The 2020 pandemic has forced financial institutions to focus on driving consumers to digital channels as branches across the country remain closed. As credit unions and banks reach a new state of "normal" over the coming months, more focus will be placed on mastering digital platforms and the user experience.
The challenge, however, is that many financial institutions are unprepared to adjust to these consumer trends and risk their users defecting elsewhere. Below is advice on how a digital-first strategy can empower financial institutions to adapt and thrive in this new normal.
Offering consumers a convenient way to bank on their own devices increases brand loyalty and grows deposits. In fact, mobile-first users give their financial institutions loyalty scores that are 50% higher than those from low-digital users. Additionally, net interest income grew 13% from 2014 – 2017 for loyalty leaders, compared to 5% for loyalty laggards.
Users who are advocates of their financial institution own more products, spend more on a primary credit card, and are more likely to buy their next financial product from their primary financial institution. Most importantly, loyal account holders are far less likely to defect to competitors.
Being digital-first naturally optimizes efficiency.
Omnichannel providers have eliminated manual processes and reduced call volume, thus freeing up resources for the financial institution and lowering the cost of ownership for any digital platform. For example, essential components of the loan application and account-opening process require staff members to verify a consumer's identity (Know Your Customer).
The process is typically inundated with requests for paperwork and driver’s licenses. However, thanks to innovation over the last five years, this historically lengthy process is being offloaded to companies that can auto-decision the identity of the consumer in less than 5 seconds, causing less friction for both the financial institution and consumer. The benefits of this are far reaching from both an internal and external perspective.
Financial institutions that use digital-first technologies leverage “The Network Effect” and drive organic growth. In the same way promotions like “Refer-A-Friend” have been widely successful in growing the user base of companies like Lyft and Uber, the referral strategy has also driven deposits for Philadelphia based Freedom Credit Union.
Financial institutions that use digital-first technologies leverage “The Network Effect” and drive organic growth.
In the case of FCU, a person using their mobile app sends a unique code to a friend and both parties receive $50 when the friend opens an account. This $100 acquisition cost is far lower than the industry average of $303. Other common tactics include financial and non-financial incentives such as one-time payouts, fee reductions, gifts, or event invitations.
As travel and social distancing restrictions are lifted and branches reopen, financial institutions should continue to invest in digital channels to meet increased demand.
By implementing a digital-first engagement strategy, financial institutions will see an increase in loyalty, profitability, and growth. Now more than ever there is an opportunity to build resiliency and outcompete the mega banks, neobanks, alternative lenders and other digital competitors. Offering a frictionless and omnichannel solution will significantly enhance the user experience and benefit both parties for years to come.