is a way to make deposits via a computer, but it's not nearly as fast and easy.
On a large scale, mobile payments are changing much of the way people "move their money." Most mobile payments work in conjunction with a bank—users need to enter their debit card information to sign up for them (although this is evolving as well with companies like Apple offering their own payment cards). Not only are people using mobile payments for convenience, they're also earning money for every dollar they spend through reward programs.
The following is an overview of are some of the top mobile payment apps customers are using.
With a slogan of "Cashless made Effortless," Apple pay is designed for customers who have Apple phones and Apple Watches. Once set up, they can order and pay for services with a tap of their finger.
PayPal One Touch
Their slogan "Turn sixteen digits into one touch" does two things at once. It taps into the convenience factor of mobile payment apps (one touch versus entering a 16-digit card number) and incorporates the name of the service. PayPal One Touch also offers extra security and a broad reach to customers.
Going straight towards a growing trend, Google Pay's slogan is "A contactless way to pay, by Google." With such a strong brand identity, they wisely include their name in the slogan. Google Pay touts their multi-layers of security as an added incentive for users to choose their mobile payment app.
Because of the number of features Samsung Pay offers, their slogan is "more than a wallet." In addition to the convenience their mobile payment app delivers, users can send and receive gift cards and they can take pictures of membership and loyalty cards to add to it.
The digital wallet.
People are more likely to leave their wallet behind rather than their phone for good reason: they can pay for just about anything with a phone. Equipped with mobile payments like Google Pay and many others including Venmo, which also has a social component to it, people have a lot more payment options than a typical wallet gives them. And it's going to keep evolving. Recently, Bank of America introduced a digital debit card that their customers can download on their mobile device.
The POS system.
To enable people to use all of their mobile payments, brick-and-mortar businesses are adapting, too: they’re updating their POS systems so that they have the technology to efficiently accept the mobile payments consumers want to use.
Because of the pandemic, digital banking is just going to be a part of life and banks will need to adopt it to run efficiently and keep attracting (and retaining) customers. Bank of America has been ahead of the game. For a couple of years, they’ve been heavily investing into digital banking efforts—and, during the pandemic, it's certainly paying off. And while all banks will need to adopt more digital banking, there are things to consider when making plans to do it.
Be consistent across channels. The digitization you provide needs to deliver the same capabilities and experience across every one of your channels—from the desktop to the call center to the ATM. The challenge for many financial institutions is that they don't know enough about the artificial intelligence (AI) and other technologies that power digitization. It’s key to work with a strategic technology partner who knows the ins and outs, so you don’t have spend money and time ramping up an internal IT team.
Make it secure. You're going to need to take all the precautions necessary to prevent fraud attacks, which isn't a small task with increasingly savvy criminals. Things like card skimming, where they attach small devices called skims to ATMs and even debit cards to lift customers’ financial information, have been causing banks headaches for years. Learn more about how you can protect your customers’ vital financial information.
Don't go solely digital. If you do some quick online research, you likely will discover articles encouraging you to adopt a completely digital bank. But not so fast—today's customers still want a bricks-and-mortar option. Take a look at Amazon, the monolithic e-commerce company. They opened physical locations because, beyond extending their reach, their customers also want a brick and mortar option (not everyone is comfortable ordering shoes without trying them on).
Choose the right fintech partner. Not all fintechs are created equal and they are not one size fits all. Make sure to take the time to find the best one to partner with to help you make the right digital solution for your customers. Look into their R&D investments, their ability to innovate. You need one who can help you hit the ground running with the best digital experience around.
Make agility a priority. As you settle on a way to digitize your banking services, keep agility top of mind. There's a decent chance that you may not get it right the first time and will need to make changes. When you can quickly and easily pivot in a different direction, you'll save time and money in finding the right digital banking solution for your customers.
Market your new digital solutions. After you've come up with an airtight digital banking plan, even before you roll out your new solutions, let your current and potential customers know about it. Create a marketing plan that includes social media engagement on Facebook, LinkedIn Instagram and Twitter. Let them know that something digitally exciting is coming to their bank. Not only will you be boosting chances of them registering for your mobile payment solution, you'll be engaging with your customers on a more personal level—that's not a small thing now that people will be visiting branches less and less.
While the world continues to adjust to life during the pandemic and plan for what the future may be after a vaccine is found, banks and credit unions can use the opportunity to improve their customer experience. By giving your customers the mobile pay and contactless payment options that they want, in addition to the full suite of digital banking features they already expect, you'll increase your competitiveness and better retain and attract new customers—not to mention future-proof you