Not so long ago, brick and mortar banks were accessible and meeting the needs of all their banking customers. However, as the world becomes increasingly tech-savvy, bank users are expecting their banking services to keep pace.
Bank customers interact with their banks almost exclusively online or through a mobile application these days, and recently the banking industry has started to invest time and energy into improving their customers’ digital experience.
Banks Go Digital: The banking industry has had some fairly massive digital innovation going on in recent years. With customers interacting with online and mobile application banking software sometimes several times a day to make payments, check balances, and manage their accounts, the industry has stretched itself to meet these digital needs in the constantly digitalizing world.
There are many ways that banks have been increasing their digital presence, but the primary method of doing so has been by expanding their mobile application functionality. This trend could be in response to recent studies that have been done highlighting younger users between the ages of 18- to 24 making twice the number of banking interactions than users 65 and older. This same, younger user base is using their bank’s mobile platform before going in to visit a teller, but are also finding the digital channels to be convoluted and confusing – often seeking help by calling customer service.
This push for digital perfection, especially among younger bank customers, has driven banks to not only improve their application environments but also to expand the digital services they offer. Customers can now make payments, set up auto billing, manage their account balances, transfer money to other individual users, and view their monthly reports all from a mobile app. As banks increase their use of the digital space, they’re encouraging customers in all age demographics to save time and money by taking their banking interactions into the digital space.
What’s in it for the banks?: Although the front-end effort to launch new applications and services may seem like a headache, mobile and other methods of digital banking actually saves the banks a significant amount of money. According to a report done by Bain in November 2016, “Each mobile interaction incurs a variable cost of about 10 cents, vs. $4 for a teller or call-agent interaction.”
By increasing the amount of digital interactions, and the number of mobile services offered to customers, banks will start saving money hand over fist. Additionally, with continually improving digital options, customers will be able to self-service for the vast majority of their banking needs – increasing customer satisfaction and brand loyalty in the long term. More and more banks worldwide are looking to adapt themselves to this new digital trend in order to supply the customer demand for more digital banking options as well as to increase their revenue.
Non-Banking Services Compete: Non-banking operations that have cropped up in recent years are also capitalizing on this digital trend, and they are giving banks a run for their money. From international money transfer operators like OFX, budgeting and investing platforms like Mint, and the wide variety of eWallet services and peer to peer lending platforms, there is a digital-first business available to consumers for every financial need that exists.
These operations have a leg up on their banking competition – primarily that there is no transitional period for their digital transformation. Banks have to work to enter the digital age and rid their systems of the old ways – brick and mortar locations, ATMs, call centers, etc. This is not the case for digital-first companies who came in on the ground floor using exclusively digital platforms across web and mobile applications. They have the room to grow and increase their digital presence at a much faster rate than banks do, simply because they got a head start in the digital race.
Looking Ahead to the Future of Financial Services: With one in three people in primary banking markets carrying a smart phone, it’s no shock that banks and other financial service companies are sprinting to keep up with the need for more digital financial options. As we move forward, there isn’t any sign of this digital demand trend slowing down. With the increase in digital accessibility worldwide, more and more people around the world are turning towards digital options for a more convenient, less expensive financial experience. In fact, the way the trend of digital transformation is being pushed in the financial services industry right now, traditional banking is quickly becoming entirely obsolete.
In the very near future, we can expect to see traditional banking methods disappear as the industry becomes more digitalized and the options for financial services open up to include private operations – not just big-name banks and corporations. Theoretically, this will take some time. However, based on what we’ve already seen as far as digital transformation goes, it’s a safe bet that traditional banking will become obsolete much more quickly than we could have anticipated.
