The Future Of Digital Banking

Last month, Tom Grottke, managing director in financial services consulting at the accounting, consulting and technology firm Crowe, was helping his 21-year-old son get an auto loan. They visited the websites of several banks and credit unions. 

Hands making contactless payment with a smart phone

The experience was less than stellar. Two of the credit unions had unintuitive applications with technical glitches. And one bank—a multibillion-dollar institution—didn’t even have an online application. It only provided a phone number to call. 

Grottke told this story to spotlight how many banking institutions, including large, well-established ones, have fallen behind on digital transformation. The banking industry is shifting rapidly with changes accelerated by the pandemic, and many bank branches sit empty. If banks previously thought they had three to seven years to adapt to the new digital age, that timeline has now sped up to two to five years, Grottke said. 

So, what should banks consider as they seek to innovate and better serve their customers? Grottke and Bob Reggiannini, who also works in financial services consulting at Crowe, weighed in. 

Where To Start With Innovation

As Grottke’s story suggests, one major area in which to invest is digital experience. Is the process of opening a checking account as user-friendly and intuitive as possible? It’s especially important to keep in mind that the experience should be seamless on both desktop and mobile. 

“It’s really now come down to mobile,” said Grottke. “I do not see consumers doing banking of any substantial nature on any other device but mobile.”

Mobile technology also opens the door for innovation in areas such as personal finance management. Artificial intelligence-enabled apps, for example, can offer consumer analytics, reminders and personalized advice. 

Of course, customers want to consult with real-life financial representatives, too, so another technology to consider is video consultation. This tool could pair well with simple scheduling technology—but many institutions aren’t even using that, said Grottke.

What If The Old Way Is Working?

Executives might be resistant to investing in too much change because the traditional banking model does still work. Even in the current climate, some banks have maintained market share and achieved growth. But there’s still room to begin or expedite the evolution of your delivery channels.

Institutions that want to evolve, but might be met with resistance, can benchmark their digital transformation progress against the market. 

“We’re not saying throw the baby out with the bathwater. Don’t stop the good stuff you’re doing,” said Grottke. “But you’ve got to move toward transformation.”

Though traditional banks have an advantage for now in terms of market share, fintech companies and challenger banks with innovative technology are quickly moving up the ladder. Younger customers who are opening bank accounts are “doing that through mobile selection,” said Grottke. 

He pointed out the example of one popular stock trading app that recently added millions of active users. The app has a simple and attractive platform, and it offers incentives to those who download it and refer friends. Though the app is controversial because critics say it’s gamifying investing, Grottke said the flip side is that the product has created an experience that’s “fun, attractive and exciting.” These factors are increasingly important to digital engagement.

Be Nimble

Traditional banks have a lot to learn from fintech newcomers. Community banks, for example, historically have moved at a “glacial” pace when it comes to innovation, said Reggiannini. “Customers are not going to stand for it.” 

Grottke recalled one bank that made a sizable investment in upgrading its digital systems. Before rolling out the upgrade, the bank wanted to confirm that every detail—from mobile notifications to emailed balance alerts—was intact and at least all existing features were there. Since getting everything perfect created too many delays, the bank reluctantly decided to release the new platform without some features it thought were critical. 

“The feedback from customers was, ‘What took you so long?’” said Grottke. The bank added on the additional features in the next few months, and the “customers loved it.” 

In other words, the product doesn’t have to be perfect from the start—but it does have to be better. 

Meanwhile, traditional banks also have a paramount lesson for digital banks: Personalize the experience. 

“It’s still a relationship game,” said Reggiannini. “Digital banks are probably looking at personalizing the customer experience in terms of capturing accounts. But it’s a better, smarter strategy to look at it more holistically, as a relationship versus on a per-account basis.”

Take A Balanced Approach

Keep in mind: Brick-and-mortar banks aren’t necessarily going away. Markets such as Miami, San Antonio and Las Vegas happen to be doing well as people relocate to these areas, Grottke said. But banks don’t necessarily need stores everywhere.

“Stores matter, but they need to be rationalized and redesigned for specific purposes,” said Grottke. Plus, banks need to think long and hard about what to do with employees, infrastructure and equipment.

“You can’t just go out and shut all the branches down,” Reggiannini said. “It’s got to be a balanced approach, based on growth markets versus traditional markets that are not growth markets anymore.” 

In our rapidly digitizing world, it’s clear that banks must act fast to keep from being outpaced and outdated. The future is now—embrace it.

Need guidance and tips on navigating digital transformation? Find the latest insights from Crowe on what you can do to strengthen communication, productivity and work-life balance.