Financial institutions are no longer just competing with the bank or credit union down the street, or even just the large national institutions. Non-traditional competitors continue to proliferate in the industry, posing a new threat to traditional banks and credit unions. So far this year, several major tech companies and retail brands have introduced or announced plans to introduce banking or payment offerings, touting a “seamless customer experience” as the selling point.
For instance, Walmart and Facebook have both recently announced their intentions to roll out cryptocurrencies. Both companies say they are creating these offerings to simplify and remove friction from the payments experience and better serve the underbanked. The Apple Card also continues to make headlines. This offering advertises low fees, easy-to-spend rewards, enhanced security and a seamless account opening experience. Apple is attempting to piece together the best aspects of Apple Pay along with best of breed card issuance practices to deliver a better, more digitally optimized customer experience.
While not all of these proposed offerings will make a significant impact or even come to fruition (there is still considerable backlash around Facebook’s Libra), it’s only a matter of time until one of these emerging competitors does ‘stick’ based on brand loyalty and customer experience and seriously threaten to disrupt the role of traditional financial service providers. The good news is, banks and credit unions still maintain a significant advantage when it comes to trust.
According to a Harris Poll survey conducted on behalf of D3 Banking Technology, more than three-fourths of Americans (78%) feel more comfortable with their financial institution having access to their personal data when compared to a large tech organization. However, we also know that convenience will trump trust most every time, so financial institutions must be able to provide an equal or better experience than these emerging competitors. Banks and credit unions that aren’t actively executing a comprehensive transformation of the digital customer experience risk falling behind and losing deposit share.
To be successful, digital transformation should include the ability to personalize the customer experience. The Harris Poll survey also found that more than three in five Americans (61%) want their financial institutions to anticipate their financial needs the same way online retailers do. Though banks and credit unions have a wealth of data about consumers’ financial information at their fingertips, they typically still struggle with how to best organize and leverage this data in meaningful ways. Financial institutions must ignite this competitive differentiator and leverage a modern digital banking platform to help them better access and use this critical information to provide personalized offerings at the most relevant times.
Though we don’t know who the next retailer or tech company to enter the financial services landscape will be, competition is only going to become more intense, so it is now more important than ever for banks and credit unions to provide customers and members with a frictionless, personalized digital experience and continuously innovate to deliver the latest features and functionality. If financial institutions don’t meet customer and members’ needs, there’s no doubt consumers will find another provider that does.