If you work in retail banking, you know this to be true: Today’s customer expects better and faster results at a greater volume. Younger customers especially are considered “digital natives,” meaning they have grown up with technology that gets faster and more comprehensive seemingly by the minute. Many banks and credit unions know they need to respond with service updates, but often struggle to keep pace with the demand.
With customers’ expectations dictating the future of retail banking, financial institutions (FIs) need to adopt scalable strategies for delivering excellent service. As you prepare your branch for the future, you’ll need to address the physical, technological, staffing, regulatory, and competitive challenges facing the industry and plan accordingly.
We have some great ideas for helping you meet these retail banking challenges head-on. Let’s get started.
Top 10 Challenges Facing Banks & Credit Unions in 2023 [+ Solutions]
1. Understanding customer expectations
The current generation of digital natives has high expectations of their FIs — namely, that service be comprehensive, fast, and tailored to their specific needs (or better yet, identifies their needs before they themselves even become aware of them). Many traditional banks and credit unions struggle to meet these demands through technology, even though half of their users rely primarily on mobile banking solutions (86.5% of Americans used a mobile device to check their bank balance in 2020 alone).
On the other hand, 62% of respondents to a 2021 survey by goMoxie (now NICE customer experience solutions) said that they still prefer a bank or credit union with a physical presence. This presents a challenge to banks and credit unions: how to balance current technology and great human capital without letting either fall by the wayside.
This starts with finding out what your customers want through feedback surveys or other tools. For example, referrals allow institutions to provide a deeper level of service by better understanding their customers’ or members’ needs. Referral-and-reward programs — which benefit both employees and customers — are a great way to incentivize your team to deliver excellent customer service.
2. Optimizing the mobile experience
COVID-19 has had a major impact on the need for FIs to prioritize mobile and non-traditional delivery methods, such as two-way video banking. If given the choice, today’s customers are much more likely to choose digital banking over in-person, and a bank or credit union without a digital presence will simply get left behind.
Mobile strategies help FIs stay competitive and are a major factor in customer satisfaction and retention. Plus, customers have gotten much more accustomed to mobile money management through tools like Zelle, Venmo, and Apple Pay, so there’s little likelihood of a UX learning curve.
3. Leveraging social media to increase foot traffic
Social media has come a long way from status updates and photo sharing. Nowadays, it gives brands a chance to build relationships with their customers that can seamlessly translate to face-to-face interactions, provided these brands have a cohesive, multi-channel customer engagement strategy.
Through customer contests and event promotions, retail banks and credit unions have a huge opportunity to leverage social media to get more people in their doors. Engage your staff in running social media campaigns that feature real employees, giveaways, and user-generated content accompanied by a unique hashtag. Efforts like these will communicate your brand’s customer-first approach and encourage your followers to pay you a visit.
4. Security and authentication
Whenever a new tech solution makes its debut, someone tries to hack it. Despite the growing popularity of mobile banking, security breaches continue to pose a significant threat. Though they can offer secure authentication for self-service solutions in their physical branches, FIs will need to ensure their mobile platforms can provide the same level of data security. Doing so is crucial for instilling and maintaining trust in your brand.
5. Fintech competition
Short for financial technology, fintech refers to software that can replace human-powered financial services, such as payment processing, loan application, financial advising, and cryptocurrency. This last item poses a major disruption to the banking industry, though fintech as a whole is not likely to replace the traditional bank or credit union anytime soon.
If they have the capability, smaller banks and credit unions can partner with fintech entities or sponsor programs that research and develop new fintech solutions. Partnerships like this can position an independent FI as a savvy industry player.
6. Omnichannel reach
Though banks and credit unions should take a multi-channel marketing approach to customer engagement, that does not mean using every possible channel. (For example, if no one’s going to engage with your FI on Pinterest, best to leave that account on the shelf.)
With insights based on market analysis — plus well-allocated marketing dollars — you can utilize traditional, digital, and social tools to reach and engage with your customers and members on the platforms they actually use.
7. Internal change
For the better part of the 2010s, financial industry recruiting efforts have been prioritizing digital expertise and innovation in applicants. Today, roles like Chief Innovation Officer and Customer Experience Director are responsible for meeting and anticipating customer expectations, with a strong emphasis placed on digital innovation.
Adopting new technologies may also mean that the traditional teller role will need to transition into someone with a more diverse set of skills. The increasingly popular “universal banker” is someone who can deliver more complex financial services while self-service solutions cover routine transactions.
8. Adopting AI
Artificial intelligence is increasingly used in finance to predict customer preferences and make risk assessments. However, many (especially smaller) banks and credit unions struggle to adopt AI because they lack a clear AI strategy. There is also the pervasive fear, and not just in the banking industry, that robots will take our jobs.
While AI helps banks and credit unions achieve more than they thought would be possible even 10 years ago, there is no substitute for human discretion and expertise when it comes to complex financial services. Comprehensive employee education and training programs will ensure that even the most powerful AI solutions won’t eclipse the flesh-and-blood financial advisor.
9. Regulatory compliance
As regulations become heavier and more complex, banks and credit unions must allocate more of their budget to compliance. Though evolving regulations are impossible to avoid, FIs that adopt scalable processes, staff roles, and tech solutions will be well-positioned to respond to changing regulatory tides.
10. Increasing pressure from competition
As integral as your local financial institution is to the fabric of your community, Accenture found that 31% of banking customers would consider banking with non-financial platforms like Facebook, Amazon, or Google if they started offering financial services. This speaks to many customers’ preference for ease-of-use; if they can shop, transfer money, and click “Purchase” all in one app, why not? Additionally, financial startups like Robinhood and Acorns have positioned themselves to be the one-touch answer to investing, looking to take the advisor out of the equation.
Banks and credit unions can counter this challenge by promoting the human talent they have on tap. App-only banking is impersonal and subject to glitches (including security breaches), so an FI that can offer expert guidance alongside innovative tech solutions can remain a cut above competing tech.
How Element Can Help
At Element, branch transformation means a lot more than an interior design makeover — our goal is to create a physical space that will align and grow with changing demands, coming from both customers and the industry. Mobile solutions aside, your in-branch experience can communicate your commitment to listening and responding to your customers’ wishes.
If you’re looking to stay ahead of the curve in 2023 and beyond, the Element team can help you reach and retain customers and members through memorable, innovative solutions. Our services include:
- Streamlining your brand identity across your network, helping to deliver a cohesive experience no matter the branch location.
- Performing a location analysis to identify your most valuable target demographic, what they want, and the channels through which you need to reach them.
- Market research that will help you (and us) to better understand your competition, as well as your unique capabilities within a local trade area.
- Incorporating unique local elements into your physical space that communicate a sense of place.
- Training your employees to engage customers holistically as they move through your branch.
- Promotional marketing tactics to augment the retail banking experience.
To learn more about how your institution can meet current and future challenges head-on, start a conversation with the Element team today.