Increasing Digital Banking Options Put Pressure On Big Lenders To Adapt

At a time of increased consumer use and acceptance of the new COVID-era digital lifestyle, the pressure is mounting on large, legacy lenders to accelerate their innovations – or become obsolete.

In remarks made at the annual Sibos global financial services conference on Monday (Oct. 5), J.P.Morgan CEO Jamie Dimon said banks that don’t adapt in how they deal with customers will go the way of the dinosaurs.

“Banks are good at creating pain points by making customers sign several forms and documents, Dimon told Sibos attendees. “We are doing a much better job now at easier, faster and quicker transactions. We’ve got to do more of it.”

Dimon’s comments come at a time of aggressive growth and gains by numerous digitally native startups that have modernized and streamlined online banking and payments for the masses.

For example, Chime CEO Chris Britt recently said that unlike traditional banks that earn money off of fees and interest from loans, his company’s profits come mostly from card usage.

“Nobody wants to go into bank branches, nobody wants to touch cash anymore, and people are increasingly comfortable living their lives through their phones,” Britt said, per CNBC. “We have a website, but people don’t really use it. We’re a mobile app, and that’s how we deliver our services.”

Of course, the pandemic has forced banks – like all businesses – to rethink their priorities and make adjustments to how they interface with customers.

According to an August study of digital banking by PYMNTS, banks are closing physical branches, reducing hours of operation and encouraging customers to use their websites or mobile apps to conduct transactions and reduce face-to-face interactions between customers and staff. In addition, the report says, services that were once available only at branches, such as loan or credit card applications, are being moved to mobile apps and ATMs.

To that point, even clunky old ATM machines are getting an extreme makeover that will turn those ubiquitous bunker-like silos into freestanding tablet stations designed to attract and retain customers, also offering the option for touchless banking.

On Monday (Oct. 5) NCR Corp. unveiled its next generation of operating software for ATMs, designed to integrate the now decades-old cash-dispensing machines into the digital age.

The Atlanta-based company noted in a press release that its Activate Enterprise NextGen ATM platform was designed for speed and ease.

“This new software expands the user experience and expands digital capabilities of ATMs,” said Frank Hauck, president and general manager of NCR Corporation, in a statement. “In the future of banking, we see the ATM becoming a dynamic, digital, self-service platform on which banks can deploy new services quickly.”

To be fair, it’s not as if banks have been ignoring the technological shift. PYMNTS research shows that 89 percent of American bank customers use mobile banking apps to manage their accounts, with 94 percent of mobile banking users completing at least one transaction per month. Experts predict that trend will continue to grow to the point where half of the global population – or some 3.6 billion people – will likely be using online and mobile banking services by 2024.

But even as the lines between old and new banks get blurred, the research shows that consumers still overwhelmingly see banks as a place to store and save money, and that brick-and-mortar branches are still one of the most important services banks can provide.

Demographic issues also skew the evolutionary efforts of the country’s biggest banks, as PYMNTS research shows that while affluent consumers primarily do business with national banks, credit unions and digital banks, lower-income consumers tend to use regional and community banks, or PayPal.

Add in generational preferences for digital products, as well as the stricter regulatory requirements and oversight that national banks face, and it becomes clear that the effort to refresh big, old banks will be no easy task.