Digital Changed How Consumers Bank — Data Will Evolve Them

The rise of seamless, digital experiences has democratized convenience while transforming countless sectors.

More than two decades into the 21st century, the banking landscape is now undergoing an evolution driven by the rise of digital banking.

“The COVID-19 pandemic forced everybody onto digital channels, and we’re not seeing people revert back,” Eric Brandt, senior strategic market analyst at NCR Voyix, told PYMNTS.

The crisis acted as a catalyst, compelling customers to adopt digital channels for various banking activities, a trend that continues even as the world moves beyond the pandemic. Digital adoption rates remain high, and customers are increasingly comfortable performing tasks online, from depositing checks to checking their balances and transferring funds.

“Simplicity and ease of use is driving digital adoption,” he said. “… Banks are making huge investments into being able to innovate faster and move faster to meet their customers where they want to be met and seen.”

But he added that for complex and higher-touch personal banking needs, the physical branch location still reigns supreme.

After all, the digital surge isn’t the whole story.

“Physical is still a very important component of banking — and while you may be able to lower your footprint a little bit, you can’t abandon that channel,” Brandt said.

That’s because physical bank branches remain vital for specific services, especially those requiring a personalized approach, such as mortgage applications and small business loans.

What this all means is that striking a balance between digital innovation and maintaining a physical presence is crucial for banks.

Read also: Why Digital-First Banking Does Not Mean Digital-Only

Customer Preferences in Digital and Physical Banking

Customers gravitate toward digital offerings due to their emphasis on ease of use, simplicity and speed. The ideal digital banking experience is characterized by accessibility, allowing customers to conduct transactions anytime, anywhere.

Brandt emphasized the importance of personalization in the digital banking experience. Understanding customer behavior and preferences through data analytics allows banks to tailor their services. The mantra of “know me, show me, wow me” underscores the significance of personalized interactions and plays a key role in enhancing the overall customer experience, he said.

“The banker has switched their role a bit too, as it relates to what they need to know and what they’re armed with,” Brandt said.

Addressing concerns about fraud in digital banking, he highlighted the importance of ensuring the security of customers’ money and data. With the growing sophistication of cyber threats, banks must prioritize robust security measures while innovating in the digital space.

“Security has to be at the forefront of everything banks are doing,” Brandt said.

Competitive Differentiation in the Digital Era

To drive innovation in the digital realm, Brandt advocated for substantial investments in data. Banks possess vast amounts of data, and the key is to make this data actionable. Investing in technologies that harness the power of data, such as artificial intelligence and machine learning, allows banks to differentiate themselves and create personalized, customer-centric experiences.

“Personalization and segmentation can be a huge differentiator in keeping the human element behind the screen,” he said.

Data-driven tactics are increasingly important in today’s banking landscape, where solely digital offerings have become somewhat commoditized, making it challenging for banks to differentiate themselves strictly based on them.

Brandt said that customer banking preferences are driven by factors such as interest rates, product features and customer-centric services, but those don’t always lead to long-term, profitable customers. Innovation remains crucial, and ensuring you are providing the necessary features and offerings plays a pivotal role in attracting and retaining customers.

Looking ahead, Brandt mentioned the potential impact of generative AI and highlighted the continuous evolution of AI in the banking sector. The ability to use AI for personalization and segmentation can revolutionize the way banks interact with customers. Understanding customer behaviors and tailoring services accordingly could be a game-changer in the future of banking innovation and help financial players stay ahead of the constantly evolving landscape.

“There are certain things that we can do based off of how we know you interact with the app to customize and make your life easier,” Brandt said. “You have to understand your customer and meet them where they are. It’s not innovating for the sake of innovating — but it’s about improving the financial health and the financial lives of your customers … as well as using technology to empower your employees.”