The influence of digital access points on the decision by consumers to switch financial institutions continues to grow in importance. It makes a “business as usual” approach the most significant risk an institution can take in responding to the digital needs of customers. According to the Accenture 2014 North American Consumer Digital Banking survey, more than one in four customers would likely consider a branchless digital bank. In addition, nearly three-quarters of US customers—two-thirds in Canada—consider their banking relationship “merely transactional.”
It seems unlikely that these statistics will not continue to trend further in their current direction. Even though the Baby Boomer generation is hardly demonstrating an aversion to using digital devices to bank, pay and network with family and friends, there is another generation rising that will even more dramatically accent the importance of optimizing digital context for all organizations, especially banks and credit unions.
In the U.S., Millennials represent more than $200 billion in annual buying power. As their net worth grows, this number will continue to rise steadily each year. More and more Millennials will be financing cars, buying homes, opening investment accounts and creating college funds for their children. They are highly connected with an always-on mentality. According to the Accenture study, 94 percent are active users of online banking and 72 percent are active users of mobile banking. Thirty-nine percent would consider using a branchless digital bank, compared to just 16 percent for those over 55.
They also want help managing their finances. Sixty-seven percent want a financial institution that will help them create and monitor a budget, compared to 31 percent of Boomers. They expect their bank or credit union to be helpful in other ways as well. For example, 58 percent are interested in their financial institution proactively recommending products or services.
Baby Boomers agree on this point with 46 percent also wanting that kind of assistance. These statistics suggest that an institution that wants to use digital channels to maximize its competitive advantage will need to do more than achieve a consistent user experience across all digital access points.
Optimizing the digital context used to deliver services to customers and members means banks and credit unions must deliver services differently than they do today. One area that needs radical reinvention is money movement; e.g., account-to-account, bill pay, person-to-person services. Today, the consumer has to know the difference between all these types of services. This is similar to asking those who need the services of a company such as UPS to know whether their package needs to go on a truck, train, plane or boat. Consumers do not care how the package (or their money) gets to its destination; they only want to get a specific package (or amount of money) where it needs to go at a specific time.
Another area that is under-optimized in the digital context is personal financial management (PFM). The initial hype around PFM has largely faded, and most of the PFM services offered by banks and credit unions in the U.S. are stand alone solutions from third parties that present as a “tab” within the digital banking experience. Consumers must not only go through enrollment, but many systems require them to spend time building budgets, reclassifying transactions and setting goals. With Millennials asking specifically for assistance with finances, institutions hoping to attract them must completely rethink how they provide this kind of assistance.
Specifically, PFM must be so integral to the digital banking experience that it is not seen as a separate service at all. When a user enrolls in digital banking, transactions for the last 90 days should be categorized and a budget automatically created with comparative charting to show trends. No additional enrollment should be required and every digital user’s transactions analyzed. If the financial institution uses aggregation, this view can include accounts and transactions from sources outside the bank or credit union, too.
Categorization engines must achieve high levels of accuracy for this approach to work (95 percent or more) and flexibility must exist for the customer to customize categorization, budgets and goals. As with the example of money movement, this approach to providing counsel and support to the consumer is best done through innovation and simplification.