Why are banks scared of change? How digital banking is driving disruption in 2022

By Matt Williamson, VP of Global Financial Services at Mobiquity

A cargo ship of luxury cars catching fire off the coast of Portugal leaves thousands of U.S. consumers with a hefty deposit sitting dormant. A semiconductor shortage makes it harder for consumers to replace the credit card in their wallet. And a global pandemic triggers unprecedented demand for digital banking services and unleashes a wave of fintech disruption.

Our interconnected financial system means any action — whether it occurs on the other side of the world or on your living room couch — produces ripple effects that touch every part of the global economy and everything from legacy banks to fintech startups to cryptocurrencies.

As digital trends accelerate and disruptions emerge in the year ahead, financial services organizations are reacting to change in real time. That includes growing enthusiasm for novel payments methods, more widespread acceptance of decentralized currencies, or shifting consumer demand and expectations for their banking experience.

In 2022, the big question is how major players in the banking industry adapt to emerging industry trends and what comes next, or whether they get lost in a reactionary cycle — fighting a constant struggle against change and falling one step behind their customers and competitors.

2022 Trends in Digital Banking

The past two years have felt like a constant reaction cycle for financial services organizations forced to keep up with the pandemic and its broad impacts on the economy and consumer habits.

This volatile environment put innovation at the intersection of necessity as banks adapted to historic demand for digital services and all of their conveniences. In fact, eight in 10 banked Americans now prefer to do digital banking via a mobile app or a website; among younger consumers, it’s nearly universal.

Here are a few key trends in digital banking we’re keeping our eye on:

• Cryptocurrency goes corporate: There is undeniable enthusiasm and a high volume of investment in cryptocurrency and other decentralized finance (DeFi) systems, which offer open-source technology as an alternative to the world’s current financial system and its regulations. This year’s Super Bowl, dubbed the “Crypto Bowl,” featured several high-profile ads promoting cryptocurrencies to its broadest audience yet. Soon enough, that could be matched by substantial seed capital. Though few legacy banks currently invest in DeFi services, this year could see major organizations take their first steps into this space.
• Banks buy into BNPL: Buy now, pay later — once dismissed as “modern layaway” — has gained steam among consumers interested in its flexible, interest-free payments. In fact, nearly one-third of consumers now say they’ve used BNPL financing, according to McKinsey. Big banks will almost certainly jump on the trend, keen to avoid another “Venmo Moment” that would let fintech run the BNPL game on their own.
• Wealth management isn’t just for the 1%: The ultra-wealthy and corporations aren’t the only ones with an appetite for investing. As technology makes investing tools and services more accessible, retail customers are more interested in wealth management; apps, neo-banks and other fintech startups have filled the gap to this point. A recent McKinsey survey found a 40% increase in direct brokerage accounts since the start of 2020, totaling more than 25 million new accounts. Legacy banks are well-positioned to offer services that democratize wealth management and financial health, leveraging existing customer relationships and troves of data on hand.
• The marketplace for banking services: More banks are opening up their systems to digital finance platforms and other third-party services, providing a marketplace for new offerings on top of banks’ existing infrastructure. For example, a bank could consolidate BNPL transactions under a single line of credit or connect a customer’s loan services organization to its own platform. These partnerships enable great transparency, better customer experiences and integrated services all under one roof. As these trends gain momentum, there’s no stopping their ripple effects.

Online is everywhere — meeting customers where they are

At the center of each of these trends is customer experience and the ways in which it’s evolving.

Gone are the days when banks could roll out an app and call customer experience a day. Today’s customers are blending experiences — logging on to a website one minute and a mobile app the next, switching between their cellphone and laptop, talking to a chatbot for one task or video calling a representative for another.

Customers expect an interconnected digital banking experience that meets all of their banking needs, whether it’s a simple money transfer, diving into crypto or starting an investment portfolio.

So what can you do to meet them there?

• Personalize the omnichannel experience: Your services are only as good as the experience that underpins them. An app’s “anytime, anywhere” banking functionality is great for paying bills or updating information, but customers are likely to seek out human interaction for high-touch interactions, such as applying for a loan or receiving financial advice. To create a true omnichannel experience, you can start by understanding how customers are accessing services and then offer a range of channels that your customers can personalize to best suit their needs.
• Follow the youth and be responsive to their needs: It’s no secret that banks have a generational problem. More than half of Gen Z and millennial banking relationships are at risk, according to an Oracle study, with younger customers much more likely to switch to another bank than their older counterparts. Winning over younger generations will be key to acquiring and retaining customers, and your digital strategy should reflect their demand for integrated, seamless experiences.
• Build trust with great transparency and accountability: Trust remains an important consideration for banking consumers of all ages. In particular, millennials and Gen Z customers rank trust as their No. 1 determining factor for choosing a long-term banking partner. Building trust can happen by integrating greater transparency and accountability into customer experiences, such as offering multiple channels for customers looking for answers to their questions, help with an issue, or to talk with a banker about their account.

The reality is we can’t predict everything that will unfold in 2022 and beyond. Will crypto come to compete with traditional currency? Will DeFi provide a safe, sustainable alternative to regulated markets? How will the metaverse take shape and how will it positively impact financial services? We can’t possibly know.

Some organizations may choose to ignore these trends altogether, only to be caught off guard and left scrambling to catch up. But the organizations that are best prepared to adapt to the new landscape and capitalize on disruptions, whatever they may be, are those that actively embrace change instead of fighting it. Understanding that the traditional ROI’s do not apply in contextual banking.

By doing so, your organization can not only react to change in today’s dynamic environment but start to drive it yourself.