Editor's note: To win the battle for the consumer, banks and credit unions must develop a digital strategy that provides them with scalability.
Editor's note: Like Tesla, financial institutions must consider the ways to remove barriers to innovation to provide customers and members with the experience they desire.
Editor’s Note: The following is third in a series of blogs excerpted from a report published by Celent entitled Defining A Digital Financial Institution by Daniel Latimore and Zilvinas Bareisis . D3 Banking has licensed the content used for general distribution. For the full report contact Celent. The previous installment in this series dealt with the the need for financial institutions to provide customers with a personalized, consistent user experience across all digital channels.
Editor’s Note: The following is second in a series of blogs excerpted from a report published by Celent entitled Defining A Digital Financial Institution by Daniel Latimore and Zilvinas Bareisis . D3 Banking has licensed the content used for general distribution. For the full report contact Celent. The previous installment in this series dealt with the the need for financial institutions to provide customers with a personalized, consistent user experience across all digital channels.
With digital banking adoption continuing to grow, branch traffic dropping and digital devices proliferating, the current approach is unsustainable for most institutions. That is why the results from the 2015 KPMG Banking Outlook Survey held few surprises. The study indicates that 46 percent of the banks that participated will increase their technology spending the coming year. In addition, nearly 40 percent of the bank executives said they plan to make “significant” investments in IT related to online and mobile banking over the next one to three years.
No one disputes that branch traffic is down and digital use is up at financial institutions. However, there is much debate over the conclusion that such a trend means that branchless banking is just around the corner. To some, the argument for keeping branches open seems to be backward facing, to a time long gone when most consumers had to make a personal visit to their financial institution to make deposits, open accounts and send money. Why hang onto branches when all those services and more can be completed on digital devices? To others, the inability of banks and credit unions to personalize the end user’s digital experience makes them hesitant to close the branches where they still do the bulk of their selling.
Financial institutions are awash in data that could enable them to construct the most intimate financial portrait of their individual customers in history including information about transactions, financial holdings, location, biometrics, user experience and social media feeds.
An IBM report analyzing 2014 holiday spending shows the distinction and complementary nature of digital devices. Smartphones drove 31 percent of total online traffic, nearly two and a half times that of tablets. While smartphones drove the traffic, more purchases were completed on tablets. Tablet accounted for 13 percent of online sales, whereas smartphones only accounted for 9 percent of total online sales.
In the last 270° View installment, we discussed how remarkably things have changed since the Stanford Federal Credit Union became the first financial institution to offer online banking. As noted in that blog posting, these changes have not necessarily been for the better in all cases.
More than a couple of really smart folks in the industry have suggested that for financial institutions to be able to respond to the digital revolution raging around them, they first must address the deficiencies in their core banking systems.