The customer digital experience slipped one notch on the list of Top 3 priorities for bankers in 2024, but it remains a critical concern for financial services leaders as consumers increasingly conduct their lives in online and mobile environments.
If it weren’t for the urgent need for banks and credit unions to shore up deposits during a tumultuous 2023, the customer digital experience likely would have maintained the second spot in BAI Banking Outlook: 2024 Trends.
The customer digital experience landed in the third spot behind new customer acquisition and deposit growth in that report.
For certain, bankers take the customer digital experience seriously. They not only cited it as their third-leading business challenge in the year ahead, but bankers identified the customer digital experience as their second-leading investment priority for the next two years.
Topping the list in BAI Banking Outlook: 2024 Trends for investment priorities is technology integration and platforms, which essentially lays the groundwork for what bankers hope is a frictionless omnichannel experience for their customers, particularly within the digital channel.
But banks have tough customers. Their expectations are extraordinarily high. They’ve been spoiled by the seamless digital experiences provided by the best-in-class online retailers, and they want their banks to emulate that level of service.
Easier said than done, of course, because banks and credit unions have complex, disparate legacy systems. And they must comply with a web of regulations that online retailers do not face.
For example, simply onboarding a customer—regardless of if it’s done online or in-person—is complicated by regulations such as Know Your Customer or anti-money laundering requirements. Onboarding requires a lot of steps that can throw sand in the gears of online interactions.
Creating a holistic experience from the customer’s lens is expensive and complicated. Our survey of 1,000 consumers of all four generations for BAI Banking Outlook: 2024 Trends found they were a bit disgruntled. When asked if their primary financial services organization understands their desired digital customer experience, every generation reported declining levels of satisfaction from when they were asked that question in March 2023 to when they were that question again in September.
The same was true when we asked if their primary financial services organization understood their financial needs. Every generation from Generation Z to Baby Boomers reported lower scores. And Net Promoter Scores for their primary financial services organization were lower across every generation. Perhaps the feedback reflects a general sense of malaise that goes beyond banking. Despite the sour consumer sentiment and the daunting regulatory challenges, banks must persist in their quest to provide a digital experience that’s every bit as good as the one they’ve long provided in person.
Bankers are well aware of the disparity between the service they provide in person versus the one they serve up online. Some 38% percent of bankers said they provide excellent customer service face-to-face, but only 11% of them said they provide excellent customer service online, according to our banker survey.
Bankers have been serving customers in person for generations, and they got pretty good at it. Online banking is relatively new, and it’s difficult replicating the in-person experience in the digital space. On top of that, the digital component completely changes the economics of the bank because the digital consists of fixed costs associated with the integration of systems and building capabilities within digital platforms.
Fintechs and direct banks are new to the game and have disrupted the banking industry with their digital expertise. When we asked bankers if they have learned lessons from the fintech community that they plan to implement in 2024, slightly less than half (46%) of them said they have. But that’s not to say that slightly more than half of bankers are ignoring or disregarding the influence of the fintech community. They are taking the fintechs seriously, just as the fintechs take seriously the work being done by traditional banks encumbered by their legacy systems and navigating a highly regulated financial services ecosystem.
As evidence of how seriously traditional banks are taking their upstart competitors, 46% of bankers in our survey said they plan to collaborate with a fintech. Banks, regardless if they’re brick-and-mortar or strictly online, must get the customer digital experience right. That’s particularly important to Gen Z. Six in 10 of them said they would switch financial services organizations in favor of a bank that offered a better app and other digital capabilities.
Meanwhile, 54% of Millennials said they would make the switch, while 34% of Generation X and 12% of Boomers said they would do the same. Although Gen Z has far fewer financial assets than older generations, these young consumers represent the future of banking. To secure that future, financial services organizations must continue to invest in and master the customer digital experience. Banks can’t possibly earn the loyalty of younger generations without offering them a frictionless omnichannel experience.
Karl Dahlgren is Managing Director, Enterprise Strategy, for BAI.
A version of this article first appeared in the BAI December Executive Report: “2024 Banking Outlook.”
