How is digital banking better for consumers?

By Mandy Pattenden, Marketing Communications Director

The last twenty years or so have revolutionized retail banking as we know it's a transformation that has accelerated thanks to the rise of the smartphone that has unleashed capabilities that go far beyond the early days of online banking.As banks continue to transform and embrace emerging technologies, new innovations on the horizon are set to make digital banking a yet more human and personalized experience.If that sounds a little counter intuitive, then get ready to discover how the bank of the future will look very different from today.

A Quick History of Digital Banking

The earliest forms of digital banking first emerged back in the 1960s with the introduction of the first debit cards and ATMs (automated teller machines). Together, these revolutionary products made it possible for bank customers to access their funds at any time of the day or night, without any need to head into a local branch of their bank.

In the 1990s, the internet stimulated a huge expansion of digital banking capabilities. Initially, banks used internet e-portals to supplement their brick-and-mortar services, but pretty soon internal processes and communications became fully digitized as the way consumers interacted with financial institutions changed.The arrival of the smartphone further revolutionized how consumers transact with banks. Making it easy for consumers to upload their digital ID, undertake payment authentication or use their phone as a payment device.

Recently, new 'digital only' challenger banks have emerged, offering user friendly finance apps and everyday tools that are becoming increasingly popular with consumers.

Let's take a look at some insightful digital banking stats:

From the UK perspective:

  • 27% of UK adults have opened an account with a digital-only bank
  • 4 in 5 (80%) of consumers use some form of online banking in the UK

And in the US:

  • 80% of US consumers would prefer to do their business via digital channels rather than visiting a physical bank location
  • 30% of consumers under the age of 54 use mobile payment services like Apple Pay at least once a wee
  • 63% of US citizens were more inclined to use a new digital app for banking than before the pandemic

What is the Appeal for Consumers?

Today's consumers are using digital banking to set up direct debits, make remote payments, transfer funds, send remittances and do other bank operations - like checking their balance - all without having to visit a local branch.

The ease and convenience of digital banking has a significant appeal for consumers, who save valuable time and resources by not having to go to a physical location to transact or manage their financial affairs. Providing access to account information and services 24-hours a day, the diversity of services on offer continues to grow as today's challenger banks grow in popularity and spur traditional banking institutions to significantly up their game.

Capitalizing on the evolving expectations of how services and processes are delivered in the digital age, challenger banks specialize in rapidly scaling products to meet customer needs, demystifying complexities and talking to consumers on their own terms. For example, creating an account is a paperless and straightforward process that in most cases can be done entirely from a mobile device.

Offering a host of built-in payment, budgeting and savings tools, these challenger banks are proving adept at responding to consumer demands for more friendly and flexible digital banking services that make life easier.

What's on the Horizon?

The recent pandemic has helped accelerate the move to a cashless economy where transacting is both instant and quick. While online banking limits consumers to the services provided by their banks, the ease and speed at which today's digital banking applications can deliver traditionally time-consuming services is impressive.

Exerting a strong appeal to consumers with a digital first mind-set who demand seamless, real-time, integrated and personalized experiences, digital banking is evolving into a complete suite of financial products and services that are increasingly customer-centric and data-driven. Developing in lock-step with banking innovations are regulatory compliance, security practices and products that can both safeguard customers and reduce business risk.

Making banking both cool and easy, expect the emergence of predictive and profile-oriented banking featuring functions like booking tickets online and purchasing products or services online. What's more, ever greater numbers of consumers are now undertaking day-to-day e-commerce purchases and transactions via their online bank and benefiting from attractive cash-backs, discounts and vouchers when transacting digitally.

Next generation digital banking services will redefine our relationship with banks

In the future, banks will use data to help customers improve how they budget for household expenses, for example by comparing the cost of products and services, such as utilities. They'll also be using AI to provide nudges to consumers designed to prevent poor financial decisions, prompt saving behaviors or even automate the re-ordering of supplies when the fridge runs low. In other words, get ready for more personalized offerings, products and services designed to increase customer loyalty and address their real-time needs.

One thing is for sure. The pandemic has accelerated a consumer shift from physical to virtual banking as consumers opted to settle bills online and utilize digital apps integrated with bank accounts. But capturing this growing desire for streamlined, fast and easy transactions means that direct bank payments will need to be handled in a highly secure way that builds consumer trust.

We'll explore why in our next blog.