Last week was American Banker's annual "Digital Banking" Conference in Austin, TX. Several thousand people attended from all over the world and we were treated to a great lineup of speakers and topics.
Of course, everything focused on how technology is shaping modern banking and what banks and credit unions of all sizes should be thinking through as they aspire to better serve their customers. This was my first time to attend the event, and here are a few of my observations:
- The adoption of technology varies widely from bank to bank, with larger institutions exploiting their scale advantage. Much of the highlighted industry progress from the past year was around implementing mobile banking apps and online enrollment for new products. Personally, I use a big bank and have had these experiences for years, so was surprised to see adoption is still early on this front. It's clear larger institutions have been able to more aggressively advance their digital agenda, while smaller regional banks, community banks and credit unions have been more incremental in their progress (whether due to cost constraints or to limitations of their core provider offerings). However, there is strong market feedback that NOT providing basic digital banking experiences has caused customer attrition at those institutions that are most behind. Thankfully, the proliferation of FinTech players catering to the smaller bank market should help level the playing field in the next few years.
- Lots of debate around the future role of retail branches. The camps are clearly split here -- pro-branch folks tout statistics showing the high volume of people who still visit branches for basic banking needs (even millennials!), and the "anti-branchers" believe customers don't really like branches but have to visit because their banks don't yet offer solid digital experiences. One speaker brought up a good point: retail branches originally came about during suburbanization as a way to make banking more convenient for customers (so they didn't have to travel downtown). Digital banking is the next phase of convenience, and retail branches in their current form shouldn't be considered sacred simply because they exist.
- Human interaction is still an important component of the banking experience. Customers want to visit with live bankers in less familiar situations like wealth management or applying for a commercial loan. Bankers should and will continue to provide expertise and guidance in these areas, albeit using technology to assist in the process. To my previous point, this connection may occur in a physical retail branch, but is increasingly online via video chat.
- Artificial Intelligence (AI) is still in the early stages, and most of the focus is on back-office / regulatory applications. Some of the more interesting product demos involved the use of AI to either reduce operational costs or detect fraud. Unfortunately, many bankers don't understand AI and are consequently wary of it (or fear it will replace them!), but AI could be a huge help to banks in automating basic tasks. Bridgit Chayt, SVP of Commercial Payments and Treasury Management at Fifth Third, stated that a typical bank has over 700 manual processes that can and should be automated. For example, humans aren't great at processing high volumes of unstructured data (such as mortgage paperwork) and are expensive compared to AI and Intelligent Capture software, especially at larger institutions. I think banks will get more comfortable with AI as vendors come to market with specific use-cases and can demonstrate the efficiency it brings.
- Banks are focusing equally on front-office and back-office digital improvements. While flashy apps around new account opening or spending analytics seemed to dominate the demos (we even had Pepper the Robot from HSBC show up!), many bankers reiterated the need to update internal systems to help employees provide better service to customers. Michael Cordas, SVP at City National Bank, commented that both consumers and employees expect "Amazon experiences" and that good internal tech is key to improving employee morale and retention. John Scully, Head of Small Business Digital Sales and Service at Bank of America, lamented that managing documents — for example, requests from clients or third parties in a commercial setting — is still a big headache for bankers and consumes most of their day. Just having a slick mobile app doesn't qualify a bank as "digital", and to fully address the entire customer experience, digitization must occur within every line of business.
- Expect innovation to accelerate. As with major prior advances such as ATMs and online banking, the customer experience is on the threshold of another set of major technology-based advances in convenience, efficiency, security and intelligence. I loved seeing banks talk about adopting design thinking to better understand their customers and the impact it has on how they approach their digital strategy. The way we interact with banks will look very different in 5-10 years, and the way banks acquire, engage, and service their customers will continue to evolve.
While the amount of new tech can feel overwhelming, bankers shouldn’t be alarmed. FinTech is certainly pushing banks forward but won't wholly disrupt them -- there is too much brand equity and residual trust built into these institutions.
Overall, the conference was enlightening, and I enjoyed meeting folks from across the industry. Certainly look forward to attending again next year.
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