Digital-First Banking Tracker® Series Report

Why Digital-First Banking Does Not Mean Digital-Only

January 2024

Customers are flocking to digital banking in droves, but there are certain aspects of the financial journey still best accomplished with a human touch. Banks that fail to strike this balance could soon find their customers migrating to competitors.

PYMNTS

Digital banking has been on the upswing over the past few years, especially among younger demographics. There are multiple reasons for this change, including ease of use, the closure of physical bank branches amid the pandemic, and the tech-savvy nature of younger consumers.
While customers generally appreciate digital banking, they still have reservations about the service potential of this technology. Many feel that a balanced approach combining digital technology and human-centric customer interaction could be the best way forward.
Banks and FIs that fail to balance digital and in-person services run the risk of losing customers to their competitors, a process that, from the customer’s perspective, is now easier than ever before.


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    Digital banking has exploded in popularity in recent years, thanks in large part to younger users forming an ever-growing share of the total financial customer base. Studies indicate that 60% of millennials, 57% of Generation Z and 52% of Generation X use mobile banking apps as their primary financial tools, making them the most common means of banking in the modern age.

    On the other hand, customers find that certain aspects of the banking experience — such as applying for mortgages and loans and conducting other major financial transactions — are best done in person. Therefore, it will be incumbent on digital banks to allocate the right balance of resources to enhancing digital experiences and facilitating in-person interactions based on their own customers’ preferences.

    Consumers Flock to Digital Banking Services

    Digital banking has been on the upswing over the past few years, especially among younger demographics. There are multiple reasons for this change, including ease of use, the closure of physical bank branches amid the pandemic, and the tech-savvy nature of younger consumers.

    81%

    of customers used mobile devices to manage their
    bank accounts at least once in the previous month.

    97% of customers rate their digital banking experiences positively.

    A recent survey conducted by the American Bankers Association revealed overwhelming consumer satisfaction — 97% — with banks’ mobile experiences. Additionally, 94% of respondents approved of their overall access to financial services, while 79% said that new technologies have helped American consumers gain easier access to banking overall. The survey also shows that, at 36%, adults in the United States trust banks to secure and protect their personal data more than any other entity — including healthcare providers and the government — thanks in large part to this technological edge.

    Mobile banking is reaching near-ubiquity among financial institutions.

    One study indicates that 98% of banks offer mobile banking in various forms. For example, 89% provide remote deposit capture, while 80% enable customers to pay bills online. The primary concern among online banking providers is fraud and cybersecurity risks. As of October 2023, 56% of banks surveyed require eSignature verification for online transactions, up from 50% in 2022.

    Customers Crave Personalization Amid the Digital Shift

    While customers generally appreciate digital banking, they still have reservations about the service potential of this technology. Many feel that a balanced approach combining digital technology and human-centric customer interaction could be the best way forward.

    71%

    of consumers say generative AI
    makes them nervous.

    Customers express anxiety over generative AI in financial services.

    While many industries use generative AI technologies like ChatGPT for customer-facing applications such as help desks, many bank and financial institution (FI) customers worry about its overall impact on the customer experience. Seventy-one percent of customers in a recent survey said the technology makes them anxious, and just 58% said they would be comfortable with their banks leveraging this technology. Most customers agreed that factors such as data transparency, human oversight and government regulation would increase their comfort levels with AI deployment in financial roles.

    Customers prioritize personalized services when seeking a financial provider.

    While customers are largely happy with their digital banking apps and websites, occasional frustrations arise from the one-size-fits-all nature of these platforms. A recent survey found that 72% of bank customers rated personalized services “very highly” when they were looking for a bank, with 46% specifically seeking personalized help for avoiding fees. While some banks have developed automated systems that analyze customer patterns to identify potential fees to skip, many customers feel that human employees are more adept at performing this task.

    Demand for Better Service Spurs Customers to Switch FIs

    Banks and FIs that fail to balance digital and in-person services run the risk of losing customers to their competitors, a process that, from the customer’s perspective, is now easier than ever before.

    25%

    of customers switched banks
    within the past year.

    One in four customers switched banks last year.

    According to a recent Salesforce report, one-quarter of bank customers surveyed changed FIs in the past year. Among those who switched, 51% did so seeking better digital experiences, while 39% left in pursuit of enhanced customer service. The study also showed that more than one-third of customers surveyed also traded insurers and wealth managers for similar reasons. This trend underscores the need for a more human-centered approach to customer service across all financial sectors, not just banks.

    Banks have found that digital friction leads to high attrition.

    Customers grow impatient with obtuse or complicated online application forms and are quick to change banks because of them. According to one study, 48% of customers encountered friction while attempting to open accounts online. Among these customers, 68% abandoned the sign-up process, and 48% opted to take their business elsewhere. A human-led approach to improving and simplifying the account sign-up process is pivotal to ensuring customer retention.

    Banks Must Balance Digital Banking With Personalized Services

    While the advent of digital banking has transformed the financial landscape, incorporating a human touch and personalized services remains essential for achieving customer loyalty. Despite the convenience and efficiency of digital services, many individuals still value the reassurance that comes with speaking to an actual person, especially when dealing with complex financial matters. Personalized advice and guidance provided by human bank representatives can instill a sense of security and confidence in customers, helping them to make informed decisions and navigate financial challenges.

    Personalized, human-led services also enable banks and FIs to cater to diverse customer needs more effectively. While digital platforms typically offer standardized one-size-fits-all solutions, human bankers can tailor their approaches based on individual circumstances. A first-time homebuyer, a small business owner or a young investor all have unique requirements — which a personalized banking approach can address adeptly. Striking a balance between digital innovation and human interaction allows banks to create a holistic banking experience that effectively accommodates the varying needs and preferences of their customers.

    About

    NCR Voyix Corporation (NYSE: VYX) is a leading global provider of digital commerce solutions for the retail, restaurant and digital banking industries. NCR Voyix transforms retail stores, restaurant systems and digital banking experiences with comprehensive, platform-led SaaS and services capabilities. NCR Voyix is headquartered in Atlanta, Georgia, with approximately 16,000 employees in 35 countries across the globe.

    Ingo

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this Tracker:
    Managing Director: Aitor Ortiz
    Senior Writer: Andrew Rathkopf
    Content Editor: Joe Ehrbar


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