The banking industry is ever in flux… and as we settle into a new year, one of the big priorities that many institutions are facing is an adjustment to the increased prominence of digital banking.
The advent of digital banking technology has not only changed the way consumers interact with their financial institutions, but it’s also upended long-established business procedures and internal workflows. For many legacy banking institutions, these changes have been met with some turbulence and some growing pains.
Recently, The Financial Brand surveyed banking professionals from across the world, asking them about the readiness with which they have adjusted to the latest retail banking trends, specifically those focused on digital banking.
The results are nuanced. Many banking professional’s articulate hopefulness, citing some specific ways in which digital banking technology has improved efficiency and enhanced the customer experience. And yet there is also a lot of trepidation embedded in the results, with many banking industry veterans saying that banks have not been nearly nimble or fast enough in implementing new technology, such as mobile/online account opening, automated loan decisioning systems, and SaaS collections software.
Retail Banking Trends from Last Year
One aspect of the survey is a look back at the retail banking trends that defined 2019. Survey respondents were asked to name the trends they thought were most impactful during the previous year. It’s noteworthy that the survey compares the trends that were predicted to be significant at the outset of the year with the ones that were found to be truly meaningful at year’s end, and there are some significant discrepancies. This just goes to show that digital banking trends can be challenging to predict.
Among the retail banking trends that were found to be actually significant, the top five are:
- Simplifying the customer journey
- Improving the use of data and analytics
- Expanding digital payment capabilities
- Improving integration of delivery channels
- Open banking and use of APIs
Retail Banking Trends for 2020
The survey also includes some data points about the retail banking trends that are perceived to be important heading into the new year. Perhaps it’s telling that many of these trends involve banks making small evolution to how they’ve always done business, as opposed to embracing any technologies that are really disruptive.
According to the banking experts who participated in the survey, there are three trends that really stand out as noteworthy. These include:
- Customer-centric perspective and the creation of a friction-less customer journey (58 percent said this was important).
- Real-time intelligent data integration made possible through AI and cognitive computing (43 percent said this was important).
- Open banking platforms, enabled by APIs (33 percent highlighted this digital banking trend).
For a complete breakdown of the noteworthy trends, please consider this chart.
Credit: The Financial Brand
It’s also helpful to compare 2020’s projected trends with those from 2019, which highlights a few issues that remain at the forefront with many banking experts (including the adoption of a more customer-centric perspective and improvement to the customer journey, as well as the open banking focus). Here’s that chart.
The most encouraging aspect of these findings may be the signs of an increased investment in innovation… an indicator, perhaps, that banks are starting to recognize the urgency of embracing a more digital ecosystem.
At the same time, there may be some red flags present in these findings. Note that the top 10 priorities have remained pretty consistent over time. This suggests a banking industry that’s changing by increments, but not necessarily making the great strides forward that it really needs to be making.
What About Strategic Priorities?
Additionally, the survey asked respondents to name their top strategic priorities. For the most part, the findings are consistent with past years. After saying that investment in innovation was an important trend, banking experts rated innovation as low on their list of strategic priorities; this may sound contradictory but could be explained by the banking industry’s belief that a big investment in innovation has already been made.
Improving the Digital Banking Experience, Simplifying the Customer Journey: What Does That Mean?
It means lowering the barriers for new customer acquisition and expanding product penetration among existing customers. Mostly it means better and simpler mobile and online experiences, closing the ease-of-use gap between banks and fintech companies. Almost every bank has adopted some sort of digital banking app for their existing customers. But digital acquisition of new customers lags far behind what institutions offer to their existing customers. Several key technologies are currently available but still not nearly as broadly adopted as they could be. Examples include instant online account opening (OAO), on mobile and web devices. Online/mobile loan origination software (LOS), with automated decisioning is another critical tool that banks are using to compete better for an increasingly large digital-channel-only cohort of customers. OAO and LOS platforms have greatly improved over the last several years, so banks who are seriously embracing lower-friction customer journeys are moving quickly to cover the gaps by expanding their use of online account opening and automated loan origination systems, for personal and business customers.
Looking Forward: Digital Banking and Beyond
The banking industry continues to generate higher and higher levels of profitability, a trend that’s definitely encouraging. With that said, there are also some real signs of vulnerability. Competition for traditional banking business continues to rise, especially as digital players make inroads in areas like small business lending.
Such disruptions are only going to continue in the decade to come, and the only way for banks to safeguard their profitability and their efficiency is to adopt digital banking and digital lending solutions, including online account opening, mobile account opening, etc. These are just the kinds of innovations that will help provide a smooth customer journey, and ultimately keep those legacy customers from jumping ship to digital platforms.
With additional questions about the use of digital technology in a legacy banking context, please reach out to the MeridianLink team at your next opportunity.