The Extract: The Role of Digital Banking in Driving Consumer Trust

  • Alex Jimenez
  • June 16, 2021

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

This week we look at the role of digital banking in driving consumer trust and how mobile banking is widening the gap between the big banks and the rest. We also examine the steps necessary to be successful in changing company culture during digital transformation.

Consumer Trust for Digital Banking

Greg Magana, analyst at Insider Intelligence, says

“US banks’ strong pandemic response efforts over the past year likely boosted respondents’ trust in their primary providers.”

This is the main finding of “Insider Intelligence’s second annual Banking Digital Trust study, which surveyed 2,412 US digital banking users in Q1 2021.” Forty eight percent (48%) of the respondents chose their current digital bank as the most trusted “to provide banking services.” This is an increase of 6 points over the 42% results of last year. The question compared the current digital bank with “another traditional bank or credit union,” as well as brands like PayPal, Visa, MasterCard, Apple, Google, Amazon, and Discover. PayPal came in second at 40.7%, down from 43.1% in 2020.

Magana notes that measures such as “increasing overdraft limits and suspending property foreclosures,” have resulted in goodwill from consumers. He points to an April 2021 J.D. Power Study which found,

“Well over half (63%) of US customers said they felt ‘completely supported’ by their banks during the pandemic.”

Magana warns that the trust earned by banks should be cemented going forward. In the Insider Intelligence study, there seems to be high correlation between the level of trust for a brand and the likelihood that the brand will be considered when looking for another financial product. He adds,

“Now is not the time for banks to rest on their laurels—they’ll have to increasingly compete with newer rivals on key dimensions of digital trust.”

Speaking of J.D. Power, in a study just released they found that “a record two-thirds (67%) of U.S. retail bank customers used their bank’s mobile app during the past year—an increase of seven percentage points from 2020—and a record 41% of bank customers are now classified as digital-only.” This consumer behavior change favors the large national banks.  J.D. Power notes, “two-thirds (67%) of retail bank customers used mobile banking apps in the past year, 41% of bank customers are now digital-only and 31% of bank customers have used digital to resolve a problem. This combination of high customer volume and increased level of engagement with mobile as a primary interaction tool has helped large, national banks earn an 8-point increase (on a 1,000-point scale) in overall customer satisfaction with retail banking apps. Regional banks have seen their mobile app satisfaction scores decrease 17 points this year.”

The J.D. Power study doesn’t include community-based organizations. However, a growing mobile app satisfaction gap between the large banks and regionals isn’t good news for credit unions and community banks. Regional banks and their smaller brethren most often share the same mobile platforms, while the large banks develop their own.

The difference is explained by J.D. Power thus,

“The gap in customer satisfaction between national and regional banks is being driven in large part by increased levels of engagement with sophisticated digital offerings, including account management tools, personalized alerts, mobile check deposits and financial literacy tools.”

The bottom line seems to be that to keep or increase satisfaction, loyalty, and trust rates, banks and credit unions will need to focus more on customer experience and invest in technology that will improve that experience.

Culture Change for Successful Digital Transformations

We have said it before but we will keep saying it until everyone hears it: the success of a digital transformation hinges on culture much more than technology. Leonardo Mattiazzi, EVP of Global Innovation at CI&T agrees. Writing in Entrepreneur he says,

“This kind of transformation has always gone hand in hand with company culture — it’s less about specific technologies and more about how people work so that they can learn faster and adapt to ever-changing consumer habits and technologies.”

Mattiazzi goes on to examine “several key aspects of digital transformation” that organizations must address to drive cultural transformation, particularly when dealing with remote teams. These are:

  1. Cohesive teams where there is a sense of tribal belonging (we call it strategic vision)
  2. Recrudescent silos where barriers between silos are broken systematically
  3. Customer centricity where there is empathy for the customer’s experience
  4. Value streams where teams are organized around customer end results
  5. Agile processes where change is a managed constant
  6. Upskilling where employees are challenged to learn regularly

The consulting company Prophet has a similar message in a blog entry. They distill the requirements of a successful digital transformation to three “conversations” that must be addressed:

  1. What are our goals? Like Mattiazzi’s “cohesive teams” or our “strategic vision,” a journey starts with a goal. Many organizations want digital transformation without truly defining the specifics of what is to be achieved.
  2. How do we get there? We often get asked the incorrect question, “what technology should we buy next?” Transformation requires a look at capabilities and not just the next shiny object.
  3. What do our people need to take us there? Much of Mattiazzi’s thesis addresses this question.

Prophet notes,

“The risks inherent in digital transformation are real. But those risks must be weighed against the consequences of not pursuing digital transformation at all.”

The risks of losing market share, opportunities, and even employees are too real to not begin on the digital transformation journey.

If you don’t know where to start and are looking for a partner to help you with digital transformation for your financial service organization, contact us.


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