The Weekly Extract: July 20, 2020

  • Alex Jimenez
  • July 20, 2020

The Weekly Extract from Extractable is a condensed roundup of digital experience news for financial services institutions — and our take from San Francisco.

This week we cover the surprising results of a pandemic banking survey, and the equally surprising results for Goldman Sachs’ Marcus. We look at approaches to banking digital transformation, and finally, we discuss digital banking strategy and tips to improve digital banking engagement.


Pandemic Banking Survey

This week, ID Insight released the results of a Harris Poll looking to understand how satisfied American consumers are with Financial Institutions’ (FIs) performance through the COVID-19 pandemic. It turns out that FIs have fared better than favorite restaurants and places of worship, but not as well as large grocery stores or medical providers.

“Two-thirds (67%) of Americans say they are satisfied with the response of their primary FI.” Surprisingly, digital-only banks (61%) underperform community banks (74%), credit unions (73%), and large banks (73%).

“We expected that online-only customers would be the most satisfied because they weren’t being asked to fundamentally change the way they were interacting with their bank,” said Jack Sundstrom, chief product and marketing officer, ID Insight. “Something about the experience is falling short of expectations.”

When asked, digital-only banking customers were more likely to sat they would switch to another FI (38%), than those that bank with non-digital-only FIs. Sundstrom posits that,

“The post-pandemic customer may have an entirely new set of banking expectations.”

While 73-74% satisfaction for legacy FIs sounds great, particularly compared to digital-only banks, it still points to dissatisfaction by a quarter of American consumers. A survey by Lightico may shed some light on why.

According to the Lightico survey “56% of banking consumers report that they have been redirected from online banking interactions to physical locations. And 48% say they’ve been asked to print, sign, and email papers while banking online.”

Clearly many FIs’ digital capabilities continue to lag those of other industries. Asking customers to leave their preferred channel — or in the case of the crisis — asking them to physically enter a branch, shows that FIs still have a lot of work to do in building true digital consumer journeys.

One digital-only bank seems to be fairing quite well during the pandemic. According to an article in Fortune magazine by Rey Mashayekhi Goldman Sachs’ “Marcus has now raised $92 billion in deposits to date, according to Goldman, with $32 billion of that raised in the first half of 2020 and $20 billion raised in the second quarter alone.”

The results are not just in the number of deposits Marcus has gathered, but Goldman Sachs’ consumer banking revenues were up by 19% year-over-year in Q2. Marcus’ Adam Dell notes:

“I think the most relevant metric is our savings rate relative to the other options that consumers have across the market. What you’ll find is that we’re still quite high relative to our competitors. It’s our aspiration to be among the top high-interest-rate account providers to the market.”

After opening a Marcus account ourselves, we understand how their focus on delivering a simple customer-centric digital experience is resulting in raving fans. According to an article in ATM Marketplace, “more than 90% of Marcus accounts were open without any human contact at all.”

How many legacy banks can say the same of their digital account opening efforts?


Approaching Digital Transformation

In the past few months, we have examined a plethora of different approaches to banking digital transformation. Nikos Karelos, Banking Director at Profile Software summarizes the approaches recommended by large consulting firms Capgemini, McKinsey, PwC, and KPGM, in an article in Bobs Guide. Many of these have been summarized here, but Karelos does a good job in putting them into a concise list.

Karelos notes that McKinsey recommends FIs:

“set a five-stage call-to-action applicable across industries emerging from the coronavirus battle: Resolve, Resilience, Return, Reimagine, and Reform.”

While Capgemini recommends a focus on:

transforming the core banking system to adopt a progressive approach, modernizing their systems to achieve time-sensitive goals with minimal risk and measurable outcome.”

PwC also recommends investing in technology, says Karelos, but also pairs it with a caution to undertake cost control measures.

KPMG focuses on the “difficult balancing act between making credit available quickly, while still performing all necessary checks.” Karelos adds,

“Machine learning, customer analytics and automated eligibility checks will be necessary in the banks’ post-coronavirus strategy, to provide insights on the customer’s profile and enable rapid origination and processing, in compliance with data protection policies.”

This week we saw another approach noted in a discussion between PYMNTSKaren Webster and Ondot Systems CEO and President Vaduvur Bharghavan. Given the accelerating consumer demand for leading digital experiences, Bhargavan suggests that legacy FIs, “must go digital in the ways consumers are seeking.”

Bharghavan notes that FIs have something that new entrants do not have: trust

“Even in this environment, we found people trust their banks more with their money — and not just the money, but also with their privacy. One of the things that we found was that folks are interested [in] these new entrants not because of privacy or security, but in spite of it. … Inherently, they trust their banks more.”

So what can FIs do to leverage that trust and keep digital-savvy newcomers from eating their lunch?

“You can draw consumers in with value, but you retain [them] with engagement. … That is the best way in for financial institutions, banks and credit unions to combat tech players.”


Strategy and Personalization

Often, we have conversations with FIs that are unsure how to approach improving their digital experience. Many organizations focus on optimizing digital banking — and feel that taking a step back to define their overall digital strategy is unnecessary.

For the former, Banking CIO Outlook published an article giving tips to improve digital banking experiences. Their tips cover four areas:

  1. FIs often focus on automating as much as possible, but don’t give customers an ability to be assisted by a real person. Banking CIO recommends that there should be “one-press to call option that will connect” to an agent.
  2. They also recommend considering digital assistants in areas that make sense.
  3. In the digital space, it is easy and common to give customers opportunities to give feedback. Banking CIO recommends that surveys should be an ongoing practice for FIs in digital.
  4. Finally, they also recommend using digital marketing to continually update customers about capabilities and changes.

Banking CIO notes that while most banks offer digital banking a continuing plan must be in place to provide the services customers expect. That roadmap is integral to what we call a digital strategy.

While these tips are the bare bones of a digital strategy, in an article in Forbes, Kathleen Craig CEO at Plinqit advocates for FIs to leverage their data to develop personalized digital experiences for their customers. Using data to develop personalized digital experiences is often a goal of many FIs we work with. However, they are overwhelmed by the sheer amount of data and what capabilities will be needed to process it.

How can FIs put a filter on this firehose of data?

Craig warns that FIs shouldn’t implement any digital changes without strategy.

“It is easy to get sucked into bright and shiny solutions without real data and information to back up the decision. The good news is that your institution most likely already has the data needed to make sound digital decisions that add the most value to your customers. Using data you have, your financial institution can provide account holders with a customized, relevant and improved digital experience”.

Craig recommends “Setting small objectives can ensure you find the right data set to support your institution’s goals and narrow in on your unique market opportunities. Taking baby steps can help ensure everyone is on the same page about who your institution is, where it is now and where it is going.”

She also notes that partnering with fintech firms can help FIs access and use that data quicker than trying to build capabilities in-house.

At Extractable, we work with FIs to build a digital strategy based on their customers unique needs — leveraging data and the current strengths within the organization. We not only help implement digital banking tips, but prioritize all changes based on the strategy, the customer, and the capabilities of the organization and partners.


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