By, Doug Brown, senior vice president and general manager of NCR Digital Banking
Banks and credit unions face new threats, opportunities and pressures that challenge their operating models and business strategies. NCR, a leading technology company for the banking industry, today shared commentary on trends and activities are having the most significant impact in the digital banking landscape and trends to watch out for in 2020.
The rising presence of digital banks accelerated by challenger neobanks and technology players. Banks and credit unions continue to face a more competitive landscape in the increasingly critical battle for deposits. Not only are they competing against large institutions, but now they must also contend with many newcomers attempting to disrupt the financial services space. The challengers include neobanks like Chime focused on millennials, fintechs like Kabbage focused on business liquidity and even major tech companies such as Apple Card or Google Checking.
In 2020, more banks and credit unions will deploy digital brands to help attract new customers and members and expand their current geographic reach. Because digital is now the preferred touchpoint for many consumers, this method can be an effective way to gain deposits and grow – if done correctly. Institutions must ensure their digital experience is convenient, intuitive and delivers a significant value add.
Drive to better serve the needs of small businesses and the gig economy. Small businesses represent a traditionally underserved segment by traditional financial institutions. Most financial institutions don’t offer a solution built specifically for small business owners, forcing them to conduct their banking with modified versions of commercial offerings too complicated for their operations or inadequate retail solutions lacking the financial tools they need. This is a significant opportunity for banks and credit unions, as small businesses become large businesses and better serving these organizations now can lead to increased revenue opportunities down the line.
The gig economy is undoubtedly on the rise. The Bureau of Labor Statistics reported last year that more than 35% of the U.S. workforce are gig workers, and that number is expected to rise to 43% by 2020. Like small businesses, this presents an unprecedented opportunity for financial institutions to attract new relationships and expand existing ones, providing customers with the tools and guidance necessary to manage both their personal and business financial health.
However, small businesses and gig workers will not simply wait around for banks and credit unions to start offering relevant tools. Fintechs and nontraditional competitors like Uber Money have identified the notable revenue opportunities and are aggressively marketing to these segments. Traditional institutions must quickly deliver the digitally optimized experience small business owners and gig workers want with the robust functionality they need, or risk losing these relationships.
Unification of siloed channels through digital transformation. Banks and credit unions have historically operated in siloes, creating complexities and added expense in the back office and inconsistent high-friction customer experiences. Legacy technology has prevented institutions from quickly introducing innovations, making it nearly impossible for banks to keep up with new competitors like fintechs and challenger banks.
The recent trend toward digital first represents a major shift in thinking. Technology now has the power to ‘de-channel’ silos within a bank or credit union. As competition for new account relationships intensifies, the customer or member experience will supersede channel supremacy.
In 2020, we will see more institutions working to simplify and streamline channels by leveraging tools such as API layers to connect customer and member profiles across previously separate channels, ultimately reducing costs and complexity and enabling a more complete, consistent banking experience. This approach will allow banks and credit unions to effectively merge the digital and physical experience, providing a personalized, consistent experience that they expect, regardless of touchpoint.
The customer experience battleground. The industry has been talking about the customer experience for years, but this year’s introduction of services such as the Apple Card and Uber Money has made it more critical than ever before. The quality of the experience is now the new battleground for customers and members. For example, the Apple Card allows customers to apply within minutes and requires very little data entry, creating an exceptionally simple, easy and quick customer experience. This is now the standard against which all banks and credit unions will be measured against in 2020 and beyond.
However, banks and credit unions still have the coveted trust equity that Apple and other alternative providers lack when it comes to consumers’ finances. CareerBuilder recently reported that 78% of Americans live paycheck to paycheck; consumers can’t afford to take risks when it comes to their financial health. That’s why institutions have a real opportunity to win market share over these nontraditional competitors, but they simply won’t be able to do it with subpar digital experiences.
The increasing significance of the customer experience is one reason we’ve seen so many regional bank mergers this year. Banks are realizing the power and importance of scale, and how moves like these mergers of equals create opportunities to invest more time, money and resources in innovative services and experiences for their customers.