By Dorel Blitz, VP Strategy & Business Development, Personetics 

Digital banks and financial apps have proliferated in number over the past five years. The market is flooded, and customers are spoilt for choice between providers offering almost the same services, at near identical cost. 2022 will be the year that banks radically step up their game to compete – and the battleground will be customer engagement.

The future of digital banking is not just about investing in the latest  technology, but a major shift in the nature of banks’ monetization models and relationships with their customers. In a crowded marketplace, the key to increasing customer lifetime value is for banks to move from the passive role of a ‘virtual vault’ to a smart, proactive and data-driven advisor. Forward-thinking banks are making the most of new technology, harnessing customers’ financial data to move from transactions to trusted advisors, empowering customers and actively promoting their financial wellbeing.

Let’s take a closer look at some of the top digital banking trends for 2022.

1. Consumers Are Willing to Switch to Digital Banks

According to Galileo’s 2021 State of Consumer Banking and Money survey, 62% of U.S. consumers say that they are somewhat or highly likely to switch to a digital-only bank. This is especially true for the younger generations: 77% of Millennials and 72% of Gen Z consumers said they were likely to switch to digital, compared to 55% of Gen X and only 27% of Boomers.

Digital banking customers also have a higher level of customer satisfaction:

• 65% of consumers surveyed currently use a traditional bank as their primary provider, and only 66% of these customers are satisfied.
• Among customers who use digital-only banks (21%) and stand-alone digital accounts (7%) as their primary provider, 79% and 81% are satisfied.

2. Growth of ESG Banking Products and “Green Banking” 

Banks are facing stronger demands from consumers and from regulators to be part of the solution to fight climate change, do business according to environmental, social, and governance (ESG) principles, and provide eco-friendly “green banking” products and services. According to Forrester, top ESG product launches in 2022 will include “green loans and mortgages, and checking accounts with sustainability and carbon-tracking features.”

One of the biggest trends in green banking right now is carbon footprint tracking. Bank of the West was one of the first banks to launch a carbon tracking tool, as part of its 1% for the Planet checking account, which shows the carbon impact of the customer’s debit purchases. Challenger bank Aspiration also offers carbon footprint tracking with its Zero carbon credit card.

Consumers are starting to demand more detailed insights about the carbon emissions and climate impact of their everyday purchases. According to a Carbon Trust survey, 67% of international consumers support carbon labeling, and 64% would think more positively about brands that can show a reduction in their products’ carbon footprints.

In 2022, digital banking features will become more prevalent as a way for banks to help customers make better-informed choices about how their spending affects their carbon footprints, recommend green products such as home improvement loans for solar panels, and connect customers with ESG investments to help support a more sustainable economy.

3. Higher Focus on Financial Wellness for Customers 

Many middle-to-lower-income bank customers struggle to pay their bills, save money, and get access to good financial advice. Recent surveys have found that 44% of U.S. consumers are living paycheck-to-paycheck, and yet only 25% of consumers say that they would ask a bank or credit union for financial education.

Employers also are showing a stronger interest in providing financial wellness programs for their employees. The Bank of America 2021 Workplace Benefits Report found that 95% of employers feel a sense of responsibility for their employees’ financial wellness, 46% of employers are offering financial wellness programs (up from 40% in 2020), and 47% are providing their employees with access to financial advisors (up from 40% in 2020).

As financial wellness and financial education become higher priorities for employers and a larger topic of public conversation, banks have an opportunity to use digital tools to deliver comprehensive financial wellness support to their customers.

One prominent example is Bank of America’s Life Plan®, a digital financial wellness program that helps customers set and make progress toward specific financial goals. As of October 2021, one year since the program was launched, more than 5 million customers have signed up for Life Plan, and those customers’ account balances have increased by $34 billion. Life Plan customers have also set up more than 1 million follow-up appointments with Bank of America financial professionals, showing how digital tools for financial wellness can help drive additional personal interaction with customers.

By developing new digital tools and platforms focused on financial wellness, more banks can add value to their customers and develop longer-term customer loyalty.

4. Data-driven Personalization for Personal Interactions 

We believe that basic personalized insights will become table stakes for financial institutions in the U.S. market by the end of 2023. If personalization is not already in your bank’s technology budget for 2022, it will be for 2023. Customers are starting to expect a higher level of personal interactions from their bank, and data-driven personalization can make this more efficient.

Survey data from EPAM found that 34% of consumers want more personal interaction with their banks and credit unions; not personalized digital self-service, but actual interactions with another person who can talk with them about their finances.

5. Rise of “The Netflix Effect” for Banking

In 2022, we’re going to see the fintech and banking world adopt the “Netflix effect.” Modern consumers want an experience where banks and fintechs can think on their behalf and, like Netflix, provide automatic recommendations based on the individual. Just as Netflix learns more about what customers want to watch based on their everyday viewing, fintechs can help banks learn more about their customers based on everyday transaction data and spending patterns. When banks know customers better, they can help customers do better in their financial lives.

The future of banking will be more about helpful interactions between the bank and customer, where the bank proactively recommends the right product, financial advice, or personalized financial services based on the customer’s needs. Banks can go deeper into their customer relationships and identify occasions to recommend relevant services to the customer, such as a home improvement loan or an automated savings program, to help people reach their financial goals.

Digital banking in 2022 is not just about new technology or new digital features, it’s about rethinking the way banks engage and interact with their customers in all aspects of their operations. There are significant opportunities for banks in 2022 to use digital tools and data-driven personalization to know their customers, advise their customers, and help their customers achieve financial wellness.