Creating a Digital Banking Experience That Competes with Digitally Native Banks

As traditional banks face increasing competition from digitally native banks and fintech disruptors, creating a compelling digital experience has become crucial for survival and growth. Banking customers and members of credit unions are increasingly turning to digital channels to conduct the bulk of their banking business, and a positive experience can drive satisfaction and loyalty.

Customers’ needs are changing. They expect more from service providers in the form of fast, frictionless, and personalized journeys,” says a McKinsey & Company study. "Their banking practices have also altered, with many of them now using digital and looking for it from their banks. Customer experience (CX) is proving to be the strategic differentiator for banks, with experienced leaders outperforming laggards.”

This article explores key strategies for financial institutions to enhance their digital offerings and rival the seamless experiences provided by tech-savvy competitors. From developing intuitive interfaces to leveraging data analytics and AI for personalization, we'll examine how banks can transform their digital presence to meet evolving customer expectations in an increasingly digital financial landscape.

Building Intuitive Digital Interfaces

Intuitive digital interfaces are crucial for banks to provide a seamless and user-friendly experience that can rival digitally native competitors. By focusing on effortless navigation and interaction, banks can significantly enhance customer satisfaction and engagement.

Key elements of an intuitive digital banking interface include:

1. Simplified navigation: Organize features and services in a logical, easy-to-understand structure. Use clear labels and icons to help users quickly find what they need. For example, Bank of America's mobile app uses a simple bottom navigation bar with icons for accounts, bill pay, transfers, and more.
2. Personalized dashboards: Provide customizable home screens that allow users to prioritize the features they use most frequently. This approach is exemplified by Chase's mobile app, which lets customers rearrange their dashboard tiles.
3. Streamlined processes: Reduce the number of steps required to complete common tasks like transferring money or paying bills. Capital One's mobile app, for instance, allows users to lock a misplaced credit card with just a few taps.
4. Consistent design across platforms: Ensure a cohesive look and feel across mobile apps, web interfaces, and even ATMs to create a unified brand experience. This consistency helps users navigate different channels effortlessly.
5. Accessibility features: Incorporate options for users with disabilities, such as adjustable text sizes, voice commands, and screen reader compatibility. This inclusive approach expands the bank's potential customer base.
6. Intelligent search functionality: Implement robust search capabilities that understand natural language queries, helping users quickly find information or complete tasks without navigating through multiple menus.
7. Progressive disclosure: Present information and options gradually, avoiding overwhelming users with too many choices at once. This technique helps maintain a clean interface while still offering advanced features for power users.
8. Visual feedback and micro-interactions: Use subtle animations and visual cues to confirm user actions and guide them through processes, enhancing the overall user experience.
9. Biometric authentication: Implement fingerprint or facial recognition for secure and convenient login, reducing friction in the authentication process.

By implementing these design principles, banks can create digital interfaces that are not only functional but also enjoyable to use. This focus on user experience is critical in competing with digitally native banks, which often prioritize interface design as a key differentiator.

Moreover, intuitive interfaces can lead to increased adoption of digital banking services. According to Deloitte, "Customers are becoming more vocal about their evolving expectations. They want their banks to balance digital-first experiences without compromising the personal touch. […] Younger consumers, in particular, are clamoring for a superior experience that some technology firms and fintech platforms offer.”

Generating Personalized Experiences with AI

Artificial intelligence (AI) and advanced data analytics are revolutionizing how banks deliver personalized experiences to their customers. By leveraging these technologies, financial institutions can provide tailored recommendations, proactive financial advice, and customized product offerings that rival the personalization capabilities of digitally native banks.

Here are a few critical focus areas for this technology.

Predicting Customer Needs

AI enables personalization primarily through predictive analytics. By examining extensive customer data, such as transaction history and account balances, alongside external factors like economic indicators, AI algorithms can foresee customer needs and behaviors.

For example, an AI program could analyze the financial habits of customers or members to identify potential savings opportunities. It could even identify insights that could improve sales conversations for specific types of products, such as mortgages, personal loans, or credit cards.

Powering Virtual Assistants

Natural language processing (NLP) significantly enhances personalization in digital banking by powering chatbots and virtual assistants. These tools can understand and respond to customer queries in a conversational style, creating a more human-like interaction.

For example, Bank of America's virtual assistant Erica utilizes AI to offer personalized insights, identifying potential savings opportunities or alerting users to unusual account activity.

"Erica’s controlled AI has become a primary gateway to personalization, and it continues to evolve with our clients’ financial needs,” said David Tyrie, Chief Digital Officer and Chief Marketing Officer at Bank of America in a press release. "Client engagement with Erica is accelerating.”

Delivering Tailored Product Recommendations

AI-driven personalization also extends to product recommendations. By analyzing a customer's financial profile and behavior, banks can propose tailored product suggestions that best meet individual needs.

Some large banks have implemented this capability in the form of "next best action” recommendations. Their online portals and mobile apps will suggest relevant products or services based on stated or implied financial goals.

As AI technology continues to evolve, its potential for enhancing personalization in banking will only grow. Banks and credit unions should be exploring use cases for this technology so they can continue to compete against digital-first institutions.

Collaborating with Fintechs

Banks and credit unions often see fintechs and digital financial brands as competitors, but they can also serve as partners in the traditional institution’s journey toward digital excellence.

Collaboration between traditional banks and fintech companies has become a crucial strategy for financial institutions to enhance their digital offerings and compete with digitally native banks. By partnering with fintechs, banks can quickly integrate cutting-edge technologies and innovative solutions, allowing them to keep pace with rapidly evolving customer expectations.

Below is a table of potential collaboration strategies:

These collaboration strategies enable banks to leverage fintech innovations while maintaining their core strengths in regulatory compliance, risk management, and customer trust. By fostering partnerships, traditional banks can create digital experiences that rival or surpass those offered by digitally native competitors.

However, successful collaboration requires careful planning and execution. Banks must ensure that partnerships align with their overall digital strategy, address specific customer needs, and comply with regulatory requirements.

Additionally, cultural integration and data-sharing protocols are critical considerations when forming these alliances.

Enrich the Digital Banking Experience

To truly rival digitally native banks, traditional financial institutions must embrace a holistic approach to enhancing their digital banking experience. This involves seamlessly integrating intuitive interfaces, AI-driven personalization, agile development practices, and strategic fintech collaborations.

By focusing on these key areas, banks can create a digital ecosystem that not only meets but exceeds customer expectations in the rapidly evolving financial landscape.

To learn more about how your organization can compete based on the digital banking experience, don’t miss the next Future Branches event. It’s happening at the Austin Marriott Downtown in Austin, Texas from December 3^rd to December 6^th.

Download the agenda and register for the event today.