Necessity is the mother of invention, and 2020 only reinforced the proverb. While banking trends mostly followed predictions, the pandemic drove them at an accelerated rate that has created a foundational change. Digital banking is now just banking.
So, it’s hardly surprising that when asked about the industry’s future in CSI’s 2021 Banking Priorities Survey—which was outlined in an executive report—digital transformation thematically unified every priority. While taking stock of their 2020 performance and assessing the year ahead, banking executives who took the survey almost unanimously agreed: digital banking usage will never return to pre-COVID levels.
This paradigm shift poses simultaneous opportunities and challenges for financial institutions. Now that the reactionary stage has passed, banking executives must execute clear strategies that strengthen their digital presence and maintain a competitive edge.
Addressing 2021’s Top Banking Challenges
The pandemic created its own set of challenges for the banking industry. From distributing PPP loans to maintaining in-branch safety, banks had to think on their feet. According to the survey, bankers expressed satisfaction with their ability to pivot. But there are ongoing concerns.
For starters, 97% expressed an irrevocable swing toward digital usage. This rapid shift in customer expectations significantly exceeds expert predictions. Despite this affirmation, respondents of the survey reported only an adequate transition to digital channels. Further, institutions admit they fall short when it comes to leveraging customer data to inform strategic decisions, rating themselves a 2.8 out of 5 in that area.
But, to quote John Adams, “every problem is an opportunity in disguise.” As security needs and customer expectations evolve, institutions must continue to reexamine the strategies and tools that will set them apart from the competition. Innovation often creates superior long-term benefits and practices, even if it emerges in a time of crisis.
Cybersecurity in Banking in 2021
Cybersecurity beat six other topics as the top industry issue in 2021, as 34% of executive respondents told us.
- Challenge – Estimated global losses from cybercrime were just under $1 trillion in 2020.It stands to reason that an increase in digital banking users would lead to a rise in cybercrime. The pandemic led to an increased number of targets and opportunities for cybercriminals, whether by phishing, fraud, credential breaches or any other tactic. Meanwhile, hacking techniques grow more sophisticated every day, and even government agencies were not immune in 2020.
- Strategy – Institutions that wish to stay ahead of cybersecurity challenges must continue to deploy various methods to keep themselves and their customers safe. A cybersecurity framework such as the CIS Controlsstrengthens your overall cybersecurity posture. Beyond basic cyber hygiene, a robust framework should include due diligence on third-party service providers’ cybersecurity and the appropriate safety mechanisms like biometrics to protect your customers. As always, the most significant cybersecurity threats come from within, so employees’ education and practice continue to be paramount.
Meeting Banking Customer Expectations in 2021
Meeting banking customer expectations followed cybersecurity as the second greatest concern among banking executives in the survey.
- Challenge – Today’s banking customers increasingly demand a seamless and intuitive digital banking experience. Indeed, according to a recent Chase survey, roughly 80% prefer to manage their finances through digital channelsand use phones or personal computers to do it. But prioritizing new digital banking technologies and striving to balance digital with the human element creates a dilemma for smaller financial institutions.
- Strategy – While appropriate technologies and smooth rollouts are essential, effective digital transformation requires a strategic view of immediate customer demand. The 37% of respondents prioritizing data analytics and reporting in 2021 reveal the massive growth opportunity that data utilization represents. Your institutions can use customer data to reveal cybersecurity concerns like suspicious activity, but transactional data and a robust CRM toolenables you to make more informed decisions about products and services that customers need.
Potential Regulatory Change in 2021
Regulatory change was the third largest concern for 2021, with 17% of bankers reporting it as their highest priority.
- Challenge – Regulatory agencies are struggling to keep pace with technological advancements. At the same time, a new administration could mean looming regulatory change on the horizon. While data privacy and BSA/AML modernizationare among the highest priorities in the realm of regulatory compliance, the American Bankers Association also maintains a list of proposed regulations and standards that could affect banks.
- Strategy – Institutions must continue to foster a culture of compliance and utilize a robust framework to address any regulatory landscape changes. The concerns that stem from a changing administration must be put into perspective, as uncertainty regarding change does not necessitate panic. But overall, as institutions keep their finger on the pulse of regulatory change, they must strive to maximize efficiency and leverage tools that help streamline and simplify risk management for them.
While these three are the hot topics at present, it’s also worthwhile to continue monitoring employee retention, mergers/acquisitions and growing technologies like APIs and machine learning.
Top of Mind Banking Technologies for 2021
Building from lessons learned during the pandemic, financial institutions will need to balance new technologies with enhancements/optimization to those that already exist. To grow market share, bankers will continue to reframe their strategies to examine new customer segments, geographic markets and product types, using digital tools to achieve those objectives.
But it’s worth reminding that without informing any digital transformation strategy with customer data, areas including cybersecurity, customer acquisition and retention could all suffer. As a result, the established data must drive these strategies as they evolve. Bankers prioritized the following technologies in 2021 to meet these challenges:
- Digital Account Opening topped the list of technological advances for 59% of executive respondents. Naturally, the pandemic drove many customers to fulfill financial needs digitally. However, institutions will want to keep online account opening software as a high priority beyond the pandemic. Even when regular business returns and branches open more fully, the customer desire to seamlessly open an account and begin to transact will remain.
- Mobile Banking Apps followed closely behind digital account opening. This prioritization makes sense, as 8 in 10 American consumers primarily use their phones, laptops or tablets to conduct banking activities. Institutions should also incorporate a standard, well-integrated design across all channels to deliver consistent functionality. Some customers are new to digital channels, so creating user-friendly processes for those late adopters is essential.
- Digital Lending has exploded during the pandemic and 37% of banking executives reported it as one of the highest technological priorities. As the economic downturn met high borrower expectations, digital lending software became an essential component of a digital banking strategy. In addition to improving the overall user experience and enabling quick loan origination, digital lending services improve efficiency, ease compliance and support efforts to use business intelligence and analytics.
- Customer Relationship Management (CRM) tied with digital lending as a high priority, exactly equaling the percentage of respondents who expressed interest in improving customer data usage. An effective CRM for banks opens the potential to achieve most of the goals and strategies above. Better utilization of CRM to capture existing customer data empowers you to deliver those needs through existing channels, like digital account opening solutions and mobile apps.
Surveying the 2021 Landscape: Read the Full Report
Whether by strengthening communication tools or aiming to provide a seamless experience across platforms, digital transformation has only accelerated. For additional tips and a more comprehensive view of the trends that will drive the industry in 2021, refer to our Banking Priorities 2021 Executive Report.
Shane Ferrell is Vice President of Product Strategy at CSI.