How COVID is Accelerating the Digital Transformation of Retail Banks

How COVID is Accelerating the Digital Transformation of Retail Banks

The COVID-19 pandemic is having a profound impact on the banking and financial sector as lockdowns and safety measures have fundamentally altered people’s daily lives. This impact is subsequently driving retail banks to accelerate their digital transformation plans as customers’ needs and tendencies change in response to life with COVID-19.

To begin, let us examine how customers are reacting to the pandemic as well as the actions retail banks are taking now and will need to take in the near future to advance their digitalization plans to better serve their customers.

A Shift Towards Online and Mobile Banking 

The most obvious change in consumer banking behavior has been the surge in online and mobile banking activity. As branch locations closed due to local and national lockdowns, online and mobile banking became the primary channels for people to interact with their bank.

Fidelity National Information Services (FIS), an organization that works with 50 of the world’s largest banks, noted a 200 percent increase in new mobile banking registrations in early April 2020, and an 85 percent jump in mobile banking traffic.

Even as lockdowns ended, the general surge in online and mobile banking did not come to an end as many customers continue to avoid using their local branches. 

According to an international survey by Accenture, 50 percent of consumers interacted with their bank through a mobile app or website at least once a week in 2020, compared to about just 32 percent in 2018. 

Additionally, a large percentage of today’s banking customers are open to using online and mobile banking apps to do more than monitoring their finances. 47 percent of consumers surveyed by Accenture stated a preference for using a mobile application or website to open a new bank account while 37 percent preferred using a desktop or laptop.

The pandemic is also having a strong effect on the way people are making purchases. Since the start of the pandemic, the use of contactless payments has jumped 40 percent worldwide.

Since the start of the pandemic, more than 50% of people living in the United States began using mobile wallets like Google Pay or other contactless payment methods. In France, 42 percent of consumers are using contactless payments more since the beginning of the pandemic.

Fast-Tracking Digital Transformation Plans 

Even before the start of the COVID-19 pandemic, banks were already striving to make more of their services and products accessible through their online and mobile banking platforms to better support the market’s shifting expectations and needs. 

Today, the impact of the pandemic is accelerating digital transformation plans as banks race to significantly upgrade their online and mobile banking services. 

What retail banks are doing to offer a better online experience

It should come as no surprise that most retail banks support online and mobile banking through customer-facing websites and applications. These digital banking services enable customers to monitor their accounts, transfer money, pay bills, locate a nearby branch or atm, deposit checks, set up alerts for suspicious transactions, etc. 

Additionally, many traditional or bricks-and-mortar retail banks are investing in artificial intelligence. Among banks with over 100 million in assets, 3 out of 4 are currently implementing AI strategies. With banks that have less than $100 million in assets, 46 percent are also investing in AI strategies. 

Many banks for example have launched virtual assistants and chatbots to assist customers with urgent problems that cannot be resolved using online or mobile banking. In Europe, nearly half of the top traditional retail banks offer customers a chatbot via their website or mobile app. 

Banks are also using chat or email services to connect with consumers. In fact, more than 4 out of 5 retail banks support email and/or chat services to assist prospective customers. For actual customers, chat and email services are available at more than 90 percent of retail banks. 

Despite these efforts, there are several actions that banks should take to beat out the competition in providing an unmatched customer experience. 

What retail banks can do to beat the competition

The retail banks that are consistently outperforming their competitors are those that have implemented digital transformation plans early. These banks now lead the way in offering the most advanced online and mobile banking customer experience. 

Remaining competitive will largely require retail banks to continue investing in technologies that will not only enhance online and mobile banking capabilities, but the overall customer experience. Here are a few areas that banks should focus on to remain competitive. 

Making more services and products available via online and mobile banking

As more people refrain from visiting their local branch, retail banks need to make as many of their services and products available via their online and mobile banking platforms as possible.  

Banks can begin by allowing potential customers to open an account online without having to visit a branch location. Less than 60 percent of Europe’s largest brick and mortar banks offer a fully digital account-opening experience. 

Second, banks should focus on digitalizing the customer journey to make their most in-demand products and services completely accessible online. Amongst a survey of Europe’s leading 58 banks, only 39 percent allow customers to take out a personal loan using the bank’s mobile app. 

Fewer than 40 percent of banks surveyed allow customers to apply for a personal loan or purchase home insurance from their mobile app. Less than 30 percent of the banks even allow customers to start a mortgage loan application or open pension savings accounts.

Building advanced chatbots

As more bank branches close, customer service centers are having to accommodate a growing number of customers. To alleviate the pressure on customer service representatives and provide a greater customer experience, banks should continue to invest in building better chatbots that can assist customers with more complex requests 24/7. 

Building chatbots for specific domains or services can make it easier for retail banks to help and convert potential or existing customers. By abandoning the one size fits all approach, banks can use highly specialized chatbots that are more capable of responding to customers specific questions or needs along with certain domains or pathways such as getting information on mortgages, opening a line of credit, choosing a savings plan, signing up for an insurance policy, etc. 

Offering personalized service

The pandemic has made consumers increasingly worried about their financial stability and wellnesses. Retail banks, as a result, should invest in developing online and mobile banking features that deliver personalized products and services. 

Studies have shown that banking customers are willing to exchange more of their personal data in exchange for more personalized services. However, 94 percent of banks do not offer customers this type of highly personalized service. 

Offering personalized services and products will help retail banks better connect customers with the right offer for their needs. When customers are flooded with a wide collection of banking products and services, nearly 40 percent will leave the website and purchase from a competitor. By presenting only the most relevant products and services, retail banks can win over more customers.  

Mobile Payments 

As mobile wallets and mobile payments continue to accelerate, developing these technologies to support the needs of their customers is essential. By 2024, digital wallet payments are expected to account for more than one-third of all in-store purchases worldwide. 

One area where many banks ought to develop is their ability to offer customers virtual credit or debit cards. Among the banks that offer this service, neobanks lead the way allowing them to provide their customers with a virtual card that can be store in their mobile wallet and used to make purchases until they receive their physical card. 

Among the top 58 brick and mortar banks in Europe, only 5 offer this service. By offering this service, retail banks can better support their customers by giving them greater access to their money. 

Protecting the Customer Experience with Quality Assurance Testing 

Today, the retail banking industry is changing rapidly as digital transformation plans accelerate to better meet customers' needs. To provide a frictionless and excellent customer experience, banks will need to continue to enhance their online and mobile banking capabilities. 

To succeed, it will be equally vital for banks to execute quality assurance (QA) testing to guarantee that their online and mobile banking platforms deliver a flawless and unrivaled customer experience. QA testing is extremely important to the success of any digital product. In many ways, QA tests act as a safety net that protects banks from the consequences of having online and mobile banking platforms filled with digital bugs or anomalies. 

To learn more about the digitalization of retail banking and the QA testing challenges it presents, do not hesitate to download our white paper below. 

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