Investment priorities to meet consumer demand for digital banking

Financial institutions need to invest in transforming their use of data and analytics to deliver on credit risk strategies. These adjustments need to align operational investment in a way that best supports their customer’s financial needs and expectations for secure, relevant digital transactions.

Our latest Global Insights Report, released in late 2020, found that there has been a 20 percent increase overall in consumer online transaction activities, a 40 percent increase in applying for loans online and a 22 percent increase in ordering food online. Our research for the report, in which we surveyed 6,000 consumers and 1,800 businesses in 10 countries, also found that as many as half of consumers expect to increase their spending online in the next 12 months and that 41 percent of customers would give an organization more business if they felt they were treated fairly during the pandemic.

All of these statistics lead to the conclusion that if the pandemic was a catalyst for minimizing person-to-person interaction, customers now feel safer online than they do in-person. However, one of the most interesting (and concerning) findings from our research was that only a third of businesses have made operational adjustments to meet new consumer demands.

Now, more than ever, businesses must operate with a key objective of supporting meaningful connections with consumers. For example, financial institutions should be aware of any financial situations that may be a result of COVID-19 and offer alternative options, such as loan deferment. There is a potential for disconnect and friction in the customer experience in each facet of online transactions. Businesses must address each channel in the process.

Another finding: Half of businesses surveyed have mostly or completely resumed operations since COVID-19 began, but only 24 percent are deliberately making changes to their digital customer journey. These changes show that businesses aren’t quite adjusting to digital demand, yet complacency is no longer an option.

Our research also found that, during COVID-19, there has been incremental growth in use of digital banking and payment methods, including an 8 percent increase in the use of mobile wallets. Additional research showed that the trend in contactless payments has continued, with the increase of mobile wallet adoption jumping to 11 percent.

Consumers expect security and convenience as they continue to merge online and offline financial transactions. Research shows that customers are growing increasingly impatient with barriers to completing their transactions. One out of three consumers are willing to wait no more than 30 seconds before abandoning an online transaction, especially when accessing bank accounts.

Here are the top three solutions businesses believe will improve operational efficiency when supporting customers’ financial needs:

Automated decision management: Our study found that one in five businesses lack confidence in the effectiveness of their credit risk and collection decisions since COVID-19 began. Being able to make the right decision is more important than ever. We need to use data and technology better than ever. Having more useful information about a customer enables financial services providers to deliver faster customer decisions and reduce the risk of consumers abandoning transactions.

Cloud-based applications: As more businesses work remotely, it is critical that employees are able to access the programs they need to do their jobs, no matter where they are physically located. On-site software has become even less appealing during the pandemic – instead, businesses have become cloud-centric. Cloud-based applications are closely integrated with automated decision management and remain a top area of investment among many companies.

Artificial Intelligence: AI is being used to strengthen the security of mobile and digital channels, improving credit risk analytics, expanding digital customer acquisition and engagement, and more. Our study found that nearly 70 percent of businesses have used either AI or machine learning to help manage their businesses in the current marketplace. Businesses also plan to keep accelerating investment in AI technology to improve financial decisioning. According to the research, AI is the top model businesses are considering to help manage credit risk.

There is no question that financial services provides must accelerate their digital transformation initiatives to address individual customer needs safely, conveniently and at scale. With increased digital consumer demand and changing behaviors, plans need to be adjusted to remain competitive. Now more than ever the integration of data, analytics and technology can enable businesses to quickly adapt to this demand.

Chris Fletcher is SVP, decisioning management and cloud solutions, at Experian.

Subscribe to the BAI Banking Strategies newsletter and podcast.