Thursday, September 18, 2014

Putting the Digital Banking Puzzle Together

Digital banking is a relatively new term that encompasses ATMs, mobile banking, online banking and has expanded to include essentially all banking channels except for the branch. Like most iterations, digital banking started as a single solution, ATMs, but really gained traction as a term when online banking and mobile banking were introduced.

The result of this iterative process has been the implementation of a "collection" of technology solutions that are intended to allow credit union members and bank customers to digitally interact conveniently and effectively with their financial institution. Let's call this Digital Banking 1.0

Problems with Digital 1.0 are abound. The first problem is a lack of strategic planning and thinking as the new technology solutions and channels were introduced. The agenda and digital innovation are being driven by the major national banks that either have the resources to develop the technology or have acquired the technology. Everybody else is following, trying to keep up. As a result, there is no digital strategy, it is all reactionary, and digital implementation is a hodgepodge of disconnected solutions.


I was having lunch yesterday with a couple of friends and a discussion about banking began. How exciting I must be as a lunch companion. A question was asked, "Who has an account at a credit union or small bank?" They are both in the millennial generation and confirmed that they both have an account with either a credit union or small bank. I asked, “do you also have an account with a major national bank?" Again they both said they do. I then asked, “who do you prefer to do business with?" They both expressed a preference to for their credit union or community bank; however, both of them almost exclusively use the major national bank. I asked why? They both said, "Because they make it easy to do business with them." 

The credit union and community bank were their preferred financial institution because they provided better loan and deposit rates, better in-branch personal service, and they knew their names, but at the end of the day that is not enough to win their business. Why, because it is not easy enough to do business with the credit union or community bank. Both are relatively new to the Atlanta area. When they moved, their big national bank made the transition easy. To this day, neither one of them have set foot in their new branch locations. The lack of a comprehensive digital strategy sent these two high value customers to a large national bank.

This was a chance discussion, ............how often do you think this happens every day? The data is clear, according to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Why, because the big national banks have a digital strategy and are leading the market with the implementation of their strategy. 

It is past time for credit unions and banks to move into Digital Banking 2.0. You have lost
tremendous ground to the big national banks when it comes to the next generation of most profitable banking members/customers. It is not too late, remember they want to do business with credit unions and smaller banks; you just have to win their business by making it easy and convenient to do business with you.

How do you make it easy and convenient to do business with you?
  1. By making digital banking a highest priority
  2. By developing a digital banking strategy
  3. By allocating the resources necessary to implement your digital strategy
  4. By mastering social media communication
  5. By treating digital banking as its own P&L channel, and not a channel to drive members/customers to the branch or call center
  6. By quite asking the question was is the ROI. That is simply a question to stop moving forward. By the way, Forrester analysts have developed a concrete ROI for mobile banking of 15.7%, if that information helps you feel better
The first step is to assign or hire a digital banking executive to lead your credit union or bank into Digital Banking 2.0 



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