What Is Banking Technology?
Banking technology encompasses a wide range of tools, including mobile apps, real-time customer service, self-service kiosks, omnichannel capabilities, and data collection and analysis. With younger generations having grown up in a digitally powered world, today’s banking adults expect their banks and credit unions to be just as technologically dynamic as their favorite online retailers.
Rather than pushing customers and members away from physical branches, effective banking technology serves as an essential building block of a successful retail partnership, augmented by five-star customer service. Many banks and credit unions are embracing new technology as a cost-saving measure, with mobile and self-service tools enabling them to reduce their physical footprint and employ or train more highly skilled staff.
In addition to answering the demands of the industry, the goals of today’s banking technology include:
- Improving the customer/member experience with comprehensive services
- Streamlining transactions and interactions via omnichannel infrastructure
- Reducing operating costs with an increase in mobile offerings
- Collecting insightful and actionable user data
- Enabling high-quality customer service by empowering employees
Read on to discover top trends and best practices for rolling out new tech tools in your financial institution.
Top Trends in Banking Technology
Application programming interface (API) technology makes it possible for apps like Venmo and Paypal to access a user’s account information with their permission. The need for this kind of integration isn’t going away anytime soon — so if they haven’t already, community banks and credit unions would be wise to open their APIs for third-party finserv companies to develop new and better solutions.
According to Business Insider’s 2020 Mobile Banking Competitive Edge study, 48% of financial institution (FI) executives believe artificial intelligence and blockchain will have the greatest impact on retail banking in the next few years. Artificial intelligence can streamline the customer/member experience with tools like ATM facial recognition software, chatbots, voice assistance, and financial forecasting, while still leaving the more complex services to skilled staff.
Best known for its role in cryptocurrency, blockchain technology leverages a segmented, digital database to process secure transactions. Since regulation is such a prevalent and driving force in banking, FIs are taking a growing interest in using blockchain technology to keep their customers’ and members’ data safe from fraudsters.
Standalone investing apps like Acorns, Digit, and Qapital present a hands-off solution to saving and investing, quite literally taking the responsibility of putting money aside out of their users’ hands. While these apps operate outside of any established FI network, banks and credit unions can capitalize on this trend by offering their customers a similar set-it-and-forget-it savings tool.
The Explosion of Mobile Banking
As crucial as the physical branch is to an FI’s brand, there’s no turning away from mobile banking. According to Business Insider, nearly 80% of Americans who use mobile banking apps say that it is their primary method of banking. For younger generations especially, mobile banking apps have become the default for transactions like check deposits and account transfers.
Mobile has surpassed online banking in popularity, so much so that over 45% of respondents to Business Insider’s Mobile Banking Competitive Edge Study say that mobile capabilities are one of the top three reasons that determine their choice of financial institution.
This is a prime example of letting consumer wants and needs drive the evolution of banking technology. Without a mobile element, community banks and credit unions will likely fall behind the competition.
The Essential Elements of a Solid Banking App
In order to stay competitive and meet evolving consumer needs, today’s mobile banking apps need to feature the following at minimum:
- Easy-to-navigate user interface
- Data security measures
- Omnichannel capabilities
- Digital wallet
- Mobile check deposit
- Ability to chat with/contact customer service within the app
- Ability to shop for and purchase banking products
- Ability for users to share account information with third-party apps or services (such as Venmo, Paypal, or Acorns)
- Ability to cancel cards in case of loss or theft
- Check or replacement card ordering
When in doubt about which features will best serve your existing audience, use customer surveys to gather insights.
Banking Technology Challenges
User data security is a major concern with all forms of digital transactions, since every new tool or platform is likely to pique the interest of a hacker or fraudster. Banks and credit unions need to build their tech tools on rock-solid security infrastructure and regularly perform audits to ensure its fidelity. From a user standpoint, FI customers and members need to be able to manage their own security settings within digital banking tools, placing holds on accounts, setting up two-factor authentication, or scheduling and verifying travel dates.
Standalone financial apps that aren’t affiliated with any FI also pose a threat to established institutions. Direct banking — furnished by companies that don’t have physical branch networks — is making a case for post-branch banking, in which users never have to leave their homes or interact with a teller face-to-face. These neobanks, as they’re called, are not bound by traditional banking technology, which can give them a competitive edge when it comes to nimbleness. However, concerns about security and the lack of a human element can erode customers’ trust.
Security and competition aside, a significant challenge related to banking technology isn’t in its implementation or capabilities; over-reliance on tech poses its own risks. Institutions that prioritize a digital-first approach may accidentally alienate customers and members who rely on in-person banking, so it’s important to keep branch services vibrant and comprehensive through employee training and engagement opportunities.
>>Related Reading: Top 10 Banking Challenges In 2023: Tips & Solutions
Stay Ahead of Evolving Consumer Needs
Today’s most successful brands acknowledge that brand loyalty is not a given. Detaching oneself from a brand or service is often as easy as clicking the “unsubscribe” button, but brands that establish meaningful, responsive, and holistic relationships with their customers have more staying power.
Therefore, FIs who wish to keep pace with the latest banking technology must ensure their customer relationship infrastructure can support any new tools. As more FIs close or downsize their branches, there is a mass shift toward building more consultative — as opposed to strictly transactional — relationships with customers and members. While the banking public may prefer to complete standard transactions without ever setting foot in a branch, chances are they will opt for an in-person interaction for more complex financial services.
In order to build and maintain strong customer or member relationships in the face of new trends, banks and credit unions should keep the following best practices in mind:
- Seek to understand which services and tools consumers value most and prioritize new initiatives accordingly
- Stay aware of your FI’s place in the competitive landscape — local, regional, and national
- Leverage customer/member data to segment your market and personalize digital and in-person interactions
- Infuse tech tools with your own brand voice and personality so new tools have a familiar feel
- Partner with local businesses and organizations to promote new tech rollouts
- Don’t deploy a new tool or service until all employees are onboarded and comfortable navigating new interfaces
- Be transparent about security measures embedded in new tools
- Keep customer feedback channels open — in-branch, in-app, and online
How to Implement New Banking Technology
New technology can be nerve wracking for FIs and customers alike. FIs looking to implement new tech tools walk a fine line between anticipating customers’ or members’ needs and succumbing to “shiny object syndrome.” Then there’s always the risk that you’ll alienate older customers or members with a new tech-first approach. But if your target demographic is clamoring for a service update, here are a few guidelines to help you roll out new tools:
- Identify specific challenges your new tools will help solve
- Choose tools that are appropriate for your budget, implementation timeframe, employee capabilities, and existing or planned infrastructure
- Keep the channel of communication open between team members and leadership, and encourage feedback
- Decide which metrics you’ll use to measure performance
- Monitor user data to gauge how well your solutions meet customer/member needs
- Offer tutorial sessions for users to learn new tools
New technology is almost always accompanied by an adjustment period, but don’t let growing pains deter you from updating your FI’s offerings. To ensure that members of your team are supported during the transition to new tools, lean on a training partner to help bring everyone up to speed.
Our Predictions for the Future of Banking Technology
While the wave of evolving banking tech feels unstoppable, there are a few things we feel we can count on. No matter how comprehensive your mobile app, or how uncanny your AI-driven virtual teller service, personalized customer service delivered by skilled professionals will always anchor a great retail banking experience. Additionally, FIs that seamlessly integrate new tech into their physical space stand the best chance of maintaining customer/member trust and fostering lasting relationships.
As we work with our clients, we see a lot of exciting new tech tools. While some are truly impressive in their capabilities, we’ve observed that they are virtually ineffective if not supported by empowered team members. Staff who can provide personalized service, customer education and tutorials, and real-time resolutions demonstrate the real value of banking technology and solidify their institution’s place as a trusted community resource.
If you’d like to learn more about how your physical space can support and capitalize on new banking technology, reach out to the Element team today. We’d love to learn about your goals.