With the introduction of video banking, a lot of people are concerned about whether or not conventional banks will be able to make it through the digital revolution. The pandemic prompted a trend toward digital solutions, which has caused industry experts to speculate about the future of brick-and-mortar banks. However, is it accurate to say that conventional banks are doomed to vanish from the earth? We don’t think so.
Even while the old banking system is losing favour with younger generations, traditional banks are still the principal financial institution for 65 per cent of all customers. We do not foresee a widespread migration away from traditional banks shortly. Despite this, the fight that conventional banks must wage to maintain their dominant position may take work. The results of a recent in-depth study that Galileo carried out to get to the bottom of customer preferences and feelings around their banking routines revealed some illuminating information, which we’ve covered in this article.
Customers Have Become More Cautious
Most customers base their selection of a supplier of financial services on one of these four primary considerations: convenience, costs, security, and privacy. That shouldn't come as a surprise; in particular, the second and third factors drive the massive transition to digital banking.
Users go toward exclusively digital banks because the services they provide are simple, easy to use, and inexpensive. Sixty-one per cent of respondents indicated an interest in moving their main account to companies that exclusively offer digital services.
Customers typically have accounts with 2.5 providers, including at least one digital service provider.
In addition, while 77% of adult Americans utilize conventional banks for at least one of their accounts (main or secondary), they store 43% of their wealth elsewhere. It shouldn't be surprising that younger customers retain a greater share of their money in unconventional accounts than older consumers do. We anticipate that this share will rise as the purchasing power of consumers in the millennial and Gen Z generations grow.
Traditional accounts, digital-only accounts, prepaid cards, and standalone digital accounts are acceptable options for users to save money across various demographics. They utilize such accounts in a relatively interchangeable manner for multiple purposes, including making purchases online, taking out cash, paying bills, and being paid. Some customers may employ independent video banking solutions in place of traditional bank savings accounts. If a customer's bank does not provide built-in bucketing choices, another alternative for consumers is to construct spending "envelopes" for various reasons that span all of their accounts.
Can Conventional Banks Keep Up?
There isn't necessarily going to be a massive transition to digital-only banks very soon, even though many customers have thought about moving. Just 18% of customers elected to make the changeover in 2020, even though there were more obstacles to overcome to visit physical branches during the COVID-19 epidemic. This indicates that conventional suppliers have the potential to maintain their client base, provided they emphasize the expansion of digital offerings.
The happiness of banking customers is the conventional banking industry's greatest challenge. The reason why digital-only and independent digital solutions have such sky-high satisfaction levels (about 80 per cent) is that they often begin by focusing on one item and executing that one thing well. These services, among other video banking benefits, gradually broaden the scope of their products over time, enabling customers who are already acquainted with the platform to embrace the features they want to utilize progressively.
Clients may have higher expectations for traditional banks, which may explain why they only have a satisfaction percentage of 66%. Standard suppliers may need help satisfying customers since customers evaluate them based on their services, such as mortgages, loans, and investment possibilities, rather than how well they manage to supply checking accounts.
Consumers will likely remain around if banks can deliver seamless digital experiences and assistance across their offerings. Traditional banks continue to enjoy the confidence of their customers. That gives you a significant edge. The increased trust that conventional banks now want may only be sustainable if customers get used to the conveniences offered by digital alternatives. Traditional financial institutions can capitalize on this trust by investing in digital experiences that are more fulfilling as soon as possible.
Suppose traditional banks are ready to modernize their ageing technology. In that case, there is no reason to believe that they won't be able to modify their services to be comparable to those provided by digital-only financial institutions. To modernize their core technology, banks need to either invest in an API-based technology stack or form a strategic alliance with a technology provider that can give customers the flexible digital alternatives they seek.
It's Not Digital Vs Conventional
Those of us working in the business may think about it in terms of "digital" vs "traditional," but the fact is that customers don't. They think about what they're receiving. It is not the categorization that they are interested in so much as the conclusion. Keeping this in mind, financial institutions have no cause for concern as long as they are ready to disregard "tradition" to advance their industry. This requires giving the ease and options desired by the client top priority.
When it comes to the virtual or actual checkout queue, a study showed that customers would choose the option that presents them with the fewest obstacles to overcome on a personal level. The number of financial tools people use is at an all-time high, and how they utilize these tools should serve as a guide for conventional banks as they work to enhance their digital offerings.
Any organization may realize its potential in the digital space with the appropriate investments and collaborations. Once financial institutions have overcome the challenge posed by technology, they will be able to direct their attention to providing the proper mix of value propositions by focusing on client feedback and rapidly iterating product designs.
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There’s no denying the many benefits of video banking. However, banking in its current form is likely to be around for a while, provided that conventional financial institutions can adapt to customers' shifting tastes - and there is no logic to acknowledge that they will only be capable of doing so.
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