Old Channels Never Die, But How They Are Used Should Change


Editor's Note: We are more digitally connected than ever before, and that trend doesn't seem to be slowing down anytime soon. As the digital web continues to become part of our daily lives, it leaves an enormous amount of opportunities for banks and credit unions to capitalize on. In this blog we discuss customer interaction and how banks can succeed if they can adapt!

All aspects of life in developed and developing countries are being touched by the growing number of devices that keep us digitally connected. We can shop, bank, move money from person to person and use apps that help us monitor our health. Banks and credit unions have not been immune to this digital tsunami. Even as the digital web around us continues to weave into our cars and homes, many financial institutions are still trying to figure out what strategy will help them fully capitalize on this opportunity.

According to a survey conducted by Mercator Advisory Group, the percentage of those preferring to bank at the branch decreased from 34% in 2012 to 24% in 2015ยน. The fact that nearly one-fourth of people still prefer to visit the branch, as their primary form of interaction is actually quite staggering. However, as Generation Y continues to gain buying power and Generation Z gets ready to enter the workforce, this number will continue its precipitous drop.

Meanwhile, in the Ethernet, the revolution is being played out across all channels, such as mobile devices that did not even exist a decade ago. In a recent article published by The Financial Brand, 40% of people (77% of ) used mobile banking an average of 8.4 times in a 30 day period. What does all of this mean for financial institutions?

Some people with particular valuations to inflate, want to extrapolate these associated trends to suggest that the future will be ruled by mobile-only neobanks. This is no surprise as vested interests are a well-known source of near-sightedness. A more balanced, historic look at banking and some other industries (e.g., retail) teaches an entirely different story.

No channel ever completely dies. The preponderance of transactions in the United States is still cash-based. The ATM machine will be 50 years old this year. Payments using mobile phones are still struggling for transactions because of the gold ol' plastic card, even with its EMV inconveniences, still, controls the transaction space.

So it will be branches. They will not disappear entirely; however, the way they are deployed and used by financial institutions is already past due for an overhaul. All these factors will drive successful banks and credit unions to re-evaluate their points of interaction within this growing set of channels to optimize whatever channel the customer is using. That, it must be noted, is no easy game to win.

There are subtle differences in each channel that present challenges and opportunities. In the past, a branch employee would be lucky to speak with a customer 2-3 times a month. The digital environment offers many more touchpoints over the same period of time. However, in a digital environment, a customer or member will likely be less open to having their bank or credit union promote additional services and/or products - unless those offers are precisely targeted to the specific needs of the busy individual who is just checking an account balance.

With the copious amounts of data financial institutions retain about customers, it is possible for banks and credit unions to do the type of personalization required to leverage and monetize the multiple touchpoints available to them in the digital space. Take, for example, I have a goal set up to save for a new car in two years. As I slowly start approaching my goal, my bank or credit union can start promoting car loan options as I login to my bank account, knowing that I will likely be needing a car loan in the coming months. An example such as this is really just the tip of the iceberg.

It is important to note that personalization is only a small part of what customers are coming to expect in any digital interaction they have with any organization. Soon, if not already, these end users will begin to want their bank or credit union to not only personalize the experience but also anticipate their needs even before the customers knows what those needs are. Though these are not covered with expensive, modern-day versions of sackcloth and ashes who often pontificate about the end of the world for banks and credit unions, these are false prophets. It will certainly be a struggle for financial institutions to adapt to the new world order and it will no doubt take time - a lot of it - but this is not the first time they have seen radical change. Those other experiences will serve them well in the present and beyond.


1. Mercator Advisory Group: 2017 Outlook: Customer Interaction (Dec. 2016)

2. The Financial Brand: The Smartphone is the New Bank (11/1/2016)