The future of digital banking and payments

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As we now enter a new year with many of the same challenges, concerns and worries about what the future holds as the COVID-19 pandemic continues to evolve, one thing remains the same: Consumers want stay safe and healthy.

While we don’t yet know what the “new normal” will look like, we have reached a stage of “normal for now”. As we look into the rest of 2021, how much will our ‘normal for now’ financial behavior change, and how much will be left long after COVID is behind us?

Even before the pandemic, changing consumer preferences were becoming apparent in the digital space, with more consumers embracing online banking, downloading payment apps, and changing the way they interact with their financial institutions.

COVID-19 has accelerated these shifting preferences, with digital banking gaining ground and contactless forms of payment rapidly gaining momentum, as PSCU shows. 2020 Eye on Payments study. Now is the time to strategize on a digitally driven approach to meet consumer needs.

Let’s take a closer look at how the financial services industry can build on the momentum we’ve seen in 2020 with the digital switchover of consumers and what executives should be considering for the future:

Use artificial intelligence, data and analytics for personalization

The idea of ​​being presented with personalized and contextual offers when you walk into a store or branch may have seemed like a privacy breach – even “scary” – a few years ago.

But times have changed and consumers now expect more personalization in all areas of their lives, including with their financial institutions.

Financial institutions need to leverage the data they’ve collected on their customers to understand how they interact with their institution – including how, when, and through what channel they transact – in order to proactively connect with them through multiple channels. .

Financial institutions have several avenues to consider when it comes to personalization. For example, setting up personalized and automatic rule-based emails can successfully target a segment of consumers who need additional financial help or reminders to maintain their financial health.

Proactive and meaningful relationships like this can reduce anxiety, strengthen engagement, and increase loyalty throughout the relationship lifecycle.

Serve and engage digital Indigenous people

According to population estimates According to the U.S. Census, millennials overtook baby boomers as America’s biggest generation in 2019, meaning financial service providers need to strategically focus on this generation of digital natives, as well. than on future generations for whom digital is already the norm.

The new reality:

The expectations of digital natives are high. If your financial institution isn’t ready to meet its needs, there’s probably an enthusiastic fintech out there.

As institutions look at their branch strategy for the current “normal for now”, now is an ideal time to also look at all touchpoints throughout the consumer lifecycle to attract generational markets.

We know that digital natives need flexibility. They want to engage when and how they want through a variety of channels, including the convenience and immediacy of social media. They lack patience and don’t expect to have to wait to talk to someone, giving the cat and AI the chance to take a starring role.

Their media consumption is fragmented. They choose streaming services and social media over TV, for example. As such, marketing plans should evolve to include these alternative touchpoints to reach this market.

Advertisements in newspapers or magazines will no longer suffice – video and other forms of media and communication will become major players.

The growing adoption of contactless and mobile wallets

As financial institutions implement their contactless strategies, it is expected that more consumers will begin to use this transaction method as they realize its safety and security benefits, both from a fraud prevention and health perspective, as “contactless” options are widely considered to be more hygienic.

Contactless adoption is expected to further boost mobile wallet usage as consumers learn ease of use and gain confidence in touching to pay. Mobile wallet adoption was originally stifled by merchants without the proper terminals, which has reinforced traditional sweeping behavior, but it’s not as much of a barrier as it once was.

What is different:

Many barriers to digital payments have disappeared as restaurants and other merchants have been forced by COVID to change their practices.

In fact, PSCU data shows that mobile wallet (i.e. “Country”) transactions and purchases for credit and debit cards continued to show strong growth along with the card business. present during the eight-week holiday season 2020. Mobile debit wallet purchases increased 62% and mobile credit wallet purchases increased 46% year-over-year.

As consumers embraced restaurant take-out during the pandemic, restaurants have adapted to deploy wireless terminals, also known as mobile points of sale (mPOS), that waiters carry when delivering food. These new terminals also accept contactless payments, thus increasing the possibilities of use in a category formerly reserved for traditional methods and further reinforcing the new behavior.

To continue to encourage and promote permanent change in consumer behavior, financial institutions should implement digital issuance and push sourcing to increase ease of adoption and keep cards at the top of their wallets.

Buy Now, Pay Later (BNPL) Growing Solutions

In 2020, online shoppers have seen an increase in payment options at checkout. According to Afterpay data from Afterpay, Gen Z spending through Buy Now, Pay Later has increased 201% from last year, and Gen Y spending has increased 86%. While attracting consumers during the payment process, financial institutions have a tremendous opportunity to build loyalty by offering the same capability.

Offering a variety of options – after purchase, during online and point-of-sale (POS) purchases – will provide consumers with value-added services to manage their spending. If they are not integrated into the cards of their financial institutions, consumers could end up with a very fragmented view of their overall financial health.

Institutions should have a strategic marketing plan to ensure that consumers are well informed and often called back to choose their financial institution’s card over the third party offer they see during the payment process. . User experience and ease of use will be the keys to adoption.

More opportunities for business banking

Credit unions have yet to fully exploit the potential of expanding existing relationships with members to form more profitable business relationships, traditionally a force in the banking market. As consumers grapple with the uncertainty of the economy, they may turn to non-traditional forms of work or even take the plunge to pursue their dream of becoming an entrepreneur.

The economy opens a door that offers credit unions the opportunity to enter into business relationships with banks.

These relationships will need to meet the same digital engagement expectations as consumer accounts – and more. The complex hierarchy of corporate accounts can create challenges, but with those challenges comes the opportunity to expand the customer base.

Contactless and mobile capabilities, document capture and “banking anywhere” remain consistent themes with business banking. In addition, the company employee who is offered a debit or credit card can become a new life member through this new relationship.

The impact of frictionless donation

The impact of the pandemic on our emotional well-being has encouraged many consumers to look for ways to stay positive and instill joy. One way to generate positivity is to donate time, resources, and money.

With the uncertainty of the COVID-19 pandemic still of concern to many, it may seem tedious or insufficient to give a one-time gift. Financial institutions can facilitate redistribution to local and national organizations through the “rounding” functionality of transactions.

The “change” is automatically donated to a charity, allowing consumers to give turnkey every transaction. Institutions can offer a selection of partners to give consumers the choice of where they want their donation to go.

It is exciting to think of the possibilities that lie ahead to help consumers feel connected and loyal to their credit union or bank through existing and new digital financial services.

As we seek to navigate our ‘normal for now’, financial institutions are encouraged to keep their eyes peeled when considering the needs of their clients and members, ultimately leading to a ‘new normal’ for business. to come up.

Cindy McGinness leads PSCU’s initiatives to equip the credit unions that own the business with innovative and engaging digital solutions. Cindy leads an experienced team dedicated to delivering PSCU’s B2B and B2C solutions across mobile and online channels, in addition to online bill payment services.

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