2019 So Far: Where Are We at with Digital Growth?

There were four frequently made predictions by industry experts, financial institutions and technology providers at the beginning of 2019, according to the recent Digital Banking Trends Progress Report from D3 Banking Technology.

“Even though we’re only halfway through, 2019 is shaping up to be another wild ride in financial services,” said Mark Vipond, CEO of D3. “In 2019, banks and credit unions must focus on consolidating and streamlining their platforms and leveraging modern technology that helps them better understand their customers’ and members’ needs.”

1. The dominance of conversational banking. Many industry experts anticipated that 2019 would be the year conversational banking takes off. However, this doesn’t seem probable as we appear to still be in the pioneer-phase at mid-year. Commonly, FIs are finding they can’t facilitate meaningful conversations with voice assistants or other forms of AI for customers and members without the right data. Most banks and credit unions are still struggling to determine how to best mine and leverage the massive amount of data available to them.

Additionally, while most institutions recognize that conversational banking and voice connectivity will be a significant and vital investment, many are waiting to see concrete-use cases and gather details on how the security piece of the puzzle will come together. Actual adoption of and movement around conversational banking will likely happen more toward the second-half of 2020 instead of this year as previously predicted.

2. The rise of digital-only banks as an instrument in the war for deposits. As experts predicted months ago, institutions have continued to get creative in the increasingly important battle for deposits. One tactic that continues to be popular is a digital-only bank or bank brand. This makes sense — digital is the favored channel of consumers, and a digital brand provides a way for institutions to expand beyond their existing geographic region.

However, banks and credit unions should heed the warning from JPMorgan’s recent shutdown of Finn — just because you build it, doesn’t mean they will come. If an institution’s digital-only brand fails to provide a value add or differentiator, consumers will not be interested. JPMorgan didn’t offer a concrete reason for consumers to open accounts with Finn. To prevail in a digital-only venture, institutions must know and understand what their customers appreciate and want from their digital banking interactions.

3. Nontraditional competitors will continue to enter the space and pose risks to traditional FIs. This prediction has come true, as we’ve seen major technology companies and retail brands, like Apple and T-Mobile, continue their ventures into financial services in 2019. The Apple Card, for instance, attempts to combine the most compelling pieces and parts of current offerings from other card issuing institutions, such as low fees, easy-to-spend rewards, boosted security and a frictionless account opening experience. None of these features are particularly innovative individually, but by merging them, Apple threatens to offer a superior customer experience than is currently available from the majority of other FIs.

The good news is that banks and credit unions still hold the advantage when it comes to trust — according to a Harris Poll survey, 78 percent of Americans feel more comfortable with their financial institution having access to their personal data than a large tech company.

4. Payments’ important role in the digital banking value chain. In late 2018, few could have predicted the heavy M&A activity experienced in the payments space this year — and we’re only halfway through. News like the First Data/Fiserv, WorldPay/FIS and Global Payments/TSYS mergers demonstrated how prized payments are to the big picture for financial services. With the increasing number and complexity of options available to consumers and businesses today, an easy and intuitive payments option must be integrated into banks’ and credit unions’ digital banking strategy if they want to remain relevant and competitive.

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