Consumer Digital Banking Strategies for a Competitive Advantage

To gain a competitive advantage in consumer digital banking, banks must prioritize omnichannel experiences that seamlessly integrate online and offline channels. This means providing a consistent brand image and user experience across all touchpoints.

According to a recent study, 70% of digital banking users expect a consistent experience across all channels, and 60% are willing to switch banks if they don't get it. By meeting this expectation, banks can build trust and loyalty with their customers.

Digital banking platforms can be designed to offer personalized experiences, using data and analytics to tailor services and products to individual customers' needs. For instance, a bank might use customer data to offer tailored financial advice or product recommendations.

A well-designed digital banking platform can also help banks to reduce costs and improve operational efficiency. By automating routine tasks and streamlining processes, banks can free up resources to focus on more strategic initiatives.

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To stay compliant with regulations, financial institutions should identify their products and services that use electronic communications, including those offered through fintech partnerships. This includes comparing their practices to the requirements in the specific regulation to ensure they're satisfied.

A key part of compliance is testing a sample of disclosures on the devices where they can be displayed, such as mobile phones, tablets, or laptops. This helps identify any deficiencies that need to be addressed.

To address any deficiencies, banks should work with management to implement corrective action, as needed. Regular reviews of electronic disclosures should also be included in change management processes, such as when introducing new products or making changes to existing ones.

The Interagency Guide for Community Banks is a valuable resource for banks considering partnerships with fintech firms. It's a guide published by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation in August 2021.

The guide is titled Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks. It provides helpful suggestions for banks to consider when vetting a potential vendor, including six due diligence topics.

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Performing due diligence is a critical aspect of the process, and the guide discusses six key topics: business experience and qualifications, financial condition, legal and regulatory compliance, risk management and controls, information security, and operational resilience.

The legal and regulatory topic is most relevant to consumer compliance, and the guide provides a nonexhaustive list of factors a bank can consider in conducting legal/regulatory due diligence.

Some factors to consider include reviewing the fintech company's risk and compliance processes, determining if the fintech company has experience with other community banks in complying with consumer laws and regulations, and reviewing the fintech company's information for consumer applications, delivery channels, disclosures, and marketing materials.

The guide identifies potential sources of information that banks can use in performing this due diligence, including proposed marketing materials and regulatory disclosures, methods used to monitor and respond to customer complaints, and customer complaint records involving the fintech company.

To mitigate compliance risk, banks should carefully draft contracts with vendors, including provisions that require the vendor to comply with applicable legal and regulatory requirements, allow access to the vendor's records, and authorize periodic reviews or audits for compliance.

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Some contract provisions to consider include requiring the vendor to comply with federal consumer protection laws and regulations, allowing the bank and its regulator to access the vendor's records, and authorizing the bank to monitor and review the vendor for compliance.

Additionally, banks may want to consider instituting approval mechanisms, such as requiring the bank to sign off on changes to marketing materials, and periodically reviewing customer complaints if available.

Compliance Considerations are crucial for financial institutions to ensure they're meeting regulatory requirements. A sound practice for financial institutions is to implement policies and procedures to comply with technical requirements regarding electronic disclosures.

To identify compliance issues, banks should compare their practices for delivering electronic communications to the requirements in the specific regulation. This includes reviewing electronic disclosures on devices such as mobile phones, tablets, and laptops.

Banks should also address any deficiencies noted in compliance reviews with management and implement corrective action, as needed. Regular reviews of electronic disclosures should be included in change management processes, such as for new products or changes to existing products.

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Here are some key compliance considerations for financial institutions:

Data at the heart of digitization is crucial for banks to provide a positive experience for their customers.

The Federal Reserve Consumer Help Center received approximately 2,620 digital banking related complaints in 2021, with 56 percent of these complaints related to mobile banking.

Error Resolution was the top theme associated with mobile banking complaints, accounting for approximately 490 complaints. This highlights the need for banks to have efficient processes in place to resolve customer issues quickly.

Funds Availability/Unable to Access Account was another top theme, with 367 complaints, emphasizing the importance of banks ensuring their digital channels are reliable and accessible.

Banks that struggle to cope with digital banking may see customers looking unfavorably on them. This is especially true during times of crisis, such as the lockdown, when customers are forced to use digital channels.

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The top three types of complaints for fintech products and services were Restricted/Blocked Account, Funds Availability/Unable to Access Funds, and Fraud/Forgery. This suggests that banks need to have robust systems in place to prevent these issues from arising.

Some banks are using data from their digital channels to improve customer experience. For example, they're using call center demand analytics to increase response times and redeploying branch staff to boost contact center capacity.

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Digital banking has become a game-changer for consumers, offering a wide range of features that make managing finances a breeze. With mobile and web banking applications, customers can transfer funds to friends and family 24/7, a feature that's been widely utilized.

Banks must ensure their web and mobile applications are user-friendly and light, with features like inbuilt payment split options or pay your contact. This makes it easy to split bills or send money to multiple people at once.

Making recurring payments has also been simplified with digital payment solutions like bank transfers, UPIs, and QR code payments. Customers can now clear their monthly expenses and payments directly from their mobile applications, saving time and effort.

Customers can transfer funds to friends and family using mobile and web banking applications, taking advantage of the ease and luxury of sending/receiving money 24/7.

The ease of transferring funds has been one of the most utilized features of digital banking, making it a crucial aspect of a bank's mobile and web applications.

Banks must ensure that their web and mobile applications are user-friendly and light to facilitate smooth transactions.

An inbuilt payment split option or pay your contact feature can add value to the digital banking experience.

This feature allows customers to split payments among friends or family members, making it a convenient option for group transactions.

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Digital banking has made it possible to apply for loans remotely, and banks can deploy technology to eliminate manual errors in the verification process. This simplifies and speeds up the loan application process.

Digital customers expect banks to offer online loan applications, which should include features for e-application, document verification, credit analysis, and loan sanctioning.

Banks can use technology to automate these processes, reducing the risk of manual errors. This ensures that loan applications are processed efficiently and accurately.

Digitalizing the loan sanctioning process guarantees loans that can be availed in shorter time frames.

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Data is key to a smooth digital banking experience. Banks should be using the data they're collecting to identify areas for improvement, such as increasing response times and better serving customers.

The use of chatbots can make a big difference, with some predicting operational cost savings of $7.3 billion globally by 2023. This can help banks to redeploy staff to boost contact center capacity.

Banks must ensure customers using remote channels have a positive experience, both during and beyond the crisis. This means maintaining connectivity for customers through apps, emails, and website messages.

A complete omnichannel experience is essential for digital customers, who expect a seamless interaction across multiple channels. Banks should offer their digital products and services over their website, mobile application, and integrated third-party applications.

Mobile applications should be the central channel, with other channels integrated to match the same. This will provide customers with a consistent and engaging experience.

Customer experience has become a key differentiating factor in every customer's decision-making process. A company's image is essentially fabricated from the positive or negative experience that it delivers to its customers, across the various touchpoints.

According to research, approximately 5% of organizations have users leave their website after just a one-second delay. Longer delays result in even higher percentages of clients looking for alternative options. This highlights the importance of minimizing delays in the customer journey.

Customers expect banks and financial institutions to offer consistent service across all channels of communication. In fact, more than 68% of customers have reported that their service representatives must have information about their service history. This emphasizes the need for banks to invest in designing a successful omnichannel experience strategy.

Digital customers value instant or near-instant gratification, and banks can lose customers if they don't deliver. To avoid this, banks should focus on providing prompt responses across multiple channels and train their representatives to offer quick solutions without unwanted delays.

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Banks should provide a digital record of customers' finances, including deposits, borrowings, expenditures, investments, and withdrawals.

Customers expect timely notifications about account credits and debits, credit card payments, EMI reminders, and recurring monthly expenditures on their connected devices.

Banks can offer value-added services like tax filing assistance, establishing emergency funds, and will and wealth management advice to enhance the customer experience.

A seamless digital customer experience is crucial for banks to achieve consistency across all channels.

Banks can capitalize on millennials' interest in financial planning by consolidating financial planning advice from multiple trusted sources and providing it in a single website or mobile application.

In today's digital era, customer experience has become a key differentiating factor in every customer's decision-making process. A company's image is essentially fabricated from the positive or negative experience that it delivers to its customers, across the various touchpoints.

Research suggests that approximately 5% of organizations have their users leave their website after as low as a one-second delay, and longer the delays, higher the percentage of clients that begin to look for alternative options. Therefore, any factor that attributes to a slight delay in the whole customer journey poses the risk of losing these customers.

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Customers expect banks and financial institutions to offer consistent service across all channels of communication. Interestingly, more than 68% of customers have reported that their service representatives must have information about their service history. Moreover, 73% of customers conveyed that they are likely to switch brands if the organization fails to offer a consistent omnichannel experience.

Here are some key statistics that illustrate the importance of omnichannel customer experience:

Digital customers vouch for instant or near-instant gratification, and banks and financial institutions must prioritize delivering a strong and consistent customer experience across all channels to meet their expectations.

Security and trust are top concerns for consumers when it comes to digital banking. Customers are hesitant to adopt digital banking channels due to the fear of thefts and frauds.

Banks and financial institutions must prioritize the safety and security of personal credentials, passwords, and pins to alleviate these concerns. This includes undertaking safety practices and advocating for best safety practices among clients.

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The key to building customer trust is to provide alternative ways to exchange personal data, such as secure online forms or biometric authentication. This helps to reduce the risk of data breaches and cyber attacks.

By implementing robust security measures, banks can increase customers' confidence and trust in their institution, leading to improved customer loyalty.

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