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Banks and credit unions have faced unprecedented levels of competition over the past year. Challenger banks and technology companies have attempted to disrupt traditional banking relationships and gain deposit share, threatening institutions' roles in their customers' and businesses' financial lives. As institutions look to adjust their operating models and business strategies to better align with shifting consumer behaviors and expectations, they should take notice of the trends and activities that are expected to impact the digital banking space in the coming years.
The increasing presence of digital banks
Over the past several years, neobanks like Chime targeted millennials, fintechs like
Digital is now the preferred touchpoint for most consumers, making this approach an effective way to gain deposits and expand an institution's geographic reach — if done correctly. For digital banks to be successful, institutions must ensure the digital experience is convenient, intuitive and delivers a significant differentiator.
Small businesses and the gig economy
Small businesses account for 99% of business in the
The gig economy will continue to rise in 2020. In 2018, the
However, institutions must act fast. Small businesses and gig workers will not simply wait around for banks and credit unions to offer the capabilities they desire, especially as fintechs and nontraditional competitors like Uber Money are aggressively pursuing them. Institutions must quickly deliver digitally optimized, intuitive experience small business owners and gig workers want or they risk losing these relationships and opportunities to grow revenue.
Digital transformation
The recent trend toward digital first banking represents a major shift in thinking. Traditionally, institutions have operated in silos, creating complexities and additional expense in the back office and inconsistent, frustrating customer experiences. Legacy technology impedes institutions ability to quickly innovate, making it difficult to keep up with new competitors. Now, technology has the power to "de-channel" disparate systems within an institution. As the race for deposits and new account relationships intensifies, the customer or member experience will supersede channel supremacy.
Next year, more institutions will simplify and streamline channels by leveraging tools such as API layers to connect customer and member profiles, ultimately reducing costs and enabling a more comprehensive, consistent banking experience. Such an approach allows banks and credit unions to seamlessly unify the digital and physical experiences, providing a personalized, intuitive experience regardless of touchpoint.
The customer experience battleground
This year's introduction of services such as the
However, banks and credit unions have trust equity that
In 2020 and beyond, it will be critical for banks and credit unions to reevaluate their digital strategies, including their approach to channels. They'll need to prioritize, modernize and enhance the customer and member experience if they want to maintain relevance. Such efforts will help institutions vie for deposits and compete against not only the bank or credit union down the street, but emerging disruptors as well.
Cover image: iStock
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