Category Archives: Banking

5 Key Digital Banking Trends in 3Q21

As consumers turn to digital banking channels for everyday banking – and for an increasing range of more complex banking interactions – the battle between digital challengers looking to enter and grab a share of the market and traditional banks seeking to optimize customer retention and engagement has intensified. With this in mind, the following are five key trends that emerged in the digital banking space during the 3rd quarter:

  1. Existing digital challengers are expanding their product portfolios and raising funding for further growth.
    • Established digital banks are continuing to report strong customer growth. They are looking to enhance existing customer relationships by introducing new products.
    • New product launches during the quarter included Acorns Early Smart Deposit; the Albert Cash checking account; a checking account and mobile app from Atmos Financial; the Douugh Wealth robo-advisor; as well as an instant payments feature from gohenry.
    • Digital banks who raised funding in 3Q21 included Revolut and Varo (raised $510 million, valuing the company at $2.5 billion).
  2. New digital challengers are emerging. With relatively low barriers to entry, new digital banks continue to emerge, with many targeting specific market niches, such as the recent launch of Nerve, a challenger bank for musicians.
  3. Traditional banks are investing to build strong digital engagement. Banks have responded to the challenge posed by digital challengers by directing increased resources to develop features and tools that enhance the digital experience. To show progress on this, many banks are now publishing metrics not only on (digital/mobile) usage, but also on growing digital engagement:
    • Bank of America reported Zelle P2P payment users rose 24% y/y to 15.1 million in 3Q21 and Zelle payment volume jumped by 54% to $60 billion.
    • U.S. Bank reported that digital transactions accounted for 80% of total transactions in 3Q21, up from 67% in 3Q19.
    • Huntington Bank reported that digitally-assisted mortgage applications accounted for 96% of total mortgage applications in 3Q21, up from just 9% in 3Q20.
  4. Traditional banks are developing their own digital banks. While many traditional banks are competing with digital challengers by enhancing their digital banking functionality, some are going further by
    • Launching standalone digital banks: Cambridge Bank launched Ivy Bank, a digital-only division.
    • Adding products to the digital bank’s offering: Citizens Access, Citizens’ national digital bank, is planning to introduce mortgage lending and student refinance by the end of 2021, as well as checking, home equity, credit card and wealth in 2022.
  5. Traditional banks remain committed to the digital-human channel model. Many banks have realized that the broad transition to digital channels for everyday banking transactions means that they can continue to serve a market with a less dense branch presence, so are cutting branches in existing markets. However, their continued reliance on branches is seen is the fact that many are opening branches in de novo markets (JPMorgan Chase is halfway through a plan to open 400 new branches by the end of 2022). Banks are also redesigning branches in existing markets to reposition them to take on new roles (e.g., advisory centers, brand beacons, community hubs, locations to showcase new innovations).

Traditional Banks Prepare for the New Digital Reality by Expanding Digital Functionality

Banking customers’ growing preference for digital (online and mobile) channels – as well as the huge number of digital challengers looking to gain a share of the market (read our December 2020 blog on segmentation among new entrants) – has led established retail banks to ramp up their investment in digital channels.

Growing digital banking users continues to be a prerequisite in establishing strong customer engagement. The onset of the COVID-19 pandemic in early 2020 was the catalyst for many reluctant consumers to use digital (online and mobile) banking channels for the first time. Many of these have continued to use digital channels even through branch banking has returned.

The top three retail banks – Chase, Bank of America and Wells Fargo – all report steady growth in active digital users. Bank of America claimed that 70% of its Consumer Banking households now use its digital channels.

Many U.S. banks also publish metrics illustrating that customers are using digital channels to carry out an range of banking activities, such as:

  • Conducting banking transactions:
    • The digital channel accounted for 68% of Region Bank’s total customer transactions
    • Interactions using Bank of America’s Erica virtual financial assistant rose 153% y/y to 94.2 million
    • 18% of UMB Bank’s consumer deposits were made using its mobile app
  • Making person-to-person (P2P) transfers:
    • Regions reported a 75% y/y rise in Zelle transactions
  • Acquiring new products and services:
    • Truist reported that 44% of new checking accounts were opened digitally
    • The digital channel accounted for 65% of U.S. Bank’s total loan sales
    • Citizens Bank’s digital sales volume rose 61% y/y
    • Huntington Bank reported that the digital channel accounted for 12% of new business deposit account production (a significant change from 0% in 3Q20)
  • Scheduling appointments:
    • Bank of America booked 871,000 digital appointments, up 31% y/y, and reported that these appointments accounted for 31% of its total financial center traffic

Obviously, banks will want to continue to enhance their digital functionality to meet consumer needs and differentiate themselves from competitors. Here are a few tips for doing so effectively:

  • Identify the bank departments, product lines or customer segments where digital channels have significant scope for growth
  • Carry out regular assessments of customer behaviors, needs and perceptions to inform digital investments
  • Conduct ongoing competitive intelligence to understand what digital functionality is now common among many banks, distill best practices, and identify competitive gaps
  • Prepare ways to counter internal barriers (e.g., organizational inertia, legacy processes) to speedy development and rollout of new digital solutions
  • Ensure that new functionality enhances the customers’ digital experience
  • Develop closer integration between digital and human service and sales channels
  • Develop plans to leverage marketing and customer communications channels to promote new digital functionality

Banks Optimize Engagement With a Diverse Content Mix

Many banks are amping up their investment in content development. This is being driven by growing customer demand for financial advice, changing customer perceptions of financial providers and a need to differentiate from both established and new competitors.

Traditional content channels for banks include content-and-advice portals, surveys, blogs and newsletters. But it’s becoming obvious that banks looking to develop a robust and client-centric strategy are leveraging both established and emerging contact forms and channels – including videos, infographics, webinars, podcasts and of course social media platforms
– to meet customers’ changing consumption patterns.

Established Content Forms/Channels

Portals

Most leading banks provide portals that offer a combination of advice and content tailored to specific customer segments, such as:

Recently, bank-wide portals, which are then categorized into various business segments, have started to appear. Examples include U.S. Bank’s Financial IQ and Regions Bank’s Insights.

Surveys

Banks have been using customer surveys for years to both gain insights into changing perceptions and behaviors, and to highlight the bank’s thought leadership in specific areas of the market. A growing trend is for banks to carry out recurring (annual, quarterly, monthly) surveys, which are designed to generate regular press coverage and ongoing customer engagement.

Newsletters

A number of banks have recurring newsletters that they either publish online or distribute via email to opted-in subscribers. Many of these newsletters are titled “Insights”, including Regions Bank’s Wealth Insights and Commercial Insights magazines, which reflect the content and branding on the bank’s Insights portal.

Blogs

Blogs are also well established. They tend to emphasize financial education and well-being, and often have appealing names, such as MoneyFit (BBVA), do it right (Ally) and MoneyLife (MoneyLion).

Emerging Content Forms/Channels

Banks are also starting to develop and promote content on emerging content channels, such as webinars, webcasts, podcasts, videos and social media.

Webinars and Webcasts

During the pandemic, as banks were unable to host live events, webinars and webcasts became a key channel to maintain customer and prospect engagement. These channels have been most prevalent in the commercial banking space with the rollouts of new webinar series by BMO Harris (Expert Conversations), JPMorgan Chase (Treasury & Technology Trends) and M&T Bank (Managing Through Challenging Times). In consumer banking, JPMorgan Chase launched the Chase Chats webcast series.

Podcasts

In the past year, many banks also developed podcast series – including Bank of America (Treasury Insights) and Regions (Commercial Insights) – for commercial banking clients.

Videos

Banks have been using video to spotlight local small business owners, while helping to promote the bank’s local connections. Examples include Huntington Bank’s Support Local video series featuring real small business owners and Webster Bank’s similar small business video series called The Moment.

Social Media Channels

Finally, banks are using their social media channels not only to promote content that is provided through other bank channels but also to present new content, which allows the bank to extend its reach to customers and prospects who might not use the other channels.

Key Takeaways

To develop a multifaceted content strategy, consider the following:

  • Create a dedicated unit for continual content development, publication and promotion
  • Understand target market content needs and consumption patterns
  • Develop a consistent look-and-feel; create templates and guidelines to support seamless content provision
  • Develop a communications plan to promote the value of content development to internal stakeholders
  • Maintain ongoing customer engagement with recurring content (e.g., series of webinars, recurring surveys)
  • Where appropriate, use the content as a prospecting tool by listing relevant executives (with titles, emails and direct phone numbers)
  • Brand the content (e.g., give names to surveys, podcast/webinar series)
  • Identify best practices within the banking industry and from other industry sectors
  • Establish feedback channels to identify content needs and gaps