Attention banks: your customers are tired of waiting for the next big thing.
After all, when is the last time banking innovation really changed customer behavior? We would have to go back more than a decade to find it, back to the days when banks started introducing remote deposit capture. The simple task of snapping a picture of a check significantly changed the way a customer interacted with a bank, letting people bypass the branch and access their funds more quickly.
Since then, banks have introduced scores of new mobile-banking features and other tools that have moved the needle on convenience, but haven’t revolutionized the industry.
Novantas research shows that customers are eager for more digital banking opportunities, but banks’ capabilities fall short. Even the seemingly simple action of opening an account online is often a bad customer experience, plagued by legal disclaimers, cluttered text on the screen, and a lot of fields that need to be completed. Not to mention, few banks provide customers the ability to complete the account-opening process online without having to visit a branch.
That means banks are losing opportunities to capture a fair share of new customers who are digitally-oriented in an era where more than half of consumers in the U.S. Canada, Australia and the U.K. say they are “always connected” (Exhibit 1). When it comes to existing digital offerings, banks haven’t done enough to drive awareness. As a result, many customers don’t know which banks offer the ability to open an account online and many banks don’t receive adequate “credit” for their digital capabilities.
Furthermore, the Novantas 2018 Global Multi-Channel survey found that mobile banking apps rank as the fourth most-common activity among smartphone users in the U.S., and more than half of customers surveyed in Canada, the U.K. and Australia had used their primary bank’s app in the past 30 days (Exhibit 2). The problem is that the majority of that banking activity is devoted to basic activities like checking balances, depositing checks and transferring funds.
The potential for further digital innovation lies in the activities that are still pushing customers into the branch, such as resolving account issues, opening new accounts, replacing cards, getting advice, or simply updating personal information.
In essence, banks are at the same crossroads as thousands of retailers globally that are grappling with the near-ubiquity of online shopping. Nike recently told investors that it expects more of its sales to move online, noting “undifferentiated, mediocre retail won’t survive,” according to the Wall Street Journal. Department store Nordstrom expects half of its sales to be online within five years. Meanwhile, hundreds of retailers filed for bankruptcy protection last year and thousands of merchants shuttered physical stores.
On the other hand, there’s the Motorola DynaTAC mobile phone from the 1980s, which has now morphed into a ubiquitous device that can take pictures, store addresses, play movies, send emails and—yes—provide phone service. Or consider the early days of online bookstore Amazon, which now owns a physical grocery store, creates original video content, and has more than 500,000 employees. Neither Motorola’s nor Amazon’s early observers could have imagined what the two companies and their respective categories would become, as both evolved dramatically and were forced to make big bets on how to meet future demand of their customers.
At this point, banks are only making incremental changes to their businesses.
Rocket Mortgage is one example of a company taking advantage of the banking industry’s slow crawl to the future. In a cheeky commercial during Super Bowl LII last month, the company pokes fun at complicated descriptions of a haircut, a menu item, and a fast-talking mortgage banker who spouts about PMI, origination fees and escrow accounts. “Rocket Mortgage from Quicken Loans makes the complex simple,” the voiceover says, as actor Keegan-Michael Key shows the mortgage customer an uncluttered application screen on a smartphone.
As the Multi-Channel Report shows, banks must not interpret consumers’ lingering attachment to branches and/or stated preferences for completing banking activities in the branch as a reflection of near-term — and certainly not long-term -trends. Instead, it reflects banks’ failure to meet current demand from customers. Continued failure or shortcomings will surely result in loss of share (in deposits and eventually customers) to well-resourced bank competitors and fledgling fintechs.
VP of Market Research, Chicago
Director, New York
Director, New York