By Michael Salo
If you are in the banking industry and asking yourself this question, you have some work to do. But you are not alone.
A recent KPMG report says that 57% of legacy banking institutions are only in the planning phases of upgrading their systems to provide more mobile digital banking services. And fintech competitors are “nipping at their heels”, happy to take advantage of what is clearly a “disconnect” between today’s financial services consumer and the banks that serve him.
And here are some additional statistics that should give you pause. A Price Waterhouse survey of global banking in 2017, as reported by seismic.com, shows that consumer behavior, relative to how they bank, is shifting rapidly and significantly.
- 81% of consumers have a smartphone and 60% of those report that they use mobile banking. Compare this with only 36% in 2012.
- Those using omnichannel banking (brick & mortar and digital) constitute only 47% of consumers today. Exclusively physical banking continues to shrink and is primarily a behavior of those 65+ in age (only 29% of this demographic uses mobile banking).
Still, physical bank branches are not yet dead. 62% of respondents state that a physical branch is important, especially for opening accounts of applying for loans. However, and this is very important, 82% of the 18-24 age demographic prefers digital-only banking.
The way in which younger generations will prefer to bank is clear. And banks will need to adjust their operational models, as well as the products they offer, based upon both these younger demographics and a new wave of banking consumers in developing countries who have mobile-only banking opportunities. To not adapt means to lose out to the huge number of fintech, digital-only, banking choices that consumers will continue to have. Indeed, the future of mobile banking will require that legacy institutions change both their services and their products, to align with new consumer demands.
The Digital Banking Technology in 2017
During 2017, a number of all-digital banks continued to increase their presence. These included Ally and Radius banks in North America, Monzo, Atom, and N26 in Europe, and Liv and Standard Chartered in Africa and Asia. The biggest draws of these “neo-banks” have been three-fold:
- Younger generations that are digitally-focused for all their needs have a strong comfort level with digitized banking. It is convenient and “on-the-go” banking which fits their lifestyles.
- Interest rates on savings (e.g. Ally Bank offers 1.25%) are significantly higher than traditional banks. And neo-banks, like Radius, offer hybrid checking/savings accounts with better interest rates as well. Add no-fee banking services to this mix, and you have a definite “winner.”
- Citizens in developing countries who have mobile phones but no access to physical banks have been drawn to the ease and convenience of all-digital banking.
While brick and mortar banks have tried to be competitive by expanding their digital services, they have still been unable to compete relative to interest rates and no-fee banking that all-digital banks offer. They have more work to do if they are to become competitive.
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Source:: Business 2 Community