Five reasons why your digital evaluation needs to start now
Demand for digital banking is escalating at unprecedented rates. Given the impact of the COVID-19 crisis, a society already set to seize the digital momentum is now moving at warp speed. For banks and credit unions, that means super-charging your digital strategy and moving digital evaluations to the top of your to-do list.
As the world adjusts to an extended environment of social distancing, here are the top 5 reasons why your digital evaluation can’t wait.
The Pace of Technology Change is Accelerating
Peter Diamandis, self-proclaimed futurist and founder of the XPrize Foundation, an organization offering cash incentives to spur innovation that solves world problems, predicts that the world will see more technological progress in the next decade than was witnessed in the previous century. And, he has some solid thoughts to back him up.
According to Diamandis, computing power is getting faster and cheaper. In addition, the basic building blocks of most digital applications, such as communication networks, sensors, robotics, augmented and virtual reality, blockchain, and AI are all advancing at an accelerated pace.
Many banking executives admit that the writing is on the wall. Sixty-six percent of respondents to a survey conducted by The Economist Intelligence Unit believe that by 2025, technology will have had the single biggest impact on the industry.i
As the technology race continues to heat up, financial institutions that wait to start digital evaluations could easily be left behind.
The Top 15 Banks’ Hold on the Market Is Growing
According to S&P Global, the top fifteen banks increased their standing in 2019, gaining over fifty-six percent of all bank and thrift deposits. These industry leaders largely credit technology for their success in customer acquisition and retention as consumers increasingly seek to engage remotely.ii
Digital pays off for big banks in customer appeal. Forty-four percent of millennials bank with one of the top 3 financial institutions, according to a Cornerstone Advisor survey.iii You can bet that the digital bells and whistles these large banks provide is a primary reason why.
To top it off, we will soon welcome a record number of Generation Zers—the world’s first cohort of digital natives—onto the scene. The emerging generation of young adults is seeking to combine a world of top-tier support for financial matters with digital tools that help them accomplish everything from making a deposit to planning their savings goals remotely.
Expanding Wallet Share Depends on Digital
For every single visit to a branch, a consumer now accesses their banking app between fifty and eighty times.iv That’s Boston Consulting Group’s take away after reviewing the thoughts and actions of over 140 mystery shoppers sent into the field to evaluate digital apps and websites. Even more importantly, the consulting group wanted to get to the bottom of the financial institution’s ability to utilize digital components in a way that increased sales and share of wallet.
Their findings indicate that most banks scored low when it came to using digital apps to support activities related to new product sales, including product research, real-time fulfillment, and targeted marketing.v The latter is particularly surprising given that the data generated through digital transactions is prime for revealing insights that lead to personalized and more on-target marketing messages and campaigns.
The findings would indicate that financial institutions need to augment their analytics capabilities to deliver insights that boost sales initiatives. Given that forty-three percent of consumers are more welcoming to personalized offers compared to other forms of marketing,vi there is no time like the present to start evaluating capabilities.
Business Banking Goes Digital
According to the U.S. Small Business Administration Office of Advocacy, small businesses account for 99.9 percent of all businesses in the U.S., representing a tremendous opportunity for banks and credit unions to expand into new markets.vii
Because these smaller organizations often operate with limited staff, they are currently utilizing a wide range of third-party applications to do
everything from generating invoices to paying bills and even handling more advanced tasks, such as predicting cash flow.
However, fifty-one percent would prefer to obtain these additional solutions from their bank or credit union,viii adding up to a $500 billion opportunity.ix
APIs Are Here to Stay
While the digital evolution is in full swing, the rapid pace of technology change has offered some important advantages for addressing a new digitally-dependent society. One of them is the advent of application programming interfaces (APIs).
APIs invite innovation by providing a place where developers can “plug in” to create a full range of products. Suddenly, platform providers are no
longer constrained by the limits of their own talent, but can partner with multiple creators offering next-generation banking products.
With APIs, financial institutions can also take advantage of plug-and-play functionality, easily connecting to the products and services consumers want today and tomorrow. Thanks to APIs, there has never been a better time to go digital.
i “Forging New Frontiers: Advanced Technologies Will Revolutionise Banking.” The Economist Intelligence Unit, Jun. 9, 2020. Web.
ii “Largest Banks Keep winning Market Share as Deposits Soar.” S&) Global Market Intelligence, Sep. 21, 2020. Web.
iii Ron Shevlin. “Why Do 44% of Millennials Bank with Bank of America, Chase, and Wells Fargo? Mobile Banking.” Forbes, Jan. 13, 2020. Web.
iv Michal Panowicz, et al. “For Banks, a Long Way to Excellence in Digital Sales.” BCG, Feb. 11, 2020. Web.
vi “Consumer Attitudes on Personalized Ads.” Innovid. Retrieved from https://info.innovid.com/2020-consumer-attitudes.
vii “2019 Small Business Profile.” U.S. Small Business Administration Office of Advocacy, 2019. Web.
viii “Meeting Small Businesses Needs through a Consolidated Offering.” Aite. Aite, Oct. 2019. Web.
ix Ron Shevlin. “The $370 Billion Small Business Opportunity for Banks.” Forbes, Jul. 1, 2020. Web.