Banks Must Think Differently About Customer Experience In A Branchless Digital Environment

Banks have offered online accounts for years, but new digital banking technologies, such as mobile remote deposit capture, and a new generation of young customers are driving increased interest in digital bank accounts.

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Customers in their 20s and 30s have been quick to embrace mobile and online capabilities that are steadily making branches obsolete -- at least for day-to-day banking needs. The fast-paced adoption of mobile remote deposit capture to deposit checks is a recent example of this trend. "The advent of mobile remote deposit capture is eliminating the No. 1 reason for branch visits," says Teresa Epperson, a managing director at AlixPartners, a consulting firm.

Once consumers adopt mobile banking, they tend to increase their use of other digital channels, particularly the online channel, and visit branches less frequently, Epperson says, adding that this trend is most pronounced with younger customers. Consumers over the age of 35 responding to a 2012 AlixPartners' survey say that branch location is the No. 1 factor they consider when changing banks. Younger customers say a desire for mobile banking capabilities is their main motive for switching, and they increasingly are drawn to digital banking accounts, she reports.

In light of this trend, it's clear that banks that want to attract the next generation of customers must offer an exceptional digital experience to draw and keep their loyalty. As these younger customers mature, the industry will see a big shift in channel usage patterns for everyday banking, Epperson predicts. "Some banks want to create a digital bank under their brand. Others -- especially the large nationals -- are repositioning themselves as tech-savvy, digitally oriented organizations to get younger customers."

Who's Going Digital

Established banks such as Barclays and BBVA Compass are expanding the accounts they offer that can only be accessed online or through other digital channels such as mobile and ATMs with no branch support. Nonbank startups such as Moven and Simple also have entered digital banking with online and mobile account offerings.

Barclays' U.S. credit card operation, Barclaycard US, began offering an online-only savings account last year to help fund its credit card book, says Andrew Harris, director of deposits and customer experience at Wilmington, Del.-based Barclaycard US. These accounts are Barclays' first in the United States; it previously only offered credit card products in the U.S. And the bank has looked at expanding its online savings offerings with an online checking account, as competitors Discover and ING Direct USA (now known as Capital One 360 following its acquisition by Capital One Bank) have done.

Digital accounts are a great opportunity for Barclays, which uses the FIS Profile core banking system, and other financial services firms that don't have branch networks to gain account deposit market share from established banks, Harris says. "We see the amount of money moving from traditional banks to online-only accounts increasing each year," he says. Deposits in online-only accounts rose to $364 billion last year, up 32% from 2010 numbers, according to a recent report by consultancy Novantas.

However, the rise of digital banking doesn't mean "either/or" when it comes to channel activity. Digital banking actually is giving customers the opportunity to truly diversify where they're getting their banking services from, according to Harris. Customers used to treat their banks as a one-stop shop for their financial needs. Now they may have a checking account with a traditional bank and an online savings account with a credit card company or a tech startup, and they may use Mint (a personal financial planning website) as their financial adviser, Harris explains. Consumers no longer need a live person as their financial adviser, he says. "Digital is removing people, not just products," Harris observes. "That gets missed. We focus too much on digital products and not enough on service."

Banks used to rely on their branches to provide all of these services and to solve customers' problems. That's always been the value proposition of having a branch network, Harris notes, but in a digital world banks must think differently about customer experience. "When you have the branch to fall back on, you don't see the customer's journey through problems. Without it you have to think harder about the sad parts of the customer journey. You have to be more clear about not creating friction. It makes us think differently."

For instance, customers opening online-only accounts don't get to sit down with branch reps to guide them through the process. Instead, Barclays has a video on its website that takes new customers step-by-step through the account-opening process.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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