Last year’s events, as tumultuous as they were, have turbocharged digital transformation in banking. Here are three resolutions for banks to power the momentum in 2021.
1. Take a mobile-first approach
The key battleground between financial service providers has moved to mobile. With branches largely out of the equation and call centres taking up the slack, banks all over the globe have encouraged customers to use digital channels for managing their day-to-day money matters. Consumers seem to have taken the advice to heart. “According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%,” CNBC reported in May.
Now the question is: will customers ever return to their pre-pandemic ways?
Looking at mobile banking usage statistics from before the coronavirus crisis hit, I’m leaning towards ‘no’. In Business Insider Intelligence’s 2018 Mobile Banking Competitive Edge Study, 97% of millennials, 91% of Gen Xers and 79% of Baby Boomers said they banked on mobile. Sixty-four percent of users replied that they would research a bank’s mobile capabilities before opening an account, and 61% would change banks if their bank offered a poor mobile banking experience. Be it setting up bank alerts, checking their financial wellness score or cancelling their Netflix subscription, they expect product and service accessibility whenever and wherever they need it.
Once people begin favouring mobile-based account access, there’s no going back.Maria Schuld, Division executive at FIS
“Once people begin favouring mobile-based account access, there’s no going back. After the current crisis abates and lockdown orders are relaxed, we expect more U.S. consumers than ever before will be using their mobile devices to handle a wide range of their banking and payments needs,” Maria Schuld, division executive at FIS’s North America banking services group, told CNBC.
2. Be open to (more) open banking
Having just turned three, the new Payments Service Directive 2 was introduced to make payments safer, protect consumers and boost innovation in the market while ensuring a level playing field for all players, old and new. The possibilities seemed endless. PwC estimated its potential to create a revenue opportunity of at least £7.2 billion by 2022 across retail and SME markets. Use cases enabled by open API data ranged from account aggregation through better financial management to credit scoring thin-file customers.
Yet, the door to a truly PSD2-driven industry has only opened a crack. All we’ve got so far is a sneak peek into what financial services could – and should – evolve into, my colleague József Nyíri has recently concluded.
Will 2021 be the year open banking delivers on its promise? It just might be.
Juniper Research analysts predict that the number of open banking users (who share data via open banking APIs to aggregate their bank accounts and access new services) will double between 2019 and 2021 to reach 40 million. The uptick, they say, is fuelled by the increasing need for consumers to aggregate accounts and having their finger on their financial pulse in the wake of the pandemic.
But that’s not all. As PSD2 adoption matures, a new challenge is about to emerge on the horizon. “In 2021 we will see a growth of interconnectivity, with accounts listed and payments conducted from inside your favourite apps,” Forbes contributor Daniel Döderlein writes. “But we will have to wait for PSD3 for universal bank account access to be everyday for the majority of banked people.”
3. Put customers’ financial health first
“Just as epidemiologists have had to learn about the virus as it advances, economists must judge its economic toll on the fly,” reckons The Economist editor Henry Curr. The full extent of the economic damage brought about by the coronavirus crisis will only be clear once government interventions have scaled back, he argues.
Whatever the damage, the The World Bank foreshadows a subdued recovery. The global economic output is expected to expand 4% in 2021 but remain well below pre-pandemic projections. However, increase in the spread of the virus, delays in vaccine distribution and financial stress caused by high debt levels might spell further slow-down on the road to recovery.
This means that financial health is likely to stay high both on bank leaders’ and banking customers’ agenda.
In a study from the height of the pandemic, one in five respondents (21%) said that money concerns are having a bigger impact on their mental health than health worries. Thirty-eight percent also worried about the impact of financial stress on a loved one’s mental state. With the rise of machine learning and predictive analytics, plus a wealth of financial data on their hands, banks are in a prime position to help customers weather the storm. In fact, putting financial well-being at the core of their strategy might just decide the winners and losers in digital banking.