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Fintech & Finserv CX

Banking Disruption & The Rise of Digital Banking

How Traditional Banking is Being Disrupted & The Ways in Which it is Adapting

If 2020 has made anything abundantly clear for the financial services industry, it’s that banks need to embrace disruption—or else succumb to it. In a survey by PwC, industry respondents said they believe a quarter of their business could be at risk of being lost to standalone fintechs within 5 years. 

Fintech disruptors are moving fast, bringing innovative technology and services to market. Neobanks, such as WeLab and Chime, are seducing millennials and unbanked consumers with all the perks of digital-only banking: no fees, helpful online tools, a user-friendly experience and personalized services. Other disruptors are helping consumers be smarter about spending and borrowing money, like ThriveCash, an up-and-coming fintech that gives students access to responsible lines of credit based on job offer letters.

Changes brought on by competition in the market are creating friction between fintechs and banks. And out of the disruption, one clear winner is emerging more supported than ever: the customer. As banks adapt to transforming technology, competition and expectations, they are enhancing their services and finding new ways to engage customers through an increasingly digital experience. Let’s take a look at five customer experience trends that are central to the rise of digital banking. 

1. Real-time, personalized assistance

Time-strapped customers expect help when they need it on the channel that’s most convenient for them. More banks are turning to chatbots and robo-advisors to fill that need, using artificial intelligence (AI) to provide fast, personalized service.

According to a 2019 Juniper Research report, chatbot integration in mobile banking apps will make up 79% of chat-driven customer interactions in 2023. 

Chatbots are a win-win, since they give customers instant answers around the clock, while saving banks millions in operational costs. The more an AI assistant interacts with a given customer, the better it becomes at giving personalized options and advice. Beyond simple demographics, chatbots can use data related to a customer’s lifestyle, purchase history, location and channel preferences to make recommendations and anticipate timing of need. By providing immediate 24/7 assistance, bots reduce the number of touchpoints needed to diagnose issues, improve resolution time and shorten sales cycles.

IHS Markit reports that, by 2030, the business value of AI in global banking will reach $300 billion.

2. On-demand, self-serve financial tools

It’s a given that consumers want digital banking that’s easy to use, accessible and available on any device, including mobile.

In 2019, more than three-quarters of Americans used a mobile device to check their bank balance. Bank of America continues to be an industry leader in that realm, with more than 25 million mobile and 36 million online banking customers. 

But the evolution of banking toward digital means far more than the ability to check your account details on your phone. Banks are investing in the digital experience by providing online, self-serve tools designed to actually educate consumers. Online services, such as credit card debt reduction tools, equip consumers with knowledge that can help them make better, more informed financial decisions. Huntington Bank and Wells Fargo, for example, both have AI-based software that gives personalized saving, spending and goal-setting advice and notifications.

3. The end of bank branches

According to the Federal Deposit Insurance Corp, over the last 10 years, U.S. bank branches have been closing at a rate of more than three a day. The COVID-19 pandemic has accelerated that shift, forcing more customers to turn to phone and online banking, while at the same time showing banks they’re capable of handling a remote workforce and more digital transactions. 

Like challenger banks that operate entirely online, big banks are cutting back even more on physical branches, drive-thrus and tellers to make way for an increasingly digital experience. While omnichannel banking still holds a place today, that very well could change in the coming years as customers demonstrate an increasing preference for digital services.

4. Fast and easy digital lending

Consumers are increasingly turning to digital-first providers when it comes to borrowing, too.

According to a study by Experian, digital lenders more than doubled their market share in the past four years. That shift has caused some banks to realize that, rather than competing with disruptors, their best way forward lies in working together and leveraging new technologies to improve the customer experience. 

Digital lending platforms are one way in which banks are partnering with fintechs to grow market share. Several online lenders, including Kabbage, Upstart and Blend, license their technology to major banks. Using online or mobile loan origination software (LOS), banks can provide automated decisioning for pre-approvals and funding of loans. The software improves the customer experience by reducing friction and making the entire process faster and easier.

5. Proactive, tailored engagement and communication

Tuning to a digital-first approach means banks have more direct and personalized ways to educate, notify, engage and survey customers, which translates to vast improvements in communication. Banks can instantly notify customers about billing, application statuses or upcoming changes. They can proactively collect feedback to eliminate friction in the customer journey. And they can share educational resources and information to help customers choose the right products and services for them.

Banks are meeting consumers where they are in their marketing tactics too, turning to social media marketing to drive awareness and engagement. With so much competition in the market, a targeted, data-driven, multichannel marketing strategy is essential to new customer growth.

Through AI-powered customer assistance, self-serve online tools, remote interactions, digital lending and tailored communications, banks are rising to the challenge of disruption and providing an enhanced digital-first customer experience. As disruptive competitors and shifting customer expectations inevitably challenge banks to adapt in the coming years, the biggest threat banking could face is a refusal to continue evolving.


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