Digital Banking ... The New Checking Account?

Back in the old days credit unions and banks aggressively marketed to get your checking

account. The reason, banks and credit unions determined that the financial institution that held your checking account was your primary place for banking. While your checking account may not be profitable, all the other banking services and products you used were profitable. 

Fast forward to today. An analysis over five years by Digital Insight of their customer data showed that highly engaged members/customers that used multiple digital banking services are 51% more profitable than members/customers who do not actively utilize online or mobile banking. In addition, members/customers who actively use digital banking services correlate to having higher account ownership, balances, retention, and debit card purchases when compared to offline bankers. It is evident that those members/customers using multiple digital banking services become more “profitable” and engaged, when compared to the offline banking segment.     

The digital channel provides increased opportunity to reach your member/customer wherever they are, at any time. Therefore, the more solutions they actively use, the more engaged they become. By reaching members/customers through multiple digital touch points including emails, banners and prompts, financial institutions can cross-promote complimentary offerings to lead their members/customers to products and services that best fit their needs.

As credit unions and banks struggle with margin compression and seek new revenue sources the answer may lie with your digital strategy. Two of the first considerations when developing a digital strategy:

1. How can digital be used to create a better member/customer experience?  
2. How will it add to the bottom-line?

Most credit unions and banks begin to address question one, although most often in a disjointed piecemeal fashion, reacting to what Wells Fargo or Bank of America are offering.    

Regarding the question most credit unions and banks view digital banking as an expense to the bottom-line.

How do you go 180 degrees from expense to revenue? By developing and implementing a strategic omnichannel and digital banking plan that defines digital as its own self-supporting channel with specific and measurable P&L requirements and performance objectives. Move digital from being a channel designed to drive traffic to the branch network. Digital banking needs to be able to stand on its own.

Branches are not going away, but over time they will fill a different role than they do today. If you have any doubt, look at the enormous success of the branchless USAA Bank (66 billion in assets) or ING Direct Bank that was recently purchased by Capital One for nine billion dollars (US operations) and Scotiabank for 3.1 billion dollars (Canadian operations). They are digital channel only financial institutions, and the list is growing. 

The successful implementation of a sound omnichannel and digital banking strategy is what can set credit unions and banks apart and create a financial model that will set the path forward.

Digital banking is not an expense, it is the new checking account that drive relationship profitability.