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Stephen Bohanon, Alkami Technology, Inc.
Stephen Bohanon, Alkami Technology, Inc.
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Digital Banking Investments Continue to Trail Behind Consumer Usage

Some key considerations for banks pursuing an omnichannel strategy.

According to a 2014 Pew Research report, 69 million consumers bank online. In addition, 15 million of those consumers – and rising – use their mobile devices to log into their accounts, check balances, view history, transfer money, view check images and deposit checks. This is not too surprising considering the rapid adoption of mobile and tablet devices. What is surprising, however, is that as these numbers continue to increase, the investments in digital banking by financial institutions do not match consumer usage in terms of channel preference.

The Future of Digital Banking

According to Mark Schwanhausser, director of multi-channel financial services at Javelin in a late 2013 Forbes article, “banks have been sitting there on legacy services and haven’t upgraded. Right now they have to recognize how fast the whole mindset is changing. They have to adapt to providing services not only in mobile, but then they have to use what they learn in mobile to reinvent and invigorate their online service.”

Stephen Bohanon, Alkami Technologies
Stephen Bohanon, Alkami Technology, Inc.

Schwanhausser went on to explain that the problem for bankers is that online and mobile doesn’t have a clear return on investment. Rather, banks see added costs for added channels. But the stickiness of digital channels is the true value. It’s what keeps customers coming back, he added.

[For More on Omnichannel Banking: All Roads Lead to the Omnichannel]

Consider this retail scenario: according to Bain & Company, once venerable companies, like Blockbuster or Kodak, failed to step up to the new era of digital. As a result, they were eliminated by the competition because they no longer appealed to tech-savvy consumers. Financial institutions face the same risks, but some continue to be hesitant with moving towards an omnichannel solution because vendors and their technologies are constantly evolving or consolidating.

Looking ahead, the adoption of mobile banking is anticipated to increase. According to the Federal Reserve’s “Consumers and Mobile Financial Services 2014” report, just over 33 percent of mobile phone users reported that they used mobile banking in the past 12 months. This is an increase from the nearly 28 percent of mobile phone users who indicated that they used mobile banking in the 2012 survey, and 21 percent in the 2011 survey.

The use of mobile banking is also substantially higher for smartphone users at 51 percent, up from 48 percent in the 2012 survey, and 42 percent in the 2011 survey. The higher incidence of mobile banking adoption among smartphone users suggests that as smartphone adoption continues to increase, so too will use of mobile banking, making it negligent for bankers to ignore it.

The Federal Reserve’s survey also found that among those consumers with mobile phones who do not currently use mobile banking, 12 percent report that they will “definitely” or “probably” use mobile banking in the next 12 months. An additional 18 percent of those who report that they are unlikely to use mobile banking in the next 12 months report that they will “probably” adopt mobile banking at some point.

Furthermore, changing demographics is making mobile banking a necessity. According to the report, individuals between ages 18 and 29 account for approximately 39 percent of mobile banking users. The next age group (30 to 44) accounts for 34 percent of mobile banking users, and those ages 45 to 59 account for 21 percent. Individuals over 60 account for only seven percent of users.

What Banks Should Look for in their Digital Banking Platforms

As online and mobile banking investments become increasingly critical, bankers must realize that not all digital banking platforms are alike. To fully reach the true value of digital banking, bankers must eliminate disparate channels and move towards an omnichannel banking approach. By investing in a single digital banking platform, banks deliver consistency across all channels. In turn, customers have a better experience and continue with – or even expand – their use of mobile and online.

In addition to improving user experience and satisfaction, banks are able to more effectively promote products and services through a single platform. Consider if a bank’s mobile banking interface highlighted a certain functionality or service whereas the desktop banking interface highlighted a completely different one. The mobile banking users may only be aware of what is advertised on the mobile channel and are therefore less informed about the other services – and vice versa.

Improved customer support is another benefit of investing in a single digital banking platform. With a platform that operates through disparate channels, call center representatives may not have access to a customer’s entire activity history. In an omnichannel banking environment, all banking activity from all channels is made available through one back-end system, providing the bank a complete view of the customer.

Investing in a single platform also means that banks have greater access to reliable, useful data, such as identifying which channel is being used more. This then enables banks to make intelligent decisions, such as where technology investments should be made based on adoption rates and usage trends.

Additionally, a single platform allows for consistent upgrades and updates. When an update is made to the mobile version, for instance, the same update is also made to the system’s online and tablet components; delivering the new feature across all platforms and on time to users, resulting in a superior user experience.

The Perceived Drawbacks for Investing in a Single Platform

Despite industry reports indicating strong growth in mobile and online banking – and the benefits of a singular system – banks continue to be slow with investments. One of the biggest concerns with moving towards a singular system is the fear of being stuck with the wrong partner. If financial institutions place their proverbial eggs in one basket and the digital banking provider they choose ceases to innovate, that effect will be felt by all customers across all digital banking channels.

In addition, compliance continues to be a top priority – not innovation or digital banking. According to Thomson Reuters Accelus Governance, Risk & Compliance (GRC) 2013 “Cost of Compliance Survey,”which surveyed more than 800 compliance practitioners from financial services firms, 67 percent expect their compliance budgets to rise this year.

While compliance clearly trumps digital banking, both can easily be achieved. A single digital banking platform can, in fact, assist with compliance by demonstrating insight into potentially fraudulent activity through a single source for a complete audit trail of a customer’s online and mobile activity.

Multi-factor authentication (MFA) and fraud analytics also help banks identify member behavior, as well as track their preferred device, common feature utilization and location. If different systems are used for each channel, this becomes problematic for bankers and requires them to investigate disparate systems for potential fraud.

Through an omnichannel approach, however, banks can track and consolidate user behavior regardless of device, which better protects customers. Essentially, an omnichannel approach is a win-win for meeting compliance needs and customer expectations.

As mobile banking adoption continues to surge, banks must get up to speed with their digital banking investments. But not every digital banking platform is the same. Consumers are becoming highly tech-savvy and expectations are growing; therefore, investing in a single digital banking platform that ensures consistency across all channels is a sure-fire way to improve customer experiences and satisfaction – not to mention maintain a competitive edge. Banks that fail to get on board and ignore consumer usage will ultimately lose.

Stephen Bohanon is Founder, Chief Strategy and Sales Officer of Alkami Technology Inc., a provider of digital banking solutions.

 

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