Prolonged lockdowns during the 2020-21 pandemic accelerated the adoption of digital banking. Consumers quickly switched to digital payments through mobile apps, which they were reluctant to use before.
For instance, in Q3 of 2020, the number of Chase consumers using digital solutions provided by the bank increased 6% YoY. On the other hand, the number of users using their mobile app increased by 10% YoY. (The number of digitally active customers was 55 million, and those actively using mobile apps was 40 million.)
The last two year have, without a doubt, driven the focus of banks on digitization and user-centricity. COVID-19 has set the bar for digital banking trends extremely high. A brand-new generation of customers is emerging for the post-COVID era. According to a McKinsey report, 75% of customers have tried different brands since the pandemic started. Out of these, 60% are expected to adopt new brands and stores into their post-pandemic lives and routines.
Today, consumers seek empathy, loyalty, and emotional connection from brands. The majority of consumers agree that it is high time for businesses to reconsider how they operate and contribute to society. Hence, banks will now have to widen their perceptions and enrich the digital experience with an emotional connection. Here are the ten digital banking trends that we may witness in 2022.
- Expanding digitization across all service verticals
Traditional banks offer a wide range of financial services but are woefully unequipped for digitization. The lockdown has demonstrated an urgent need for digitization in the banking and finance industry. Even though most banks across the world were gradually adopting digital processes, the pandemic exposed their unpreparedness and inefficiency to serve customers in the time of need.
For instance, consumers had to visit a bank branch to get KYC done or apply for a loan while risking their health in the process. The banks, unfortunately, did not adopt or effectively utilize the technology to guarantee remote service to customers even though it was very feasible.
This situation gave an opportunity to fintech startups to step in and fill in the gap. Banks must take a lesson from this. They must thrive to deliver a better experience to consumers by expanding their digital offerings.
- Implementing a customer-centric culture
Digital-first companies can quickly adapt to changing customer preferences. They can remove obsolete practices, upgrade to newer technologies, and modify products according to clients’ needs. Today, the business culture has become a crucial component of success. Even a well-thought digital transformation can fail miserably if a customer-centric mindset is not there at the company level. For instance, 79% of US customers are interested in brands that understand them and care about them, and 89% of the customers want to engage with only those brands that go above and beyond.
It means that creating a digital journey with the customer at the center is the need of the hour. Fortunately, it is easy to implement in digital-first companies. All that is needed is some critical planning. The whole company should be engaged in seeking and executing ideas that solve the problems of the customers. Even though it can be a little challenging for older banks to adapt to these changes overnight, when implementing the digital transformation, customer-centricity should be a priority.
- Addressing the gaps
The banking system, be it traditional or modern, can leave numerous gaps between what the customer expects and what the brand can provide. If the difference is more, there is a high chance that the customer will drop the brand altogether. A couple of decades ago, when only a handful of banks operated, it was difficult for customers to switch banks. Presently, digitization has made it easy for customers to switch banks and opt for a brand that would suit their financial needs better. For financial institutions to succeed in 2022, they need to address these gaps.
The gap between customer expectations and services of financial institutions exists at various levels, such as:
• The culture gap exists when the top management is not customer-focused. This situation prevents employees from giving customers the best possible experience.
• The feedback gap happens when the organization does not collect feedback or fails to incorporate it into the business processes.
• The design gap is when products and services are of low quality. Bridging the design gap requires careful customer-centric planning. The execution gap is not being able to provide a satisfactory UX.
• There is also the value gap where the design of the products and services do not meet the customers’ expectations.
• A gap of overpromising creates even more disappointment.
• And finally, there is the emotional gap, where the customer feels that the brand does not care about their concerns.
When creating digital products, it is becoming immensely crucial to address these gaps. Some banks know this. That is why many traditional banks are open to collaborate with fintech startups to attract the newer generation of customers while still providing legacy services to the digitally challenged population.
- Building an emotional connection
Purpose and empathy are the two main currencies of a brand currently.
The second-order effect that we see now is people are suffering from pandemic fatigue because of working from home in isolation. With all processes becoming digital, people are feeling even more isolated. Therefore, building an emotional connection with the customer is becoming increasingly essential.
However, the banking industry often keeps such emotional connections at bay to preserve their notability. In 2021, fintech companies are building personalized experiences for customers based on these emotional connections. Now, it’s not just about using “first name” in their fintech marketing strategies, but keeping the entire digital experience personalized.
When it comes to digital experiences, banking apps are still nowhere close to the seamless experiences that digital platforms, such as Facebook or YouTube, provide. Also, they address the needs of the users in the best way possible. Banking apps can take inspiration from these platforms to build an emotional connection with the users. And this is not unknown anymore. Services like N26 and Mint are examples of apps that take personalization to the next level; Abe AI integrated banking services with Google Home provides a more convenient banking experience.
- Measuring modern metrics
With the customer experience as the primary focus, most financial institutions will shift to experience-driven metrics to evaluate their performance. The key performance indicators of digital banking products will assess how ably companies are engaging with the customer. The metrics will not just look at the operational efficiency but also how comfortable the customers are using them. The new metrics will consider user feedback which includes user comments, ratings, and recommendations.
Financial institutions can switch to these new metrics without many new investments. The metrics that FIs can evaluate include app store ratings, net promoter scores, customer lifetime value, reasons why most customers contact support, app retention and switch rates, active customer volume, etc.
- Automation and the shift to EQ
Emotional intelligence has become even more dominant after the pandemic. While banks and financial institutions have primarily marketed their IQ, EQ is slowly becoming a salient part of the equation. Newer technologies, such as artificial intelligence, are enabling fintech institutions to be less robotic. For example, BELLA is a banking platform that shows how brands can integrate EQ into banking. It provides a conversational banking platform with a massive focus on the community.
- Developing a consistent ecosystem
An issue with modern digital banking systems is the lack of consistency. Legacy banks experienced digitization in phases. It has led to a fragmentation of user experience. Visual elements across apps and websites look and behave differently. The internet banking website, the apps, the ATMs: each have their distinct interface. For example, the State Bank of India has multiple apps for investment, payments, card management. They even have an app that unifies all these features. Each of them has a different UI and design system. This UX is also completely different from the user experience that the website and the ATMs provide.
Customers expect all channels to provide a consistent experience when using digital banking. A unified experience will help establish a smooth transition as the customer switches between different banking platforms.
- Providing contextual solutions
With tools like big data analytics, banks can provide a more contextual experience to their customers. AI can be used to monitor spending activity and provide a recommendation. A great example of this is Trim. Apps like Olivia.ai forces users to change bad spending habits. Apps that deliver contextual experiences can inform users to take action when it is needed. They can monitor financial health and predict how the user’s current activities will affect their future financial health.
- Increased collaborations with fintech
Banks are increasingly partnering with fintech companies to integrate digital processes in their businesses. Traditional banks are often too big to be digitized overnight. Phased digitization has also caused fragmentation. Hence, banks can partner with fintech companies and startups to bring innovation and convenience to their customers. The partnerships can be for various reasons. For instance, Commerzbank partnered with IDnow to help verify customers over video calls. FidorBank has partnered with CurrencyCloud for its e-Payment system. Similarly, Bankia collaborated with Euro bits to provide invoicing services for SMEs.
- Sustainable and inclusive banking
Today, customers expect more from their favorite brands. For instance, people want to be associated with institutions that care for society and environment. And people do not hesitate to contribute to a cause. Banks can help their customers create a positive impact on the planet. It will help them stand out in the competitive market.
For example, the green fintech initiative: a collaboration between fintech and climate tech, makes banking sustainable. Banking solutions like Tomorrow and Bunq promise to make digital banking more sustainable. Platforms like Beyonic provides digital payment solutions to SMEs in Africa. Similarly, Tanda offers alternative financial solutions to the underbanked.
The pandemic reminded every business of its purpose and what it has to offer to its clients. Customers expect banks and financial institutions to have their back, understand them, and help them out actively. The shift to digital that started way before the pandemic has suddenly accelerated. This situation has also provided financial brands with an opportunity to rethink their purpose, modify their mission statement and make the digital banking experience more personal, empathetic, and understanding.
WRITTEN BY Nidhi Agarwal