The Importance of Digital-First Banking Experiences

The COVID-19 pandemic has been a powerful driver of digital transformation across many industries, including financial services. As a result, industry leaders have set their sights on the next era for financial services — one focused on creating a meaningful digital experience for consumers.

While the pandemic may have accelerated the shift to digital, industry experts agree: digital-first banking is here to stay. According to a 2022 Ipsos-Forbes Advisor U.S. Weekly Consumer Confidence Survey, 78% of Americans prefer digital banking over in-person or phone options, and McKinsey reports that consumers across all age demographics prefer Internet and mobile banking for day-to-day transactions, including among those age 65+ who had traditionally preferred in-person banking. 

When done well, digital-first offerings not only enable customers to more easily manage their money, but also lay the foundation for a new era of personalized banking. And, for traditional banks, an outstanding digital experience may hold the key to fending off disruptors to the industry and retaining their customer base. 

Here, we delve into the trends driving the shift to digital banking, the power of today's meaningful digital-first experience, and the trends shaping the digital banking landscape of tomorrow. 

What’s driving the shift to digital-first banking?

The unique stressors of the pandemic, such as branch closures and the need for social distancing, shaped customer attitudes and led banks to rethink their strategies. “Banks have traditionally had a homogenous set of offerings and services: it’s a place to hold or go get money when you need it,” says John Epperson, managing principal of financial services at Crowe. “The pandemic really accelerated the demand for digital-first offerings, and it also significantly reduced geographic barriers that many banks have traditionally relied on to provide value.”

At the same time, traditional banks face heightened competition from disruptors in the industry, further shaping customers’ expectations. “Significant encroachment from tech providers in the banking space calls for traditional banks to rethink their value,” Epperson says. Institutions that center banking as a service — or those that cater to the unique needs of niche industries — are set to thrive.

Meeting customers' expectations in a digital-first world

Of course, simply offering digital services isn’t enough. Brands can ensure they understand and meet customers’ expectations to retain their customers and attract new business. 

When Deloitte conducted a survey of over 2,000 Americans in 2020, they identified a poorly-designed mobile platform as the top driver of customer attrition during the pandemic. What’s more, over half of those surveyed said that a well-designed banking app was one of the top factors they considered when choosing a bank, underscoring the importance of digital for attracting consumers as well as retaining them. 

Deloitte’s research also shed light on what customers expect from a digital-first banking experience. Above all, customers crave convenience and security — the ability to set up an account in minutes and secure their data using biometric features. They also want seamless integration to gain a full view of their finances, and the ability to set and track financial goals. Finally, today's customers demand excellent customer service, including the ability to access support anytime, from anywhere. 

These table stakes features represent the baseline banks can reach to retain customers. However, they may be just a fraction of the potential for digital-first experiences.

The potential for personalization

As digital-first offerings become standard, banks are beginning to explore ways to add a human touch to remote services. From managing their wealth to renovating their home office, customers are looking to banks to offer solutions to real-world problems, and they seek personalized support to help them reach their goals.

A well-designed mobile app that offers personalized product recommendations and educational content is a good start. But leaders in the field will extend personalization to developing products that resonate strongly with customers’ unmet needs. Epperson identifies three areas where digital-first banking is poised to excel:

1. Person-to-person (P2P) payments: Convenient and seamless real-time payment solutions for money transfers between customers and businesses.

2. Investment and wealth management: As wealth trickles down from boomers to Millennials and Gen Z, younger consumers crave digital offerings to manage generational wealth. 

3. Engagement with digital assets: Broader access to tools that help users manage and trade digital currencies. 

What's on the horizon?

According to Epperson, the goal for digital-first banking should be a fully integrated platform that can provide data-driven insights and recommendations. “Customers want to know if they have 15 subscriptions they forgot about that are costing them money,” he says. “They want to know how they compare to others in their demographic.”   

So far, fragmented customer data means that few institutions have a holistic view of their consumers' financial health. However, emerging leaders in this space who build an "all-in-one" platform can collect the customer data they need to deliver a fully customized experience — and ultimately, deepen relationships with customers through personalized support that helps them achieve their financial goals.

The bottom line

Financial services are at a turning point, and institutions that embrace the shift to digital have the opportunity to distinguish themselves from their competitors. 

Being a leader in this space, particularly for traditional banks, requires organizations to rethink their business models and strategies, says Epperson. Banks need to deeply understand their customers’ unique pain points and create their digital strategy around their customers’ expectations. In addition, customers are looking for a human-driven approach to make digital-first banking feel personal, and financial institutions need to offer support to help customers solve real-world problems, he notes. 

Getting it right requires taking calculated risks, which, for a traditionally risk-averse industry, may present a challenge. But there’s also the risk of not adapting and doubling down on business strategies that may have diminishing returns in the future, he says. “If organizations aren't thinking about human-centered digital experience, they risk being left behind by those who do.”