Clearly, consumer attitudes towards digital banking are changing. More people are confident banking online or in an app – it’s one of the biggest driving forces behind the digital banking revolution that we’re seeing today.
Yet, at the same time, it’s not consumers’ experiences in their banking apps that are shaping their expectations. On the same day that they sign in to their bank’s app, users might already have hailed a ride using Uber, bought a parcel on Amazon, and ordered lunch using Deliveroo. By the time they come to check their balance or pay a friend for last night’s drinks, they haven’t forgotten the simple user experiences they encountered in those apps. Banks are no longer competing just with each other, but with huge tech giants as well.
John James, Head of Digital Product at First Direct, says that they have seen a transition from a telephone-only bank 30 years ago to one that is now, on transaction count, 98% digital. What consumers expect from digital is being shaped by other apps they use outside the banking sphere.
“Customers’ usage and habits have gone overwhelmingly digital but their expectations are now continually set by the other services that they use on that device. It’s not necessarily other banks that are setting those [expectations] but it’s your Amazons, your Ubers, et cetera. All those services are about moving friction, making things as painless as possible and having a great customer experience. They’re not necessarily things that you can traditionally say about banks.”
That’s something that Stewart Bromley, CTO at digital challenger Atom Bank, agrees with. “The thing that’s changing is customer expectations because of their experience elsewhere,” Bromley says.
“It’s very rare that banking leads the way when it comes to digital innovation. Customers’ expectations get shaped from the Amazons, the Googles, the Spotifys, the Netflix – the digital services they consume day in, day out. That sets an expectation that banks – if they want to satisfy customer expectation – have to step up to and meet.
“I think therefore the role that these other companies have in this greater sphere of customer experience is what’s actually shaping demand. Of course what comes with that is the ability to innovate and to change the banking model… existing revenue streams for banks have been eroded because of these changes in expectations and new ones are popping up. Those that can move the quickest and have the agility and really understand those customer needs will tap into those opportunities. Undoubtedly, there’s going to be new business models, different business models, as we are seeing.”
John James of First Direct says: “There’s a certain awakening among the general banking markets. If you look on most of the high-street banks’ websites, they’re touting their mobile apps and their functionality as being the headline attraction. Underpinning that, then, is the hardnosed commercials where – in a low interest-rate environment – how do you make money out of this piece?
There is opportunity out there… there’s also a lot of opportunity when you begin to think about what the data allows, and what services from the point of view of a customer would they be comfortable in you offering to them to save them time and effort? [There’s a] whole layer of things that we, as a bank, know we could actually help you with over and above and that we’ve traditionally not done anything with.”
“65% of digital champions ranked in the top 10% for analysed UX scenarios,” Deloitte says. It found that the biggest gaps between champions and latecomers were in opening an account (71% vs 23%), buying an insurance product (44% vs 7%) and beyond banking service (48% vs 11%).
The usefulness of good UX stems from the fact that, for many, banking is a chore. Most banking services are used out of necessity not choice, as John James points out.
“In a retail sense, very few of our customers get up in the morning and say ‘let’s do some banking,” he continues. “We really need to be conscious of that from a bank’s perspective and why that customer experience and lack of friction is so key – actually it’s because people aren’t coming here through choice. They’re not coming somewhere to use a banking service because they enjoy it. That’s a big challenge that we need to be cognisant of in how we design things and how we remain competitive going forward.”
In terms of specific functionalities, Forbes Advisor’s study found that – among US customers who use their bank’s app – the most desired functionalities were mobile check deposits (35%), viewing statements and account balances (33%) and transferring funds between accounts (31%) or paying bills (28%). The least desired functionalities included cardless ATM withdrawal (6%) and, perhaps surprisingly given the popularity of digital challengers like Revolut and Monzo, budgeting and tracking tools (5%).
“Immediacy is a big thing for customers,” Stewart Bromley adds. “They want things now, not tomorrow or next week. That’s from their experiences elsewhere digitally. I think choice is another thing which is massively changing because of digital in large degrees, and open banking. So whereas a customer may have all of their accounts, all of their financial needs, entertained or satisfied by one institution in the main, digital has broken that down completely.
“People can now have much more choice in terms of their products and where they get those products, so in essence I don’t think their financial needs are actually changing but certainly… how they use banking to satisfy those financial needs is changing immensely.”
Dan Klein is Regional Director Data for automation specialists Zühlke. He agrees that user experience and functionality are such important parts of the digital journey that they can be considered ‘headliners’ – but he’s a bit blunter about the legacy banks’ approach to their digital offerings.
“The banks at the moment are exhibiting FOMO [fear of missing out],” Klein says. “They actually don’t have any rationale for anything they’re doing – the traditional banks – in my view. They’re just very scared that they’re going to miss out on something and the fintechs are doing a very good job at challenging the status quo. They’re terrified that they’re going to lose market share, they’re terrified that they’re going to not have a cost ratio that’s going to work for them, and they are busy trying to think of ways of streamlining their existing legacy IT which they probably haven’t changed in 20 or 30 years.
“Open banking for example, in Europe, is profoundly changing how they think because they suddenly realise that there’s other people that can eat them for lunch. Particularly when you think about the value chain of ‘why does anybody go and talk to a bank?’, it’s a transaction engine, it’s a utility function. You worry about your spend and what you can earn and what you can potentially get as debt, and making that work should be what banks are satisfying. When you have things like Compare the Market and MoneySupermarket – arguably they are better at serving the needs of the customer in terms of managing their finances than the actual bankers.”
That’s the sort of advanced, user-centric functionality that consumers are becoming accustomed to from the other apps and products they use on a digital basis. And, with Deloitte describing the state of the banking industry as a “digital arms race”, this is something that is only set to continue – spurred on by the challenger banks and digital innovators, and monitored closely by mainstream institutions.
If we put ourselves in the mindset of the consumer, their favourite rideshare-hailing app knew where they wanted to go as soon as they launched the app. Their favourite online marketplace was able to recommend products based on their order history. So why can’t their banking app do the same with payments?
