The popularity of online banks can’t be denied. In the past 5 years alone, the number of digital banking users in the United States grew 18% from 133.5 million in 2014, to 161.1 million in 2019. What’s more, in the last 12 years, two trends stand out. The number of banks and credit unions peaked in 2009 but then began a steady decline, with annual decreases ranging from 0.4 to 1.6 percent. That’s a drop of about one-third in roughly a dozen years. The biggest reason for this may have been due to the banking crisis and loan defaults around that time and the resulting increased regulations. It’s also possible the decrease could be due to some larger banks and credit unions absorbing smaller institutions while other banks have combined or failed. Whatever the reason, the increasing presence of online banks cannot be ignored.
What is Digital Banking?
There are two different kinds of digital banking including both direct and neobanks. Digital banks, also known as online-only banks, are accessible on computers or through apps on tablets or smartphones. This means you can bypass traditional in-branch service and do your banking any time of day or night, 7 days a week. Often, digital banks are divisions of a traditional, usually well-known “big player” such as ING or Chase. Neobanks, on the other hand, work like traditional banks; money can be deposited into interest-bearing accounts and you can borrow from and make loan payments to a neobank. The only notable difference is that they’re 100 percent digital with no physical branches and no ties to a brick-and-mortar parent bank. Their existence is exclusively digital.
There are pros and cons to each type of digital bank. Both can offer better rates and lower fees because they have less overhead. You can be instantly approved for loans, have direct access to your money, and the AI associated with them can automatically detect fraud and track patterns. You also have 24/7 access to customer services, instead of being limited by traditional banking days and hours.
But What About Brick-and-Mortar Branches?
Avannis surveys and reporting show that customers still value services branches offer that can’t be obtained from an online-only bank such as getting money orders, notarized documents, and using physical safe deposit boxes. Physical branches are also still the best choice for depositing cash, as moving cash through the mail is unsafe and depositing at an ATM can be cumbersome.
What’s more, traditional brick and mortar banks are reliable and can be found in your hometown. And it’s tough to discount the value of having access to live, professional help when you need it. Take a look at the daunting process of applying for a loan, for example. Even when a complex transaction such as mortgage refinance is fully digitized, many applicants may still feel intimidated by the sheer complexity of it. This is where a bank branch can demonstrate its value, offering face-to-face interaction and walking customers through each stage of the process. That’s a service digital banks can’t provide, one that boosts applicants’ confidence and trust.
Customer support is another example of a situation in which face-to-face contact (or at least speaking with a live CSR on the phone) results in much greater customer satisfaction than a digital-only experience. When a customer encounters a problem with their account, navigating a computerized phone menu or online chat is more frustrating than calling a direct-to-human number. When customers can speak with someone who grasps the problem, they can get it fixed immediately. Plus, at your local branch, the teller may know your name and that familiarity makes you feel at home. All of these reasons are why branches still drive business, and financial institution leaders are starting to realize the link between physical branches and positive customer experience is crucial to long-term success.
Financial Institutions Need to Find Balance
The importance of personal banking can make it tempting to disregard the significance of fintech advances. A 2018 Adobe survey found that less than 30 percent of financial institutions say they’re investing significantly in educating branch staff and increasing their digital skills. Those numbers show that the majority of banks and credit unions don’t see that embracing all things digital doesn’t mean abandoning physical branches. Unfortunately, ignoring technological advances and the digital trend will set brick-and-mortar banks and credit unions up for failure.
Customers want versatility, so the best way to stay relevant is to deliver on both experiences, balancing digital banking with physical locations. Financial institutions that want to compete with the neo and digital banks need to keep their edge by providing superior, individualized customer experiences to their patrons along with traditional products and services.
To survive and thrive, banks and credit unions should plan for a future in which every brick-and-mortar branch serves as a hub for face-to-face interactions with personal bankers, while also offering real-time data and digital tools. Achieving both will ensure building lifelong relationships of trust that keep customers coming through the doors.
Finding Your Balance with Customer Feedback
The bottom line is that brick-and-mortar financial institutions are still relevant. Research shows that 94% of customers say they prefer a bank with physical branches. At Avannis, we’ve seen that in smaller towns and communities, physical banks and credit unions are part of the fabric of the community where locals can stop by, say hi, and even grab a cup of coffee. We routinely receive the following comments about the branch experience from customers and members:
- “We like the people that work there.”
- “I like the personal touches and friendly service.”
- “It is close to home.”
- “My branch has fun employees.”
- “I like the free coffee and hot chocolate.”
- “I have been banking with (my institution) since I was a teenager and I plan to continue to do so indefinitely.”
- “I am not just a number but feel like a valued customer.”
These are just a few examples of the kind of insight that is crucial to keeping your customers’ experience positive, and Avannis can help you get a handle on it. We can deliver a daily drip of information concerning what your customers are thinking so you can adjust your programs and procedures to keep them happy. Gathering customer feedback to help you track and monetize the customer experience is what we do best. Contact us today to see how our customized surveys, online tools, and seasoned expertise can give you the edge you need to differentiate your bank or credit union from your branchless competitors.