Looking back in the last year, there were definitely a lot of changes that were attributed to the pandemic. Yes, the pandemic may have accelerated certain industries and certain behaviors but that is hardly the sole driver of digital transformation. If I look at my personal spending before and after the pandemic, I may notice that I have taken less shared rides via services like Lyft and Uber, but that expense shifted to food services and deliveries. There is one similarity that I noticed: my high dependency on digital devices. It used to be a “teenager issue,” but now it’s an integral part of everyone’s lives. Let me also call out a key difference: pre-pandemic, I relied on a handful of trusted merchants, but now everyone is fair game.
What do I mean by that? Well, I have a love-hate relationship with my digital devices. They do what I need them to do 90% of the time, but they drive me up the wall the remaining 10%. I also have moments of “it’s not you, it’s me.”
Meeting Digital Expectations is Difficult
Technology has influenced how we expect things to work and how long it takes to get done. It’s our digital expectations. During the pandemic, I opened nearly a dozen new accounts with vendors that I never bought from before. I also opened a new investment account to better manage our finances. I was not alone though. Based on a Digital Banking Report by DBR Research, the number of financial institutions that indicated that their customers can open new checking accounts online rose to 66% from prior years. And it doesn’t stop there. Customers want access to their financial institutions when and where they want, typically through their digital devices.
Threat of Financial Technology
The digital experience gap is costly. Financial institutions have traditionally been inundated with regulatory checks, credit checks, and know your customer compliance requirements. However, on top of all that – which are not going away – they now have to put customer experiences in the forefront. Why? People stay loyal to their banks. Recent studies show that customers remain with their banks for an average of 15 years, that’s not only in the US but around the globe. Think about the lifetime value of those customers that you are able to convert after spending your marketing dollars.
You Snooze, You Lose
So what does that mean? If you don’t act, you will get passed. If you don’t put digital experiences first, your customers have other options. Regardless of the type of financial institution, all players are seeking to stay relevant and “compete” as they innovate to capture the new wave of customers. Whether you provide banking or lending services, everyone is seeking to provide a “better way” to bank for all.
First Impression Matters
One of my favorite quotes is by John Gunn from OneSpan. He said in The State of Digital Account Opening Transformation report: “They (Neobanks/Challengers) are giving people an alternative, and it all starts with the digital account opening experience. That’s where they compete.” Nowadays, there are endless options for banking, loans, and credit via strictly digital processes – the onset of challenger banks contributed to that. These options continue to grow and consumers are buying in.
Stay Ahead of the Game
Even if you have the best product, the best services, the best interest rate – whatever it may be, it would be remiss if you don’t put your energy in meeting digital expectations in your first interaction. That is not to say or to suggest relaxing how you bring a customer onboard or entice them with any special offers. It is to say that you need to consider the level of effort that is required for someone to sign up to become your customer. But how do you not make it so quick, easy, and frictionless that you become vulnerable to fraudsters?
The answer is: a probabilistic approach to identity verification. Traditionally, financial institutions focus on binary answers – yes or no – which we will refer to as a deterministic approach. It has its place in onboarding customers but when complemented with probabilistic data, it allows for a refocus on customer experience and that first impression.
Ready to learn more? Check out our webinar with American Banker “Looking Beyond Credit Risk to Identify Your Good Customers”