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Digital banking is reaching a point of no return. For years now, the trends have been pushing at greater speeds toward digitalization, with customer preferences firmly shifting in favor of faster and more varied service options. Across demographics, the experience needs to be omnichannel – meaning that customers enjoy a flexible, seamless, and streamlined service on the communication channel of their choosing.

Recent global changes – such as the aftermath of the pandemic, shifting geopolitical contexts, and maturing younger generations – have accelerated this change. What’s more, banks are aware of this and most have undertaken some kind of digital transformation initiative to a greater or lesser extent.

However, there are still plenty of questions, challenges, and uncertainties that are standing in the way of true digital transformation. The current state of digital banking is defined by interplays between challenges and opportunities; speed and caution; and technology and traditional, in-person authenticity.

Online banking statistics reveal a lot about our current context and the successes and failures that are shaping the new face of digital services in the finance sector.

General statistics about the banking industry

Within the banking industry, there is a general consensus that new technology needs to be incorporated into their service offering. However, we’re also seeing bottlenecks that are slowing progress.

Areas of progress in digital banking

The statistics show that banks are making headway in their drive to compete on innovation. A recent World Retail Banking Report showed that two thirds of financial institutions are currently using a BaaS platform to provide a better service experience. What’s more, among the third that don’t currently have a platform, 25% claim to have plans to or are currently developing one (The Financial Brand).

These initiatives are beginning to bear fruit, with notable improvements in flexibility across the organization, as well as increased scalability, and agility (Capgemini). Beyond the operational improvements, embracing cloud technology and similar advanced technologies is allowing institutions to be more financially efficient – while also increasing the speed of innovation and time-to-market for products and services.

An uptake in collaboration

The technological progress we are witnessing has been hard won as banks are faced with significant challenges. In a services context, a reported 25% of decision-makers say that technology is one of the biggest challenges in achieving digital transformation (Forrester).

What’s interesting to note is that many banks are opting for tech collaboration agreements, rather than direct competition with fintechs and other non-traditional banking organizations. This is perhaps taking place in response to the challenges involved with building proprietary software from the ground up.

These collaborations aren’t new but they have been increasing in popularity, with the number of interbank ecosystems almost doubling since 2014 (Deloitte). Looking forward, we can expect to see an increased pace in collaboration between traditional banks and smaller digital-only banks or fintechs.

The balance between physical and digital

We are hearing more and more that everything is going digital, and this is undoubtedly true as online banking users continue to climb. However, there is still a certain amount of nuance regarding this issue. A reported 24% of consumers expect to visit a branch less often in the future – however, 82% still believe having a branch nearby is extremely or very important (EY).

Banks’ response to this situation has been, by and large, proportionate. We’ve seen a 20% reduction in the number of physical locations since 2017, and yet employment in the branches has declined at a slower pace. This is pointing to consolidation as the main objective, rather than eliminating branch banking altogether. The resulting fall of 18% in branch staff per customer is in line with customer expectations to visit branches less frequently (McKinsey).

That said, the rate of branch closures is higher among certain institutions than others. The UK HSBC bank is set to close over a tenth of its branches (69 out of 510), showing a strong shift toward online banking instead (Financial Times). This action is based on a 50% decline in average footfall 2017.

The state of digital banking transformation

As mentioned above, there’s a disconnect between banks’ digitalization ideals and the reality of bringing them to life. There’s no doubt that customer preferences are increasingly moving towards digital platforms and mobile devices. Historically, banks have been hesitant to adopt these digital transformation initiatives.

This is no longer the case – and yet the practice of implementing these large-scale digital projects is proving more difficult than anticipated.

The current banking transformation landscape

Currently, 35% of global banking executives are reporting successful progress with their digital initiatives and related buying decisions. These represent the forerunners of the new digital context and are likely to experience the greatest success in the coming years.

On the other end of the spectrum, there is more cause for worry. Not only do 12% report only having plans to execute their transformation initiatives, but incredibly 6% have no immediate plans to do so at all(Forrester).

It’s surprising that there are decision-makers in the banking sector that don’t have any plans to update their digital offering. The preference for digital channels in a financial context is undeniable and true around the globe. In fact, Forrester found that 77% of Canadian customers, 71% of US customers, and 69% of Spanish use their online banking services at least every month (Forrester). Given this reality, every financial institution should be pushing for full digital transformation.

Mobile banking is going from strength to strength

One of the main shifts in user behavior is a strong preference for mobile banking apps over desktop or in-person options. According to a recent survey, the adoption rate is extremely high among digital banking users, with 89% of customers using their mobile devices to carry out banking operations. What’s more, when you focus only on Millennials the number rises to 97% (Insider Intelligence).

Drilling down on mobile usage

In terms of how customers are using it, the statistics reveal the mobile banking app features that customers most value.

The top three, each with 30% of the vote from survey respondents, are transferring funds from one account to another, mobile check deposits, and viewing their account statements and balances. From there, 22% of mobile banking users value paying a bill, 9% appreciate peer-to-peer payment, and 8% like finding nearby ATMs.

While only 7% claim to find it valuable, the budgeting and tracking tools are showing an increase in perceived value (up 2% year-over-year) and is a mobile banking trend to watch out for. There are signs that customers appreciate these features, with many opting to connect third-party apps to their primary bank for budgeting that better meets the experience they require. Consequently, this is an area that may increase in popularity in the future, especially as the quality of the tools increase (Forbes).

The importance of customer experience 

Apps for banking represent a key focus point in delivering a digital experience that customers respond to. However, mobile alone isn’t enough to ensure a full, end-to-end service experience and a robust online banking platform is necessary.

What do customers want?

In terms of what customers want, the answer is quite simple – everything and at their own convenience. This means banks need to provide multiple options for engagement, ranging from self-service platforms for simple queries to sophisticated interactive tools for in-person collaboration with customer service agents. Importantly, as mentioned previously, this involves both online and offline channels, with 82% still considering a local branch as extremely or very important (EY).

When it comes to online tools, the statistics show a preference for hybrid experiences. While online chat technology that connects customers to a human customer service rep has a 66% satisfaction rate, only 26% of customers are satisfied with AI-powered chatbots (The Financial Brand).

The judgment on AI chatbots is even more severe, with 80% of customers who have used chatbots to inquire about a product in the last 12 months claiming they would never use them again. Of that number, 46% said that they’d prefer to go into physical branches (Deloitte).

That’s not to say that chatbots don’t have a place in the customer service offering. The statistics simply show that they have limited applications, and once they stop being useful they quickly become a source of frustration. For simple banking tasks and queries, chatbots are successful – provided the customer can escalate the issue where necessary.

This extends to other artificial intelligence tools, such as smart speakers. In 2021, 30% of US online adults used a smart speaker to check their bank account balances. Likewise, 30% of UK customers who own a smart speaker reported using it to send money to another individual, while 22% of Canadian respondents have transferred funds between accounts (Forrester).

Customer perception is influencing retail banking 

Beyond having to contend with changes in customer preferences, which are driven by new service expectations in other industries, the financial sector has a specific problem with customer perception.

Lower trust than ever before

Customer loyalty no longer exists to the same extent as it once did. Nowadays, customers will change financial providers if they get a recommendation from a trusted source. The reason for this isn’t entirely clear. It may be simply that service expectations are so high that customers are willing to move from one brand to another to get the experience they expect.

However, it also might be due to the dramatic fall in trust, which can have an impact on loyalty. According to the J.D. Power 2022 U.S. Retail Banking Advice Satisfaction Study, trust has decreased by 30 points on a 1,000-point scale in one year (JD Power). Forrester also claims that trust in banks fell for the first time in years in Australia, Canada, Germany, and the US.

This is particularly noticeable among younger generations, who don’t think that financial providers care about their needs. Only 33% of survey respondents in an EY study say that a bank is their most trusted financial services brand. This currently trails fintech firms, with 37% opting for them. For wealth management firms, this falls even lower, with only 12% singling them out as the institution they most trust (EY).

As the economy faces upcoming challenges, there will undoubtedly be an increase in the cost of borrowing, less access to loans, and an increase in foreclosure rates. This financial situation presents a significant challenge for banks who want to boost customer trust in the coming year (Forrester).

Conversational banking and Unblu

The changing context in digital banking is proving challenging for traditional banks and digital banks alike. Online banking statistics are clearly showing that digital services must be exceptional to meet customer expectations. 

The number of digital banking users is growing and top conversational banking capabilities are the only way to ensure customer satisfaction and secure your place in the future of banking.