Deep Dive: The Many Roads To Digital-First Banking

PYMNTS’ Where Will We Bank Next? Survey found that banking customers are increasingly placing a higher value on convenience, personal data security and appealing products. These offerings are becoming table stakes for banks, with 34.8 percent of banking consumers being somewhat, very or extremely interested in changing their primary FIs because they did not have modern services. Banks that do not provide even the simplest of products risk falling behind. 

Many banks are taking digital-first approaches to meeting these demands, leveraging technologies such as AI, ML and data analytics to automate and improve customers’ banking experiences. The following Deep Dive explores the various methods banks are using to unlock digital-first experiences at their various customer touchpoints.

In-Branch Technology

Physical branch locations are still crucial despite digital banking’s disruption in the space. A recent PwC survey found that 61 percent of respondents ranked close physical branch proximity as an important factor when choosing an FI. Half of surveyed customers over the age of 35 considered it a top priority.

It has thus become imperative for banks to have the most recent technological innovations. For example, BMO Harris opened a new “smart branch” in Chicago last year with smart ATMs, video screens that link to live tellers and mortgage professionals, and employees equipped with tablets capable of conducting transactions. The location’s more efficient layout and distributed workforce ensures shorter wait times, enabling customers to do business faster than at traditional branches.

Umpqua Bank has made similar moves by opening a string of digital-first branches that feature touchscreen walls where customers can access bank services and products as well as receive recommendations for the best mobile solutions for their banking needs. The FI also leverages AI to predict customer inquiries and handle simple questions, such as account balance lookup. The offering requests help from staff only when queries are too complex.

ATMs Get Smarter

ATMs are another key facet of the digital-first banking experience. ATMs have become more advanced in recent years, offering unprecedented convenience and security with cameras, passcodes and biometric fingerprint and retina scanners.

Many banks and credit unions are supplanting old-fashioned ATMs with interactive teller machines (ITMs), which use high-speed internet connections to link customers to offsite tellers via video. This enables customers to perform a range of banking interactions that would be impossible at traditional ATMs, such as opening accounts, obtaining credit cards and handling checks. Some FIs are even deploying remote-activated lockers alongside their ATMs, allowing customers to submit sensitive documents without having to visit a physical location.

ITMs can also prevent fraud by allowing tellers to use a live video feed to match customers’ physical features with their identity documents. This function is especially useful in remote locations where customers have to travel long distances to branches for face-to-face assistance.

Many ITMs can be accessed either via advanced touchscreens or customers’ smartphones, with the latter enabling several functions that even full branches cannot. Customers can use their smartphones to select how much money they would like to withdraw, including the exact bills and denominations. Users only need to verify their identities before the transaction is conducted — a process that takes only a few seconds.

Bringing Banking to the Cloud

Digital-first approaches are also beneficial to FIs’ back-ends. Many legacy systems can be overloaded by the influx of new technologies, resulting in system failures and connectivity outages. This can disrupt internal banking operations, negatively affect banks’ business efficiencies and cause frustration when customers cannot access their accounts or instantly make payments or transfers.

Banks are turning to cloud banking to resolve these issues, as it can offload many of the advanced calculations and AI-driven functions necessary to run a digital-first ecosystem to third parties. FIs need only pay monthly subscription fees rather than invest heavily in dedicated hardware, software and IT personnel, saving money and offering powerful back-end infrastructures.

Third-party cloud servers do have their drawbacks, however, including compliance and security risks. Outsourcing data management systems can increase the chance of a security breach, and banks may face noncompliance penalties if their third-party partner has inadequate standards.

These are just some of the many paths banks are taking on their digital-first journeys, and as competition from other FIs grows, many other strategies will be necessary to make digital-first banking ubiquitous.