The beginning of a new decade finds bankers wrestling with age-old challenges: growing new customer deposits, retaining existing customers and maximizing efficiency and profitability. With the reliance upon technology becoming more prevalent, bankers are turning to digital answers to achieve those traditional goals.
In CSI’s annual Banking Priorities Report, 227 bankers provided insight into how banking strategy is increasingly intersecting with digital technology. The survey found 45% of bankers stating that some form of technology will most affect the industry in 2020. While there was no consensus on which technology would have the greatest impact, bankers are tracking the rapid development in Application Programming Interfaces (APIs) and Open Banking, payment disruption and the adoption of cloud services.
The drive for digital is the natural evolution of customer demands and expectations from a decade of digital transformation in the retail commerce industries. Retail and commercial customers alike now expect a seamless digital experience, and all generations are becoming more comfortable conducting financial business online.
Consumers’ ability to order and pay for items online from a full marketplace of retailers, along with the introduction of contactless retail stores using mobile wallets to create frictionless experiences in financial transactions, have conditioned customers to expect that same experience at their bank. In order to satisfy customers’ expectations, banks must also offer digital wallets and facilitate digital peer-to-peer and real-time payments.
To meet these needs, an overwhelming 96% of survey respondents plan to either maintain (32%) or increase (64%) technology spending in 2020. The most common technologies bank executives plan to incorporate or increase spending on include:
- Mobile Banking Apps
- Digital Onboarding
- Customer Relationship Management (CRM)
- Digital Lending
- Same Day ACH
Each of these technologies will help bankers address one of several age-old issues driving strategy – customer acquisition, customer retention, profitability or efficiency.
Mobile Banking Apps:. Bankers know that mobile apps are one of the best ways to attract new customers and interact with existing customers on a regular basis. MX’s “Ultimate Guide to Digital Banking” report found that 84% of consumers use their mobile banking app at least weekly and more than half now use it every couple of days.
In 2020, bankers are looking for ways to enhance their first-generation apps. The mobile app has advanced beyond just checking account balances, so banks are enhancing features to ensure that customers can conduct all their business on a smartphone.
Digital Onboarding: When it comes to customer acquisition and onboarding, financial institutions must ensure they provide consumers with the frictionless experience they’ve come to expect from every product, service and business they encounter in their daily lives.
For banks, that means leveraging a digital, core-integrated account acquisition solution. Banks are investing in secure, online account-opening solutions that can meet identity regulations and provide instant approval or denial of new applications. And once the customer is onboarded, the bank can send personalized offers—via the new customer’s channel of choice—for additional solutions or add-ons to products they’ve already selected. This personalized service helps meet the customer’s individual needs and provides them with the best possible experience.
Customer Relationship Management (CRM): Financial institutions are arguably one of the most data-rich industries. Despite this, many bankers do not take advantage of their data to spur growth in their business and create opportunities to build stronger relationships with their customers. To address this gap, bankers report that they will integrate their CRM with their core system. An integrated CRM gives the bank the power to instinctively pinpoint customers’ channel preferences and proactively anticipate their product and service needs by providing real-time insight and holistic views of each customer.
Digital Lending: In the survey results, digital lending ranked among the least important strategies, only ahead of social media outreach. However, digital lending remains a primary strategy for increasing customer acquisition, and is anticipated to blossom into a $30 billion industry by 2025. This is one of the areas in which non-bank companies, such as Best Egg and SoFi, have made significant inroads. They pose significant competition for banks.
Customers want the luxury of researching and applying for loans at times and locations most convenient for them. If given options to sit on their couch while considering loan options or enter a branch during a limited time frame, consumers are increasingly choosing the former. In order to remain competitive, banks must explore ways to provide user-friendly digital lending experiences.
P2P and Same-Day ACH: The days of carrying out transactions primarily through cash and check are dwindling. From a payments perspective, P2P and Same-Day ACH are the two areas that took the lead for anticipated payment technology spending in 2020. Roughly 31% of respondents placed P2P as their highest priority in the coming year. In the beginning, Venmo and PayPal experienced adoption largely from millennials and centennials, but the demographics are changing. All generations are now adopting digital payments due to their ease of use and option for instantaneous payments.
Further, 27% of the survey’s respondents said Same-Day ACH was a top priority, since consumers continue to demand instant access to funds transferred digitally. The push from the Federal Reserve to develop a real-time payments network has only increased the expectations for eliminating the old three-to-five day wait to transfer funds.
Technology investments are a requirement for banks, and community and regional banks must take necessary steps to keep up with the big banks. Cornerstone Advisors studied banks’ tech spending as a percent of assets and found that large banks spent, on average, 0.4% to 0.5% of their assets on tech each year. Banks with $500 million to $50 billion in assets spent only 0.22% of their assets on technology investment.
Overall, strategic technology investment helps banks reach new customers and retain existing accounts in a more efficient way that will save time and money in the long run.
To gain additional insight from your banking industry peers that can help your institution develop its strategic initiatives, get your copy of CSI’s 2020 Banking Priorities Executive Report.
About the Author: Steve DuPerrieu is vice president of Product Management for CSI