It wasn’t that long ago that the digital capabilities of the largest U.S. retail banks paled in comparison to those of a host of digital-only banking start-ups. Boy, how the tables have turned.
The largest U.S. banks have significantly improved their digital capabilities in recent years, while digitally native neobanks continue to lose money despite providing high-quality digital experiences.
That doesn’t mean banks can get complacent. On the contrary, digital-only banks have discovered a winning formula by establishing their brand as a lender before expanding into banking services. The strategy has enabled them to tap customers for new products and services, slashing the acquisition costs that plague the single-product neobanks.
But regional banks have many competitive advantages, notably established customer relationships, products, and brand equity. Moreover, consumers trust their banks to process their banking transactions and secure sensitive financial data—certainly more so than a start-up or one of the tech giants.
Most banks don’t maximize the value of this trust relationship, though. Instead, they must start by delivering the digital experience that customers have come to expect outside of banking. The largest retail banks and neobanks have closed that gap. Most regional banks? Not as much. That’s too bad because new technology has made advanced features much more straightforward and cost-effective to implement. Your card network, Mastercard or Visa, and card-issuer processor may also be able to provide the capabilities discussed below.
Let’s take a look at the digital features banks should provide to level the playing field with the big guys.
A Data Management Dashboard
Consumers have bank accounts and payment cards connected to many services. As trusted custodians of our money, banks are best-equipped to help their customers track, manage, and secure these relationships.
Chase’s Security Center dashboard, for example, lists where users have stored their cards. That’s a big time-saver when your card has been lost or stolen, and you’re getting a new card and account number. The dashboard also lists the devices, apps, and websites that can access your accounts. The user can deactivate access with a couple of simple clicks.
Banks that launch these capabilities will have laid the groundwork for open banking applications by enabling customers to control which data points are shared with other companies.
Many of the largest banks now also provide a subscription tracking dashboard to keep track of all monthly bills for streaming TV, music, etc.
Credit Card Features of “The Big Boys”… and Then Some
A handful of banks—including Citi, Chase, Bank of America, and Capital One—dominate U.S. credit-card issuance, mainly because of co-branded partnerships with airlines, hotel chains, and many others.
But that doesn’t mean your bank can’t compete for credit card customers and the steady fee revenue that comes with them. The card business tends to operate independently from the rest of the consumer business, and therein lies an opportunity.
Your bank could offer a cash-back rewards card, which functions as a debit card that taps a checking account and a credit card, similar to the OneCard offered by neobank Upgrade. The credit feature could also include a Buy Now, Pay Later (BNPL) option.
Product innovation aside, your card must also offer the digital capabilities now standard for cards provided by the giants. These include:
- Pay with Points: Accrued reward points should be easy to track and use for online purchases with partners like Amazon and PayPal. Your card-issuer processor should be able to set up a rewards and redemption system for you. Card networks Visa and Mastercard also provide APIs that link your rewards program with their partners.
- Lost or Stolen Cards Are No Longer a Worry: If you fear that your card has been lost or stolen, your bank’s mobile app should enable any user to lock and unlock the card while they try to find it. The user should be able to order a new card on their mobile app or website, but the account number, expiration date, and 3-digit CVC code should be available immediately. This feature lets the user replace the old card number with the new one everywhere it’s stored. The user can also use the new credentials to make online purchases. And here’s another way your bank can differentiate itself, offer to make the new card available as soon as possible at a local branch or arrange to have the card sent by overnight mail. Unless you ask for overnight service, it takes 7-10 business days to get your new card from one of the big card issuers.
- Automate Digital Wallet Activation: Make it easy for customers to add their cards and bank accounts to their mobile wallets of choice. If the process is manual, the customer may delay adding or opt to add those from banks that have automated the process. In addition, being “top of wallet” may not be vital as it once was. Customers typically use the card or account that makes sense for that purchase based on available rewards. But, your card must be one of your customer’s digital wallet options.
- Automated Savings: Automated savings programs do not have to remain the sole domain of fintechs like Chime and Acorns. You should be able to track spending by category and provide real-time alerts with actionable insights.
- Account Aggregation:A data network like Plaid can enable your bank’s customers to connect their other accounts to a dashboard on your platforms. A customer with multiple accounts typically has more assets than other customers and is more likely to treat your bank as a primary relationship if you have this capability. Moreover, the relationship will likely stick with your bank once these connections are established. Unfortunately, in most cases, account aggregation services do nothing more than track the customer’s total assets. To add value, the bank must continuously apply analytics to the data to deliver actionable insights that add value.
The Time Is Now to Grow Digital Capabilities
Banking applications that provide only basic functionality, such as checking a balance and paying a bill, are no longer enough. Customers want their bank to simplify their financial lives.
The list above is daunting, especially if your bank doesn’t offer any of this functionality today. But technology has become much more accessible and affordable in recent years, and you may not need to change any of your existing architecture. Software-as-a-service (SaaS) offerings hosted in the cloud and connected to your systems via applicational programming interfaces (APIs) have opened new opportunities for banks and credit unions of all sizes.