5 Ways Banks Can Keep Up With Consumer’s Digital Demands

As technology progresses, more financial institutions will face scrutiny from consumers seeking features powered by advanced digital banking platforms.

Consumers are actively searching for banks that value them by giving them remote, customized experiences. Many banks have seen record growth in digital banking usage in recent years, according to a Deloitte Insights report. While this might create a challenge to many financial institutions, it can also be an opportunity to further build relationships with consumers. Below are five things banks should do to proactively respond to customers’ digital needs in their next stage of growth.

1. Analyze Consumer Data
Gaining real-time insights from consumer data is one way banks can start improving customer experiences. Analyzing data allows banks to see how, when and where consumers are spending their money. This data is a gold mine for creating custom approaches for individuals or recommending products that a consumer could benefit from. This electronic trail of customer information can ultimately lead to more personalized financial strategies, better security features and more accurate insights as to what digital banking features will be needed in the future.

2. Humanize The Digital Experience
Financial Institutions are being given a chance to humanize their digital banking platforms. Banks can build and strengthen relationships with their consumers by customizing their mobile experience — right down to the individual. Listening to feedback and valuing a customer’s experiences can create productive and useful relationships. It is important to take a customer-centric approach, whether in-person or through digital platforms. Financial institutions can use consumer purchase history to create custom reward offerings — like 10% off at their favorite coffee shop or rewards on every purchase — that lay the foundation for a bespoke, valuable experience.

3. Understand Digital Trends
According to Forbes, 95% of executives say they are looking for new ways to engage their customers. Financial institutions that remain complacent and tied to their legacy systems can expect to fall behind their competitors if they do not keep up with advancing digital trends. Consumers increasingly shop around and compare account offerings and benefits; they are choosing customizable, digital solutions. Banks that don’t, or refuse to, keep up with digital trends will lose these relationships. As technology expands, so do the needs of consumers —it is up to banks to keep up with those needs.

4. Utilize Advance Card Features
Technology’s rapid advancement means that the digital features that banks can take advantage of have also advanced. Consumers want features that correspond with their everyday financial management strategies and spending. Virtual cards with state-of-the-art security features are just one of the many digital solutions available to banks. Adjustable settings, like the ability to block and unblock merchants, create family hubs, set spending limits for individuals and family members, are just a few of the ways that banks can differentiate their card programs.

5. Keep Evolving
Many banks use legacy systems that are outdated, expensive and difficult to uproot. This technology strategy holds them back from being on a level playing field with their competitors. However, partnering with fintechs that can integrate with their current systems is one way that banks can keep up with digital trends — without the upfront cost of installing an entirely new system.

According to a FICO study, 70% of U.S. bank customers report that they would be “likely” or “very likely” to open an account at a competing provider if that provider offered services that addressed their unmet needs. Today, consumers do not just prefer digital banking: They expect it. Banks that cannot provide their consumers with customizable digital options are at a disadvantage.

How Engagement, Not Experience, Unlocks Customer Loyalty

In casual conversations, “customer engagement” and “customer experience” are often used interchangeably. But from a customer relationship perspective, they are absolutely not synonymous and it’s critical to understand the differences. Here’s how we define them:

Customer experience (CX) is the perception of an individual interaction, or set of interactions, delivered across various touch points via different channels. The customer interprets the experience as a “moment in time” feeling, based on the channel and that specific, or set of specific, interactions. A visit to an ATM is a customer experience, as is the wait time in a branch lobby on a Saturday morning or the experience of signing up for online banking.

Customer engagement, on the other hand, is the sum of all interactions that a customer has throughout their financial lifecycle: direct, indirect, online and offline interactions, face-to-face meetings, online account opening and financial consulting. Engagement with a customer over time and repeatedly through dozens of interactions should ideally build trust, loyalty and confidence. It should ultimately lead to a greater investment of the customers’ money in the bank’s product and service offerings.

Why the Difference Matters
As customers demanded and used self-service and digital banking capabilities, bank executives focused on the user experience (UX); however, that is merely a subset of CX and a poor substitute for actual customer engagement. Moreover, the promise of digital-first often doesn’t meet adoption and usage goals, worsening the customer experiences while underutilizing the technology. The addition of digital-first channels can also cause confusion, frustration and dead-ends — resulting in an even worse CX than before.

Take for example the experience of using an ATM. If the ATM is not operational, this singular transaction — occurring at one specific point in time — is unsatisfactory. The customer is unable to fulfill their transaction. However, it is doubtful that after this one experience the customer will move their accounts to another institution. But if these negative experiences compound — if the customer encounters multiple instances in which they are unable to complete their desired transactions, cannot reach the appropriate representative when additional assistance and expertise is needed or is not provided with the most up-to-date information to quickly resolve the issue — they are going to be more willing to move to a competitor.

When banks focus on experience, they tend to only look at point interactions in a customer’s journey and make channel-specific investments — missing the big picture of customer engagement. This myopic focus can produce negative outcomes for the institution. Consider the addition of a new loan origination system that produces unsustainable abandonment rates. Or introducing live chat, only to turn it off because the contact center cannot support the additional chat volume and its subsequent doubling of handle times. These are prime examples of how an investment in a one channel, and not the entire engagement experience, can backfire.

While banks often look at point interactions, or a customer’s experiences, to assess operational performance, bank customers themselves judge their bank based on the entire engagement. Engagement spans all customer interactions and touch points, from self-service to the employee-assisted and hyper personalized. Now is the time for bankers to consider things from the customers’ perspectives.

Instead, banks should prioritize engagement as being critical to their long-term success with customers. Great things happen when banks engage with their customers. Engagement strengthens emotional, ongoing banking relationships and fosters better individual customer experiences over account holders’ full financial lifecycle.

Engagement enables revenue growth, as new customers open accounts and existing consumers expand their relationship. Banks can also experience increased productivity and efficiency as each interaction yields better results. Improving customer engagement will naturally increase the satisfaction of individual customer experiences as well.

The distinction between customer engagement and customer experience is central to the concept of relationship banking. Rather than providing services that aim to simply fulfill customer needs, banks must consider a more holistic customer engagement strategy that connects individual experiences into a larger partnership — one that delights account holders and inspires long-term loyalty with each interaction.

Demonstrating Empathy Through Technology

Many banks are still trying to determine which consumer preferences and behavior changes are permanent, given the shifts that have occurred over the past 24 months.

During this time period, I’ve spoken with hundreds of bankers and the prevalent theme emerged: The need to respond to customers in a timely fashion, and assurance that there is go-forward alignment with the right business model.

At this point, institutions should consider further exploring ways to refresh customer experience or tackle questions about feasibility, with a focus on defining the strategy for a more competitive customer experience and acquisition structure in today’s digital economy. A strategy that successfully addresses customer needs depends on the ability to project empathy. Executing this in an omni-delivery ecosystem requires financial institutions to effectively listen to their customers’ needs and respond with information or options that are relevant and timely.

There are solutions that financial institutions can leverage today to demonstrate empathy through a listen-respond model. This involves embedding “listening posts” within six functional areas including:

  1. Website sensory: Detecting and interpreting customer needs based on digital behavior. Based on this insight, banks can quantify a customer’s intent and propensity-to-purchase and apply decisioning to trigger the “best” engagement, which could include digital advertising, lead capture or engagement campaign deployment through digital or human channels.
  2. Customer engagement responses: Applying analytics and decisioning to quantify and respond appropriately to customer interaction with campaigns. Desired responses include launching a survey, clicking a link to complete a fulfillment or accepting an invitation for other services that offered by the institution.
  3. Personal financial planner: Obtaining self-disclosed information related to customer needs through unique personal financial planning tools. With goal-centric solutions, the customer selects primary and secondary goals that could include meeting monthly expenses, housing, transportation, education or retirement. The user enters financial information such as income, expenses, assets and debt. By listening to customer goals and financial position, the solution can identify segmentation, quantify customer value index and calculate goal achievability.
  4. Omni-channel fulfillment: Tracking fulfillment attempts and automatically deploying abandonment retargeting campaigns to increase conversions. During the fulfillment process, listening posts can detect customer progress through the application. Through fulfillment completion, a bank can use a decision engine to select an appropriate onboarding engagement plan based on the product selected and any additional anticipated needs.
  5. Staff interaction: Quantifying and monitoring customer satisfaction and attrition risk scores related to personal engagement. Branch and contact center staff listen physically, but they also contribute to digital listening. For example, missed service-level agreements and customer complaints contribute negatively to customer experience and impact predictive attrition risk, triggering customer action. Banker-assisted fulfillment, followed by positive customer survey feedback, can increase satisfaction scores.
  6. Attrition risk: Identifying and quantifying attrition risk factors and proactively and reactively mitigating them. Digital environments can lead to increased customer attrition due to decreased face-to-face engagement.

Solutions can quantify behavior and sentiment indicators based on information that is detected through embedded listening posts. Automated decisioning can respond when thresholds are met and deploy appropriate engagement. Leveraging management insight through key performance indicators and reporting allow banks to monitor, track, execute A/B testing, perform trend analysis and optimize the listening-response model so they can better understand and meet customer needs.

Meeting customer needs requires engagement over time. When banks can understand their customers’ needs through listening and respond with relevant engagement, the customer feels heard, and the institution benefits from increased acquisition, relationship expansion and improved customer experience.

What Does Today’s Community Banker Look Like?

After more than a year of great uncertainty due to the coronavirus pandemic, the biggest driver of change for community banks now will likely come from customer behavior.

The shift towards digital banking that took off during the pandemic is expected to become permanent to some degree. Customers are most likely to use online or mobile channels to transact and they are becoming more involved in fraud prevention, with measures such as two-step verification. They are also performing an increasing number of routine administrative tasks remotely, like activating cards or managing limits. Branches are likely to endure but will need to rethink how to humanize digital delivery: The Financial Brand reports that 81% of bankers believe that banks will seek to differentiate on customer experience rather than products and location.

Digitalization is good news for community banks. It reduces pressure on the branch network and increases opportunities to develop the brand digitally to reach new customers. But it also creates an obligation to deliver a good digital experience that reduces customer effort and friction. In the digital age, customers face less costs of switching banks.

Banks that assume they will be the sole supplier of a customer’s financial services or that a relationship will endure for a lifetime do so at their own risk. President Joseph Biden’s administration is promoting greater competition in the bank space through an executive order asking the Consumer Financial Protection Bureau (CFPB) to issue rules that give consumers full control of their financial data, making it easier for customers to switch banks. Several countries have already implemented account switching services that guarantee a safe transfer. How should community banks respond so they are winners, not losers, with these changes?

With their familiar brands, community banks are well positioned for success, but there are things they must do to increase customer engagement and build loyalty. Continuing to invest in digital remains crucial to delivering a digital brand experience that’s aligns with the branch. Such investment will be well rewarded — not only in retaining customers but also attracting new ones, particularly the younger generation of “digital natives” who expect a digital-first approach to banking. The challenge will be migrating the trust that customers have in the branch to the app, offering customers choice while maintaining a similar look and feel.

The branch will continue being a mainstay of community banking. Customers are returning to their branches, but its use is changing and transactions are declining. Customers tend to visit a branch to receive financial advice or to discuss specific financial products, such as loans, mortgages or retirement products. Some banks already acknowledge this shift and are repurposing branches as advice centers, with coffee shops where customers can meet bankers in a relaxed atmosphere. In turn, bankers can go paperless and use tablets to guide the conversation and demonstrate financial tools, using technology augmented by a personal touch.

Community banks can play a crucial role in promoting financial literacy and wellness among the unbanked. As many as 6% of Americans are unbanked and rely on alternative financial services, such as payday loans, pawnshops or check cashing services to take care of their finances. According to a 2019 report by the Federal Reserve, being unbanked costs an individual an average of $3,000 annually. By increasing financial inclusion, community banks can cultivate the customers of tomorrow and benefit the wider community.

Cryptocurrencies are the next stage of the digital revolution and are becoming more mainstream. Although community banks are unlikely to lose many customers in the short term over cryptocurrency functionality, these digital assets appeal to younger customers and may become more widely accepted as a payment type in a decade. Every bank needs a strategy for digital assets.

The shift to digital banking means bank customers expect the same experience they get from non-financial services. Application program interfaces (APIs) have ushered in a new era of collaboration and integration for banks, their partners and customers. APIs empower banks to do more with data to help customers reduce effort, from automating onboarding to access to funds and loans immediately. At a time when community banks and their customers are getting more involved with technology, every bank needs an API strategy that is clearly communicated to all stakeholders, including partners and customers. Although APIs cannot mitigate uncertainty, they do empower a bank to embrace change and harness the power of data. Banks without an APIs strategy should speak to their technology partners and discover how to find out how APIs can boost innovation and increase customer engagement.

The Missing Piece in Customer Engagement Strategies

Usage of appointments in banking has increased significantly since the outbreak of the coronavirus, and is expected to continue in a post-pandemic world.

Appointments increased nearly 50% in the second half of 2020, according to customer usage data, allowing banks to manage limited branch capacity while ensuring the best possible customer service. For example, Middletown, Rhode Island-based BankNewport experienced a month-over-month increase of more than a 466% in appointment volume between March and April of last year, with numbers remaining steady into May 2020. The $2 billion bank noted that these appointments allowed them to prepare for customers, solving their needs efficiently and safely.

Now, nearly a year later, appointment setting is helping banks to meet the transformative and digital-centric needs of their account holders. Online appointments enable any customer or prospective customers to schedule high-value meetings with the right banker who is prepared to speak on a specialized topics. In addition, these appointment holders can choose their preferred meeting channel, such as in-person, phone or virtual. But, how does this translate to customer engagement?

Customer engagement begins when a question or task needs to be done. As the customer or prospect starts searches for an answer on a local bank’s website, banks can use appointment scheduling to ensure that customers have options beyond self-service or automated customer service to connect one-on-one with staff. By optimizing consumer engagement strategies with high-value appointments, banks can increase revenue, boost operational efficiency and improve overall customer satisfaction.

Increase revenue
Today, many branches are faced with the challenge of maximizing revenue opportunities with highly compressed margins. This leads banks to search for more cross-sell opportunities such as opening new accounts, loans or alternative revenue-driving sources.

Appointments help banks maximize these opportunities by connecting customers or prospects with the most knowledgeable service representative to handle sensitive topics, such as account openings or wealth management inquiries. Banks should take full advantage of these crucial meetings because engaged customers are more apt to expand their relationship with an institution when provided with the right resources at a time they’ve scheduled. In fact, TimeTrade SilverCloud data shows that appointment scheduling increases the likelihood that a person will move forward with a loan or deposit by 25% to 40%; customers and employees are better equipped for the meeting’s purpose and have stronger intent to transact.

Boost operational efficiency
Proper branch and contact center staffing levels allows banks to be more efficient without adding to the overall headcount. In the absence of appointment scheduling, employees can be burdened by prolonged rescheduling of meetings and correcting inconsistent information, stemming from unproductive customer interactions and resulting in wasted time.

Appointment scheduling allows employees to prioritize their time to address complicated issues and ensure their full potential is being used during business hours.

This can be further optimized with customer self-service. As more account holders reach a resolution without staff interaction, employees can spend more time with complex customer inquiries. Bank of Oak Ridge saw technology-related questions decrease by 64% after implementating a consumer self-service solution, allowing employees at the Oak Ridge, North Carolina-based bank to expand existing relationships and focus on more critical tasks.

Improve customer satisfaction
Like employees, customers’ time is valuable and their money is personal. When their time is wasted by a low-value interaction, this can greatly impact the overall customer experience. Negative comments about unprepared or ill-informed staff can be detrimental to an institutions’ reputation and consumer trust.

It is paramount that banks route customers to the employee best suited to meet their financial needs and questions. Banks that cultivate a comprehensive customer engagement experience, using online appointment scheduling, will be well equipped to meet customer needs and provide a great experience.

Banking by appointment is a powerful tool in today’s new business environment. Banking competition is increasingly prominent, and going the extra mile to make financial transactions and consultations as easy as possible will be an essential differentiator among institutions. Enabling customers to connect with the right person at their right time, and capturing pertinent customer information at the time of scheduling, allows banks to provide the right answer, resulting in more satisfied customers, better served employees and a healthier bottom line.

A Simple Tweak to Increase Financial Wellness, Engagement

Between the economic uncertainty among U.S. consumers caused by the pandemic and some recent high profile predicaments involving new market entrants, now is the ideal time for bankers to stake their claim as true advocates for their customers’ financial well-being.

Too often, however, financial institutions are guilty of merely engaging in virtue signaling when it comes to their level of commitment in truly supporting their customers. But those institutions that truly focus on providing financial literacy and educational resources to their customers are realizing the benefits of those initiatives, most notably through the increased usage of bank services and increased brand loyalty and “stickiness” within their customer bases.

We know, for example, that just 14% of consumers utilize their bank’s bill pay services, and most of these customers tend to be baby boomers and Generation X. Banks are looking to deepen existing customer relationships, drive usage of available services like bill pay and add younger customers; but the first steps toward developing an impactful financial wellness program don’t have to be complicated. The key is focusing in on an existing need that customers and providing immediate, tangible value to them.

Upwards of 80% of consumers in the U.S. overpay their monthly bills — creating an opportunity for bankers. Each of these consumers are in a position to generate savings simply by renegotiating routine services, canceling recurring subscriptions and monitoring for service outages and added fees. Bills like cable, internet, phone, alarms and gym memberships are usually negotiable, especially since all of these providers typically face healthy degrees of competition within their own markets. Consumers are generally unaware of this, or lack the time needed to do so. By providing services like these to their customers, either directly or through strategic partnerships, bankers can become more active participants in supporting their customers’ financial wellness initiatives, and ultimately become more valued partners and advisors over time.

These incremental savings can add up into meaningful amounts for bank customers and are not difficult to identify. Canceling unwanted subscriptions that began as a free trial offer often yields noticeable results. Pairing subscription management or bill reduction with the transaction makes managing bills and associated costs a seamless, frictionless experience for customers. By providing customers a way to easily unsubscribe with the click of a button within the mobile app, banks can both increase customer engagement within the channel and strengthen customer relationships.

Banks are already ideally positioned to help consumers improve their financial wellness: they possess detailed customer information, transaction data and an established level of trust with their customers. The introduction of new technologies and new digital entrants into the retail banking industry have created an increasingly competitive market — particularly with U.S. consumers embracing a digital-first approach to banking. Banks must be more creative in developing ways to connect with their customers and nurture those relationships. The institutions that go beyond merely identifying themselves as financial wellness providers to actively playing a role in supporting customers stand to benefit the most.

Increasing Customer Engagement to Exceed Expectations

The new normal produced by the pandemic has underpinned the need for change and connection.

One impacted area are the adjustments organizations are making as they rediscover the benefits of connecting with consumers, rather than simply selling them a product. These businesses are on the right track, as one thing is becoming abundantly clear in the wake of Covid-19: This is not the time to solely sell and advertise.

While advertising and selling inevitably play a big role in business operations, companies are often too focused on these two aspects and it doesn’t always pay off. Now is the time to connect, reach and engage with consumers on a deeper level. The coronavirus pandemic and economic fallout has impacted nearly all areas of consumers’ lives, and their interactions and needs from their banks and financial institutions need to change as a result.

Focusing on advertising and selling may work for some organizations, but with growing consumer expectations, this just won’t do for banks. Customers choose banks partially because of their emphasis on customer service and will be annoyed if the institution tries to advertise or sell them a product that doesn’t match their financial needs.

Connection goes beyond having the best catchphrase or the sunniest stock photo. True engagement is driven by identifying customer needs and communicating relevant solutions, peaking their interest and building connections that will last.

Right now, traditional, product-focused promotional efforts and marketing don’t work because people’s daily lives have drastically changed. Their financial situations may have been altered. A more personal approach develops connections and loyalty that will last for years.

It is more important than ever that banks use customer and business intelligence effectively to promote relevant products and services. Some institutions may need to return to their roots and their initial goal: to serve their communities and the people that live in them. This approach may sound simplistic, but it can prove challenging to achieve.

And banks, like their customers, don’t want to merely survive this health crisis, they want to thrive in these unprecedented times. It takes a shift in strategy to do so. “In a matter of weeks, digital and mobile banking technologies went from being a ‘nice to have’ to a ‘must have.’” The pandemic was even the catalyst for tech adoption at some financial institutions. With the help of data-driven communication systems, one-on-one communication is both realistic and accessible. The massive drive for digital solutions allows banks to reassess digital access to products and services. This immediate boost in digital engagement offers a huge opportunity for institutions that are implementing digital marketing plans, perhaps for the first time.

Practically applied, banks need to turn to smart technology to create a clear path to build better customer relationships and return to the longstanding values of one-on-one communication. While this may seem straightforward, using forward-thinking, innovative technology as the way to “get back to their roots” is an approach not previously imagined by many bank executives.

Utilizing a data-driven digital infrastructure allows banks to reach customers personally, uniquely and instantly. Banks need to embrace comprehensive digital outreach to touch people where they are with the services they need most. Customers still need access to financial services, even if they are avoiding branch locations and ATM lines. The solution is simple: Be the bank that communicates what options are easily accessible and available to them. Be the branch that shows that they care. With the help of an intelligent digital experience platform and the right technology, banks can automate the relevant communications, so the right messages reach the right person at the right financial time for them.

The pandemic sparked a much-needed shift: from being overly focused on advertising, selling and pushing products and services to establishing and building better customer relationships, increasing customer engagement as well as gaining consumers’ trust and loyalty for years to come. Returning to your bank’s original mission of serving the community will give you the ability to target consumers at the exact right time in their financial journey – reaching each customer’s specific needs and allowing banks to engage with their customers.

Three Reasons to Prioritize Digital Customer Service

Consumers and businesses are increasingly choosing to complete financial tasks in digital channels, but banks have largely failed to evolve their customer service and support strategies.

Traditional phone service models that banks have relied on for decades are notoriously frustrating and inefficient not only for the consumer, but for the agent as well. Forcing customers to leave the digital channel to connect with a service agent via a time-consuming phone experience is detrimental to customer satisfaction and loyalty. Not to mention, this channel hop leads to higher costs and inefficiencies for the bank. It’s time for banks to take a digital-first approach to customer service.

Digital customer service has experienced significant acceleration in recent months. Banks that modernize their customer service strategies with digital-first communication and collaboration capabilities will be able to enhance the customers’ and employees’ experiences. There are three top reasons banks should adopt digital customer service: modernize communications, boost operational efficiencies and increase customer engagement.

Modernize Communications
The coronavirus pandemic has amplified the use of digital this year, more than anyone could have predicted. With fewer customers visiting branches, digital banking usage has skyrocketed. While this shift made banks realize that the digital experience should be their top priority, many are neglecting the glue that makes digital transformation work: digital customer service.

For many consumers, this is the first time they’re relying on digital for more-complex tasks like opening accounts and applying for loans. Customers must have the ability to be met with full support and guidance within digital channels by bankers that can see their issue in real time and help them find a resolution.

Boost Operational Efficiencies
Contact centers have traditionally fielded simple requests, such as determining account balances and transferring money between accounts, but now self-service and automation allows most customers to handle these more straightforward tasks themselves. As a result, bank agents are typically met with more complex requests and inquiries. This has created a need for contact centers to become more sophisticated, with more highly-trained and specialized employees.

Savvy banks are recruiting AI to help with this transition — not just for customer-facing inquiries but agent training as well. Bots can speed up customer service by surfacing relevant information during interactions, alleviating agents from manually retrieving data from back-end systems. They can also recommend the best next action and pre-approved verbiage for customer responses, reducing time and effort for agents and increasing compliance with bank policies. As agents accept or decline the suggestions, the bank’s system can capture more data to optimize and improve bot recommendations for more accurate, targeted assistance in the future.

Digitizing customer service and enlisting bots to assist agents gives banks a way to save time, increase operational efficiencies and boost staff morale and satisfaction. This is especially important now, as they navigate thin margins and the pressure to do more with less.

Increase Customer Engagement
Today’s phone-centric customer service models typically include long wait times and disjointed experiences. Once customers connect with an agent, they have to spend time reauthenticating and providing context around the issue at hand. Meeting customers where they are in the digital channel instead — whether that’s through chat, video or voice — ensures that the agent can see the issue in real time, eliminating any guesswork. Agents should never have to ask ‘How can I help you?’ again. This more-seamless option leads to a better customer experience and increased engagement and loyalty.

Customers expect their financial services providers to know and understand them, just as big tech companies and major retailers like Amazon.com and Netflix do. Through digital customer service, banks can better, more quickly access relevant customer information necessary to tailor responses and interactions, ultimately boosting customer loyalty. In fact, it’s common for banks that leverage digital customer service to experience 20% improvements in customer satisfaction, reflected in net promoter and customer satisfaction scores.

Banks are increasingly realize that a phone-first approach to customer service will no longer cut it, especially in the increasingly digital world.  In fact, the most-advanced institutions are removing phone numbers from their websites entirely, replacing them with flexible, digital-first communication options. Those that embrace digital customer service will be well positioned to keep and grow customer relationships, increase profit margins and secure a strong competitive position.

Pivoting to Offense to Endure the Covid-19 Economy

Banks must plan for the economic conditions looming on the other side of Covid-19.

Banks must simultaneously figure out how to weather the public health crisis and serve their clients in almost entirely remote environments while preserving their financial health for months of economic uncertainty. The depth and longevity of this crisis requires banks to strategically reassess the immediate negative impacts, project probabilities of further disruption and re-engineer their delivery models.

We believe that the banks that take bold and decisive action around these key issues will emerge from this period with more-durable relationships, greater agility and resilience, steeper market growth and better profitability compared to their peers. Banks should prioritize a set of five stabilizing actions that will set the stage for resilience in any potential downturn. 

Help Customers Confront the Crisis
Adversity contains implicit opportunity for customer outreach. Banks should contact customers to communicate that their bank is open and available for support. They should devise strategic outreach programs to solidify customer confidence and build long-term relationships.

Banks should then immediately focus on helping customers find ways to ease cash flow constraints and shortfalls in working capital and liquidity reserves. They should consider relief programs and creative, beneficial adjustments to loan structures such as permitting deferred payments, interest-only payments, re-amortizing payments or waiving select fees. Aligning their clients’ new needs with bank solutions and products will establish a foundation for post-crisis revenue growth.

Surgical Expense Reductions
Often, the immediate reaction during economic turmoil is to cut staff without strategic approach. While this can lower costs by the next financial period, this approach fails to strategically position the bank for post-downturn recovery and risks misaligned skill-sets or understaffing.

We recommend that banks understand which levers can be strategically pulled to quickly reduce costs. These levers range from identifying and evaluating paper-based processes, robotic process automation and aligning operations and personnel to the revised sales volume estimates. There are significant cost savings available even in credit risk management — simply by optimizing credit processes and better leveraging data.

Credit Risk Management Tailored to the Crisis
Banks had no visibility into the recession, and must assess not only the immediate impact on borrower financial and implied repayment performances but also the delayed impact on various segments of the economy. Ensure your risk management strategy reflects the new credit reality:

  • Consider proactively managing the portfolio renewal cycle by implementing mass short-term extensions on lines of credit, re-evaluating credit policy exception limits and increasing monitoring through frequently conversations with borrowers.
  • Leverage data to scale the identification of emerging portfolio risk and related triggers.
  • Consider creating a Covid-19 financial health assessment to facilitate financial relief and to identify potential credit downgrades.
  • Assess industry-based impacts on your portfolio to predict deteriorating credits in order to right-size loan loss reserves. 
  • Increase the frequency and detail of credit monitoring procedures for sectors that have been immediately impacted and those that will be impacted in the near term.

Align Resources with Client Need
Changes in spending will impact the creditworthiness of many loan applicants, so banks must take a hard look at realistic expectations for new business goals in 2020 and 2021. Realign banker-relationship manager priorities and shift from new business development with prospective customers to selling deeper into the existing portfolio, where possible. Client engagement will enable banks to manage risk while providing the client with much-needed attention, solutions and assistance. 

It will also be critical to scale up certain operational functions quickly to meet shifting client demand. Realigning  branch staff to handle call center volume and line resources to assist with spiking credit action volumes allow you to redeploy and scale your workforce to the new reality.

Create a Balanced Remote Workplace Strategy
Banks must leverage all available tools not just to maintain, but further, customer relationships and generate new business activity where possible. Empower customers to make deposits digitally by providing remote deposit capture hardware and services and consider waiving a portion of RDC equipment or service fees for a trial period.

Proactively run and distribute bank statement reports through digitally secure methods, rather than requiring customers to create and distribute these reports. Collaborate with bank customers to send check payable files to the bank for check printing and distribution.

We believe a bank’s actions in the next 90 days are vital to the survival, sustainability and long-term positioning for regrowth. Responding to customers with needed outreach sets the stage for new levels of customer loyalty. Shifting the bank’s focus inward toward operations with a keen focus on streamlining processes, proactively changing procedures and aligning the right people to the right tasks will ultimately lead to both a sustained and improved financial ecosystem.

Five Digital Banking Initiatives for Second Half of 2020

As the calendar nears the midpoint of 2020 and banks continue adjusting to a new normal, it’s more important than ever to keep pace with planned initiatives.

To get a better understanding of what financial institutions are focusing on, MX surveyed more than 400 financial institution clients for their top initiatives this year and beyond. We believe these priorities will gain even more importance across the industry.

1. Enabling Emerging Technologies, Continued Innovation
Nearly 20% of clients see digital and mobile as their top initiatives for the coming years. Digital and mobile initiatives can help banks limit the traffic into physical locations, as well as reduce volume to your call centers. Your employees can focus on more complex cases or on better alternatives for customers.

Data-led digital experiences allow you to promote attractive interest rates, keep customers informed about upcoming payments and empower them to budget and track expenses in simple and intuitive ways. 

2. Improving Analytics, Insights
Knowing how to leverage data to make smarter business decisions is a key focus for financial institutions; 22% of our clients say this is the top initiative for them this year. There are endless ways to leverage data to serve customers better and become a more strategic organization.

Data insights can indicate customers in industries that are at risk of job loss or layoffs or the concentration of customers who are already in financial crisis or will be if their income stops, using key income, spending and savings ratios. Foreseeing who might be at risk financially can help you be proactive in offering solutions to minimize the long-term impact for both your customers and your institution.

3. Increasing Customer Engagement
Improving and increasing customer engagement is a top priority for 14% of our clients. Financial institutions are well positioned to become advocates for their customers by helping them with the right tools and technologies.

Transaction analytics is one foundational tool for understanding customer behavior and patterns. The insights derived from transactions and customer data can show customers how they can reduce unnecessary spending through personal financial management and expert guidance.

But it’s crucial to offer a great user experience in all your customer-facing tools and technologies. Consumers have become savvier in the way they use and interact with digital channels and apps and expect that experience from your organization. Intuitive, simple, and functional applications could be the difference between your customers choosing your financial institution or switching to a different provider.

4. Leveraging Open Banking, API Partnerships
Open banking and application programming interfaces, or APIs, are fast becoming a new norm in financial services. The future of banking may very well depend on it. Our findings show that 15% of clients are considering these types of solutions as their main initiative this year. Third-party relationships can help financial institutions go to market faster with innovative technologies, can strengthen the customer experience and compete more effectively with big banks and challengers.

Financial institutions can leverage third parties for their agile approach and rapid innovation, allowing them to allocate resources more strategically, expand lines of business, and reduce errors in production. These new innovations will help your financial institution compete more effectively and gives customers better, smarter and more advanced tools to manage their financial lives.

But not all partnerships are created equally. The Office of the Comptroller of the Currency recently released changes surrounding third-party relationships, security and use of customers’ data, requiring financial institutions to provide third-party traffic reports of companies that scrape data. Right now, the vast majority of institutions only have scrape-based connections as the means for customers to give access to their data — another reason why financial institutions should be selective and strategic with third-party providers.

5. Strategically Growing Customer Acquisition, Accounts
As banking continues to transform, so will the need to adapt including the way we grow. Nearly 30% of our clients see this as a primary goal for 2020 and beyond. Growth is a foundational part of success for every organization. And financial institutions generally have relied on the same model for growth: customer acquisitions, increasing accounts and deposits and loan origination. However, the methods to accomplish these growth strategies are changing, and they’re changing fast.

Right now, we’re being faced with one of the hardest times in recent history. The pandemic has fundamentally changed how we do business, halting our day-to-day lives. As we continue to navigate this new environment, financial institutions should lean on strategic partnerships to help fill gaps to facilitate greater focus on their customers.