Few would dispute that the pandemic drove many people to
digital banking channels, but that was just the prologue. The long tail of the
trend underscores two challenges that must be addressed sooner rather than
later by all banking providers, including fintechs, and especially by regional
banks.
One is banking’s competition with fintechs and neobanks,
which typically excel at digital customer experience but increasingly feel
profit pressure to become more than a one-trick pony. The newcomers may start
moving towards banking’s app turf to compete on a broader front.
The other is to solve the “creative tension” within each
bank between mobile app development and online banking development, in terms of
emphasis, style and resources.
J.D. Power analysts cross-compared multiple studies on
banking and credit card mobile apps and online (web-based) services. In an
interview with The Financial Brand, Jennifer White, Senior Consultant for
Banking and Payment Intelligence, says that there will be no turning back on
the digital front, and that usage patterns are in flux.
Banks and Fintechs Will Encroach on Each Other’s App Turf
“In our pulse research on financial health trends, we’ve
learned that 39% of U.S. consumers have changed their behaviors after using
different tools and functions within their mobile banking apps or online,” says
White.
As people try out more digital money management tools, how
they use digital services will evolve. This will drive fresh thinking not only
on the part of traditional institutions offering digital channels but also on
the part of tech competitors, according to White. In some cases, she suggests,
there will be convergence of what each camp brings to the digital table.
Pre-pandemic, many banks chose the strategy of creating
online and mobile offerings that included robust account management tools,
alerts and financial literacy features. When Covid-19 arrived, says White, this
put them at an advantage with some people: Those institutions had made it much
easier for their consumers to make the transition to digital-only banking.
“Those banks were able to capitalize on people realizing
that the content was already available from their primary bank,” says White.
Fintech and neobank players, on the other hand, “are
typically transaction based and because of that they don’t generally have a
large amount of educational content — some more than others. But that’s not
been their purpose.”
Continuing, White explains that fintechs often offer
low-cost, easy-to-use transactional options. “That attracts a certain consumer
— some might say a younger consumer. But I don’t know that it’s exclusive to
that — it could just be the consumer is looking for a simpler way to transact.”
Post-Pandemic Consumers are Digital Savants:
Both industries have to realize that during the pandemic
consumers were exposed to online ways of transacting many kinds of business —
think of the transition many people made to telemedicine. This will drive
consumer expectations going forward.
Tech Firms Face Decisions about ‘Leveling Up’
It’s not likely that fintechs and neobanks are going to
start opening branches — though one expert predicts exactly that — but a
logical step for them, to better compete with traditional institutions, would
be to add advisor/agent interaction or similar services to their apps.
Their overall challenge, says White, is whether, and how, to
“level up” with banking institutions, especially large national ones that have
labored hard to replicate omnichannel experiences in digital form.
“Fintechs need to start thinking, ‘Wait a minute — our bread
and butter was made on the ideas of simple, lightning fast, low-effort’,” says
White. “‘So, as we decide to level up, we need to be careful about balance. We
need to make sure we haven’t gone to a place where we have information or text
overload or create difficulty in navigating’.”
The Battle of Banks’ Apps Versus Their Own Online Service
A few years ago, says White, the typical advice was that
mobile banking apps and online banking had to march, if not in lockstep, very
nearly so. Usually the recommendation by experts to institutions was that
mobile apps should mimic the bank’s online presence.
“If there was an online functionality that they could
provide, the mobile app had to be able to do the same,” says White. The idea
was to avoid confusion when people went from one channel to another.
But more recently the conventional wisdom has flipped.
“Mobile app innovation has taken over in many institutions,”
says White. “So we aren’t seeing the same degree of online innovation as we are
seeing in mobile.”
The firm’s research has found that banks and credit card
firms have invested much more in the mobile app user experience than in the
online experience in recent years. One factor is that standard-issue features
on most mobile devices, like user-facing cameras, facilitate functions like
facial identity that are not commonly considered for online banking.
As apps and online generally operate in banking now, there
are some functions that consumers tend to use more often via app and others
vice-versa. The chart, drawn from multiple J.D. Power satisfaction studies,
gives a sampling of the differences.
Going forward, according to White, the question is whether
there should be a split in design thinking between apps and online, or if there
should be a definite bigger push to mobile banking. The answer will vary among
institutions depending on their customer bases and who they are trying to
appeal to the most. One thing that appears clear, according to J.D. Power’s
research, is that mobile app and online design will increasingly and naturally
diverge as the mission of each evolves.
Most Regional Banks Have Catching Up to Do
As a general rule, regional banks studied by J.D. Power have
leaned towards a very clean and simple transactional design for their apps,
offering less depth than national players that have developed banking apps with
greater functionality. This has led to a widening gap, in favor of national
institutions, over regional players. Users feel that tools such as alerts are
lacking in regional players’ apps, for example.
Is Digital Going Two-Tier?
The time may have come for banking institutions to recognize
that mobile users are pulling ahead of people who lean toward online.
Online banking customers are considered less tech-savvy,
according to J.D. Power, and that observation supports splitting design
efforts. In any event, a key conclusion is that some banks have become stuck in
the “good enough” stage, and need to up their game if they wish to compete.
“The nation’s largest banks and credit card issuers have
been continually innovating new digital solutions that support increasingly
complex tasks, such as problem resolution, personalized alerts and profile
management,” says White. “This is driving increased engagement and significantly
higher levels of satisfaction as the world shifts to digital. That’s a
challenge for regional banks that have traditionally taken a simpler design
approach and are now starting to see customer satisfaction scores fall.”
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