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Digital experience will remain a challenge in 2023

Our latest BAI Banking Outlook survey shows that customers have noticed improvements in online and digital, but they have more wants and needs.

Jan 20, 2023 / Consumer Banking

As financial services organizations head into 2023, improving the digital experience for customers of every age group remains a key business challenge. Institutions must overcome this hurdle to remain competitive with the ever-nimble fintechs working to overtake this storied sector.

A mere 4% of financial services leaders report that they deliver an excellent customer experience digitally, a decline from a year ago, according to the 2023 BAI Banking Outlook. Fielded in September, the survey focused on identifying trends and preferences within four customer demographics: baby boomers (and older), Gen Xers, millennials and Gen Zers, digital natives whose leading edge is now in early adulthood.

A much greater 44% of respondents said the digital customer experience they deliver is merely average. The biggest customer experience gaps include onboarding, digital interaction and account opening—three areas that are imperative to the industry’s success. Failure can have consequences: More than 55% of respondents said they would switch institutions for a better mobile banking app/digital capabilities, up significantly from 47% a year earlier.

Meanwhile, the percentage of consumers who said their primary financial services organization is a direct bank (one with no branches) has increased since a year ago. The biggest change came from millennials, with a surge to 34% from 22%. The percentage also increased among Gen Xers and boomers, a group that tends to lag when adopting new technologies, while it decreased slightly among Gen Zers.

When asked about ways to improve apps and digital capabilities, every age group cited 24/7 customer service. Beyond that, age groups differed. For Gen Z, the ability to bypass ID reverification was important, while millennials seek faster payments. Gen Zers and millennials reported the highest weekly usage of mobile apps and desktops to access banking services, while Gen Xers and boomers reported the least. Boomers were the only group that used desktops more than mobile apps.

Top frustrations with digital banking include fast-changing technology, concerns about fraud and security, a slow experience and a lack of personalized recommendations. Drilling down into age groups, only Gen Zers listed “no personalized recommendations” as a top concern, while the other three groups cited technology. Gen Zers and Gen Xers listed “a slow experience” as No. 2.

What would it take to increase consumers’ digital use? Across the board, the top answer was to make digital easier to use, followed by making it faster. Gen Zers, Gen Xers and boomers listed “more personalization” as No. 3, while millennials want things to be more up to date. When it comes to managing money, Gen Zers and millennials want faster payments and transactions, while Gen Xers and boomers seek better protection from fraud and identity theft.

Regarding opening a deposit account online, usage declines with age: 70% of Gen Zers and millennials have done so, compared with 61% of Gen Xers and 24% of boomers. Gen X and boomers think opening an account has gotten easier compared with a year ago, while their younger counterparts think it has gotten harder. Meanwhile, more than seven in 10 of deposit accounts opened online recently were with direct banks.

When it comes to opening a loan online—a more in-depth commitment than simply opening a deposit account—more than half of Gen Zers and millennials have done so, compared with 45% of Gen Xers and just 20% of boomers. Every age group reported that opening loans online has gotten easier since a year ago. As with opening deposit accounts, seven in 10 loans opened online recently were with direct banks.

Behind these many statistics, the BBO survey’s findings reinforce in some ways and amplify in others many of the recent trends that we’ve observed in recent years regarding customers’ digital wants and needs – among them, 24/7 customer service, streamlined ID verification, faster payments and ability to easily turn cards on and off.

Understanding these priorities can help banks and credit unions strengthen their relationships with customers by making the everyday digital experience easier, safer and more personal, which in turn can provide a valuable differentiator in an increasingly competitive landscape.

Karl Dahlgren is a managing director of research with BAI. 

For more on the trends we see playing out this year, we encourage you to download the latest BAI Executive Report, Addressing banking’s key business challenges in 2023.