Digital Banking

Digitization And Its Discontents

 The world, or at least the United States, is awash in digital technology — or maybe it only seems that way.

Last month, the McKinsey Global Institute found that improved technology adoption in the U.S., namely through digitization, could add as much as $2.2 trillion to the nation’s gross domestic product (GDP) through the next several years, to 2025.

Those gains would come chiefly through better productivity. Yet, that eye-popping addition to GDP has a more sobering consideration that comes in tandem with it — namely, the loss of jobs that would be a byproduct of those efficiency gains. The job losses over the same period, according to McKinsey, could range between 8 million and 12 million positions.

So, which industries will see their stars shine, and which are dimming? Perhaps no surprise, early and wholesale tech adopters have included information and communications tech firms (though these firms represent only 5 percent of U.S. GDP) and financial services outfits. Who lags? Those stumbling behind, in industries that are as much as 15 percent less digitized than the top echelons, include health care and construction.

Beyond the McKinsey report lies a payments-specific question: What of banking and financial services? The trends that drive Big Data and mobile have been bringing branches into the digital age, with mobile moving beyond the purview of consumer-driven adoption to actually lessening loads on tellers, through means of kiosks, for example. But will that be enough?

Perhaps not, given the fact that a recent report from BBVA found that millennials represent the upcoming (looming?) wave of banking customers and can be thought of as a generation that expects automation to be part of the transaction. Forget the fact that individuals may not have as much “asset power” as other cohorts. The key lies in numbers: Millennials represent a full one-fourth of the U.S. population, and that is enough to drive industries to either meet their demands and thrive or fall into obsolescence. The millennials are also among those demographics with relatively higher levels of education and, by extension, higher earning power and, by extension again, the eventual need to park those assets somewhere as they accumulate.

One thing’s for certain: Average millennials will not want to park their cash and investments with something that resembles their grandfathers’ old bank branches — or even their big sisters’, for that matter. In the move to digitization, the banks would do well to establish independent teams, as BBVA noted, reaching directly out to millennials on a personalized basis. But that takes capital and, in some cases, a lot of it. And, in the piecemeal movements that have been focused on bringing financial inclusion through digital payments technologies to nations that have never traditionally banked but now have cell phones and other mobile devices en masse, capital that must be spent goes beyond dollars but will require local efforts, local teams, local education efforts and more.

No wonder then that we may see digitization come through long-term partnerships between banks and their competitors that have skewed younger, nimbler and more tech-savvy, otherwise known as FinTech. Adversarial relationships may now become ones of opportunity. And through digitization that spurs innovation and greater numbers of transactions and satisfied customers, banking may just be the better for it.


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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.