When it comes to digital transformation, an almost universal truth seems to emerge: many banks and credit unions feel behind where they need to be.
In fact, in a recent survey of 141 leaders of financial institutions, 53% said they felt at least a little behind – if not very far – from their peers. This response includes the perspective of executives representing institutions with assets exceeding $ 20 billion. Of those from the largest institutions that responded to the survey, 40% said they felt late.
Who can blame them? The pace of technological advancement is unlike anything the world has seen before. Exponential advancements in everything from data analytics and artificial intelligence to 5G, cloud computing and soon quantum processing are democratizing technologies that were once out of reach, making it hard to keep pace .
Big Tech Lending Experiences Turn Up the Pressure
Credit departments, in particular, are feeling the pressure of the competition to keep pace. Digital native loantech providers are entering the automotive, real estate and consumer credit markets, raising borrowers’ expectations for digital experiences to the same level as those offered by large corporations. technologies.
“Meeting the demand for Amazon-style experiences” was the second most popular response our survey respondents gave when asked to name the greatest headwinds impacting the success of their loans.
Loan Demand Is Strong – If You Can Win The Funding Race
The unprecedented events of 2020 flooded credit unions and banks with liquidity, all eyes on the lending team.
Credit union savings growth is the fastest in 35 years and is expected to increase by around 15% in 2021 due to stimulus payments, pandemic uncertainty, low gas spending and an aging population, according to the CUNA Mutual Group Credit Union Trends Report for February 2021..
In our survey, getting more loans on the books and earning increased income from both interest and non-interest sources dominated the charts in terms of importance to credit unions and banks. The good news is that the demand for loans is there. With low interest rates and unprecedented federal support for lending to community institutions, the trick isn’t to convince consumers to borrow – it’s to win the finance race.
Targeting young consumers requires a solid loyalty strategy
It wasn’t terribly shocking to learn that the top three segments our survey participants focus on growing over the next five years are Millennials (born 1980-1994), Xennials (born 1980s). 1975-1985) and Generation Zers (born in 1995-2012). . Here are some of the strategies our survey participants devised to gain business from these hot segments:
- Streamlined, easy-to-use automation, digitization and products.
- Better online / mobile experience and tools.
- Digital transformation and direct processing (STP).
- Building personalized digital marketing automation and interaction platforms for highly engaged groups of members.
- Develop mutually beneficial relationships by being proactive about people’s needs, rather than reacting to requests.
These are all great strategies and likely to be just as appealing to Gen X and Baby Boom consumers, too, in a post-pandemic environment. Why is this important for lenders? Because the average debt balance of Boomer (born 1946-1964) and Gen X (born 1965-1979) borrowers far exceeds that of Gen Y and Gen Z borrowers.
If marketers are successful in pushing Gen Z through the door, it’s important that they stay around long enough in their lifetimes to allow them to fully engage with the institution’s lending services.
Keep in mind:
To retain consumers – and attract new ones – digital capabilities and experiences are essential.
Of the more than 67 million credit union members in AdvantEdge Digital’s aggregate data set, more than half have a preference for digital services.
Digital demand drives investment decisions
Another potential issue for lenders is how decisions about innovation are taken into account and ultimately made. When it comes to digital investment, the existing levels of engagement seem to guide the ship.
Financial Brand / AdvantEdge Digital survey participants said they plan to invest 2021 digital transformation dollars in online loan applications and account opening experiences, as well as overall improvements in mobile and online banking services.
Interestingly, 26% of survey participants did not detect any change in digital engagement at their financial institution in 2020. Another 30% reported an actual decrease in engagement last year. Is it because consumers were finding new suppliers to meet their growing digital banking needs?
Knowing that a digital consumer is a profitable consumer, it highlights the opportunity cost of not leading consumers to digital. For financial institutions with a dual imperative of profitability, loss of engagement can be even more costly, as they can lose business to providers less concerned with the long-term financial well-being of consumers.
Lenders migrate to the cloud to gain agility and scale
When it comes to investing in digital, many financial institutions are turning to the cloud. Cloud-based software as a service (SaaS) solutions, in particular, are expected to gain a large chunk of that investment – some $ 118 billion in 2021 alone.
Much of this is due to the pandemic, Gartner says, which has forced organizations to optimize IT costs while supporting a remote workforce. Now that SaaS cloud applications have proven their worth, the wave of cloud demand is unlikely to recede.
Notably, 93% of respondents rated “operational improvements” as being very or somewhat important to the success of their loans in 2021. This suggests that lenders see a strong link between process and outcome. Indeed, as we have seen at AdvantEdge Digital, streamlined processes and the integration of intuitive human-centric technologies can have a big impact on getting new business and increasing revenue.
Cloud-based solutions have a lot to offer in the area of operational improvements.
Executives of financial institutions are ‘extremely’ optimistic
Even after all of the pandemic chaos, fierce social unrest and devastating natural disasters at the regional level, 2020 has left the majority of financial institution executives with optimistic prospects. 89% of those who responded to our survey were optimistic about the future growth of their credit union or bank. Remarkably, more than half of those who say they are optimistic say they are extremely so.
Digital transformation is an ongoing journey – just keep moving forward.
Lenders who feel behind the pack on the digital transformation journey are not alone. The important thing is to keep moving forward. Executives who design their roadmaps for quick wins, capitalize on momentum, and pivot when needed stand the best chance of unlocking their digital potential, winning the business of more modern borrowers along the way.