Digital-First Banking

The Pandemic’s Push For The FI/FinTech ‘Win-Win’

Anecdotal evidence has shown that the digitization of consumer habits began the day stay-at-home orders effectively shut down in-person interaction in the real world.

Necessity being the mother of invention, consumers rapidly reset their lives around digital across the board — from working to shopping to learning to managing their financial lives online. But Ondot Systems Vice President of Customer Success Balu Kikkeri told PYMNTS that evidence of that great digital shift is now visible not only anecdotally, but in the data as well.

He said research has shown that as of June, 17 percent of senior citizens were logging into their financial accounts via smartphones at least once a week. And the share of digitized consumers only goes up as ages go down. That number climbs to 38 percent among baby boomers, 74 percent for Generation Xers and 85 percent for millennials and Generation Z consumers.

Kikkeri said this is the highest penetration that mobile banking has ever seen among consumers. And for financial institutions (FIs), that translates into an incredible opportunity to build better digital banking journeys for their customers.

But an opportunity is only as good as the bank’s ability to pursue it. Kikkeri said that’s why FIs must consider how to leverage their FinTech partnerships and push to market the digital services that customers have become habituated to in the past six months.

“Consumers are expected to be able to undertake digital journeys that are truly self-service,” he said. “For example, if I should lose my card, I should be able [to] get a replacement, get it instantly pushed to my digital wallet and be able to activate it instantly online.”

But the playing field to providing those services to increasingly digitized consumers is getting both more crowded and more competitive, Kikkeri said, and banks need to build partnerships to deliver on consumers’ emerging needs, or risk being disrupted right out of the game by Big Tech players who will.

Getting Ready To Fight Off Apple And Google

Kikkeri said the pandemic’s shift in consumer behavior isn’t the only big change to the market that has recently appeared on the horizon. He said FIs are also increasingly feeling competitive pressure from the Apples and Googles of the world, which have begun moving quickly into the segment and applying lots of pressure on incumbent players.

Apple and Google are bringing a new level of user experience to banking and payments that did not exist before now,” Kikkeri said. “They're clearly shaking up the industry, as they are teaching consumers to really expect convenience and simplicity.”

He added that while convenience and simplicity both sound like easy and obvious goals, providing them in a secure manner to customers across any and all channels isn’t.

That’s where FinTechs can come in. However, Kikkeri said FIs should consider the robustness of potential FinTech partners’ offerings. Is something geared toward transactions across multiple channels? Does the FI understand the FinTech’s ecosystem beyond simple licensing requirements? Is a given FinTech looking ahead to technology shifts to things like real-time transaction cards? What is the process implementation period like?

“Any new technology requires an initial output of funds,” Kikkeri noted. “So, when working with partners, it is about finding a robust infrastructure in the cloud that scales as the customers’ needs increase overtime.”

A Better System Benefits Everyone

Kikkeri added that it’s important to keep in mind the many ways that improving the customer journey also improves the bank’s experience in provisioning services to consumers.

For example, Kikkeri said that the simple upgrade of improving the transaction data that customers see on their digital card statements can take pressure off of an FI’s call center.

“If a customer sees a transaction labeled as going to ‘RBX Idaho,’ it leaves them wondering if they have ever been to Idaho, and [they] have no idea what ‘RBX’ means,” he said. “That confusion will often make them call a call center to find out what's going on. On the other hand, if that same statement reflects a Redbox kiosk near their home, it won’t merit a call now. They remember the purchase.”

Kikkeri said such self-service solutions can also reduce pressure on call centers. For instance, a customer who can report and replace a lost card in-app without a stopover on the phone will often jump at the opportunity.

He said that means banks need to consider how to partner with FinTechs to build those services and push them to market quickly. Customers are looking to make connections with providers that have risen to and exceeded the challenge of digitization.

“Right now, what banks need to be considering is how they can offer services to their customer outside what they would normally do with banking and loan products,” he said. “That is going to be what is truly helping as we move forward over the next 18 to 24 months.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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