In 2018, it’s no longer an option for banks to be heavily invested in their digital transformation. Customers are yearning for exceptional digital experiences and as millennials and Gen Z become the dominant revenue base for banks, it’s imperative that banks adopt a digital-first mindset with regard to account opening and customer onboarding.
In their 2018 Global Banking Outlook, EY surveyed over 200 financial institutions across 29 global markets to understand where they stand in their digital transformation journeys: not pursuing, beginning, transitioning, maturing, and digital leadership. EY’s findings, in addition to our own recent webinar with Mitek, help highlight why digital transformation is imperative for banks who want to retain market share and increase revenue growth.
Digital Transformation is a Critical Priority
EY found that 85% of banks cite implementation of a digital transformation program as a business priority in 2018. 85% of banks surveyed expect revenues and profitability to increase over the next 12-36 months, with 31% believing revenue will increase over 9%. With capital levels increasing 200% since the fiscal crisis of 2007, banks no longer have an excuse to be delaying the digital transformation that will have a defining impact on their next decade of growth.
FinTech Adoption for Money Transfer and Payment Services Has Skyrocketed
While FinTech disruptors have yet to replace traditional banks for large financial products like mortgages and auto loans, there is no doubt that they have made substantial inroads in two key areas: money transfer and payment services. In fact, consumer adoption of FinTech companies for these two services rose from 18% in 2015 to 50% in 2017. Banks should take note that the digital transformation of these two areas is an indication of a larger digital transition for all bank products.
Digital Channel Adoption Continues to Grow Among Bank Customers
In our recent webinar with American Banker and Mitek on Breach-Proofing Digital Account Opening, we discussed the digital account opening shift across a variety of financial products including auto loans, mortgages, and credit cards. Mitek and Javelin Strategy found that over 50% of bank customers are using digital channels to apply for these top financial products, with credit cards leading the way at 66%. In fact, 56% of credit card applications are now occurring over digital channels exclusively, with another 10% crossing both digital and offline channels.
Digital is Quickly Becoming the Preferred Channel for Opening New Accounts
Surprisingly, call centers are still only handling a small fraction of new account openings, likely due to the lagging customer experiences that call centers are traditionally known for. While bank branches are still the preferred channel for larger financial products, at least 50% of customers now prefer using a desktop computer or mobile device to apply for credit cards and checking accounts. Brokerage accounts, auto loans, and mortgages are not far behind with 30-40% each.
A Digital Path Forward for Banks
Each new year represents an opportunity for banks to reset and realign their priorities. In 2018, it’s apparent that digital transformation must be an essential element of their investment strategy to stem off a wave of competition from FinTech disruptors—in addition to their fellow banks.