How the Digitization of Finance is Changing the Way Consumers Bank

A person is holding their cell phone and bank card in front of their computer illustrating multiple digital banking options.

In the same way that Amazon has usurped local bookstores, fintech powered digital banking services have begun to expand into verticals previously served by brick-and-mortar bank branches. This trend was accelerated by the COVID-19 pandemic when many consumers had no choice but to conduct their business online.

Banking customers have high expectations when it comes to their digital banking services due to the multitude of options at their disposal. Bank leaders need to be aware of this shift in consumer preferences so that they can adapt their offerings to drive customer satisfaction, retention, and profitability.

Digital Adoption During the Pandemic

The COVID-19 pandemic caused many banks to temporarily close their physical locations. While this upheaval was difficult, it also had a positive side effect – a dramatic increase in digital adoption.

Many customers that would not have otherwise used digital services were forced to begin using them during the pandemic. This digital banking trend continued into 2022. As lockdowns have eased and branches reopened, many customers have chosen to continue using digital services rather than returning to their previous patterns. At Bank of America, consumer banking digital sales made up 53% of total sales in the first quarter of 2022, surpassing in-person sales for the first time. However, bank branches remain vital for many customers, especially for complex transactions.

Bank Branches Are Likely to Remain Important for Complex Transactions

While many customers gained a newfound appreciation for digital banking services during the pandemic, research shows that consumers still prefer to conduct some transactions in person. According to Deloitte, more than three quarters of banking customers prefer to transfer funds via online banking or mobile banking apps while only 30% of customers prefer to apply for a loan using digital channels.

In general, customers prefer to perform simple banking transactions online like checking their balance, paying bills, and updating account information. On the other hand, customers still prefer to visit a bank branch or speak to a live person to perform high-touch functions like applying for a loan, opening an investment account, and receiving financial advice. These complex scenarios often generate questions that bankers can answer more quickly and thoroughly in person. Additionally, these complicated transactions generally involve a significant amount of money and bankers can create a greater sense of trust compared to digital alternatives.

Lessons Learned During the Pandemic

While branches were closed, banks tried digital methods to connect with customers who would have otherwise conducted their business in person, and these methods were met with varying degrees of success.

Video Calls

During the pandemic, some banks tried to blend human interaction and digital convenience using video calls, and this strategy proved moderately successful. After branches reopened, one-quarter of millennial and Gen X survey respondents said that they would be likely or very likely to continue to use this type of service.

Chat Bots

A less successful method of blending the human and the digital realms was chat bots. While these can be helpful in certain situations, they come with their own challenges.

Customers who engaged with chat bots found them to be less knowledgeable and empathetic than human representatives. Additionally, customers reported that using this service extended the time it took to resolve their issues. As a result, 82% of customers said that they would not use this feature in the future.

Digital services provide significant benefits for both consumers and bank leaders. But, for now, bank branches remain a key component of the customer experience, especially when it comes to complex transactions.

How Banks Can Adapt to Changing Customer Expectations

In order to be successful in a post-pandemic world, banks need to adapt to changing consumer expectations. This includes providing easy to use online features as well as maintaining a physical presence for complex activities.

Digital adoption skyrocketed during the pandemic, but customers still seek the empathy and comfort of human interaction. So, bank leaders have a complex task ahead of them – building and expanding easy to use online features while continuing to offer the in-person services that consumers value.

One way that bank leaders are approaching this task is through seamless integration of digital and in person services. These processes would make it simple for customers to engage in a multichannel journey. For example, a customer could use their mobile device to search for home mortgage services, use a chat bot to inquire about rates, call their customer service center to have their questions answered, and then fill out an application in their local branch.

Developing a seamless integration between digital and physical spaces will take time and resources. However, banks must work toward this goal to meet customer expectations while driving productivity and profitability.

At ADM, we keep our finger on the pulse of new developments in the banking industry. To stay abreast of these topics, as well as interest rate changes and other valuable financial information, be sure to check out our Insights page and follow us on LinkedIn, Twitter, and Facebook.

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