2022 Digital Banking Predictions: Which Industry Trends are Here to Stay, and What Product Features do Banks and Credit Unions Need to Stay Competitive?
It is this time of the year when industry pundits release their predictions for the year ahead. In the past, there have been some rather radical-sounding prophecies about robo-advisors and chatbots replacing mobile and online banking, digital solutions replacing cash and check transactions and the “tech-fins” such as Amazon and Google taking over banking, making traditional banks and credit unions redundant – to name a few!
I don't predict this year’s lists to be very different, but before I share my thoughts on 2022, I want to first look back on some of the macroeconomic and societal trends from last year, which will undoubtedly impact digital banking in the year ahead.
- As 2021 was winding down, we saw pandemic relief programs ending in the U.S., workers returning to offices, and an increase in shopping and travelling. Although we’ve seen a gradual rise in interest rates and a steady inflationary trend due to supply chain issues and a tight labor supply, we are seeing growth in liquid assets, which benefits consumer spending.
- Corporates have been using this time to improve their balance sheets and rid themselves of underproducing assets.
- Specific to credit unions, there have been several positive market signals like: >10% growth in assets, >5% increase in loans, growth in membership, and improvements in account balances and top-line growth. According to a 2021 Callahan report, more than 60% of members have a credit union checking account, signaling consumers are leaning on their local institutions for their primary banking needs.
- During the pandemic, many switched to digital and remote banking channels, but even as they slowly return to other in-person activities, digital banking usage doesn’t seem to be on the decline. In fact, digital banking adoption is steadily rising, as many first-time users have realized the comfort, convenience, and benefits first-hand.
So, what do these market happenings mean for banks and credit unions, and specifically for digital banking adoption in 2022? Here are my top 5:
- Full-featured digital banking solutions: There are a plethora of personal financial management (PFM), investment, and money transfer solutions available, but end users still trust banks and credit unions more than any other financial entity. As a result, there will be a growing need for traditional institutions to allow users to view their entire financial portfolio from within their digital banking application. This includes showing more than just checking and savings accounts, CDs, and loans – but also investment accounts, insurance plans, cryptocurrency balances, and other related pieces to their financial story. Showing users a comprehensive picture of their entire portfolio is more relevant and desired than ever before.
- Cryptocurrency: According to a Bakkt Holdings study, nearly half of U.S. consumers reported investing in cryptocurrency during the first half of 2021. I think crypto currency balances and trades will keep growing this year, even if not exponential. Several banks and credit unions will also start to allow end users to view their crypto balances from within their digital banking applications – linking to the above point around the need for a holistic view of one’s finances.
- Financial wellness advice: As a new generation enters the workforce, the need for greater financial literacy and education grows. Given today’s landscape, this is likely in a blended form of in-person and virtual workshops or digital tools. Users across all generations now expect their bank or credit union to teach them “the basics” like: best practices around saving money, making large purchases such as vehicles and homes, how-tos around overdraft protection and courtesy pay, and guidance on credit scores and applying for micro-loans. Today’s generation of account holders also expect tips and recommendations on moving money, advice on financial challenges, and ways to set spending limits for a specific category or credit card. The opportunity to be your customer’s or member’s trusted source for financial advice is endless. And, with account holders spending more time at home, banks and credit unions have a great opportunity to engage users by leveraging data insights, make product and service recommendations for cross-selling and up-selling, offer wellness programs, and more.
- Data and analytics: Unfortunately, as we have all experienced, as one wave of COVID ends, another one appears, forcing many to still work remotely. Branches remain relevant, but there will be fewer visits and in-person meetings. As a result, banks and credit unions must continue to offer digital services that bridge in-branch transactions with those can be performed from home, such as remote deposit (RDC), skip-a-pay, scheduling loan payments, and opening a new account or loan. Virtual customer service assistants like avatars and virtual agents will also become more prominent with the implementation and adoption of digital tools. While these solutions drive automation and efficiencies, financial institutions must establish a plan around effectively collecting data and end user feedback through digital channels. Once the information is captured, platforms then need to be implemented to better leverage this data and make it actionable, translating into better products, services and new customer or member-facing programs that are personalized and relevant.
- New cybersecurity issues: The 2021 Cyber Threat Report by SonicWall revealed a 62% rise in ransomware attacks since 2019. Banks and credit unions are not insulated from these cybersecurity situations, and we anticipate new types of digital banking issues related to identity theft, data breaches, and fraudsters misusing digital payments. Add to this landscape some emerging trends like the metaverse, and end users will soon expect institutions to support new ways of performing identity verification - like using VR (virtual reality) glasses. It's also important to consider ways of authenticating users at a virtual branch in the meta universe environment. Although many techniques are already in place, digital banking security requires continuous attention to ensure it’s rock-solid against these latest threats and trends.
With such a dynamic market landscape, can we truly predict the exact set of digital banking services a bank or credit union will need this year to remain competitive? As Nassim Taleb states in his bestselling book “The Black Swan,” predicting the future is not easy and it’s important to expand your knowledge and hedge your bets! In addition to listening to customers and members, banks and credit unions must also monitor macro trends and developments, be ready to collaborate with partners and other institutions, and most importantly be agile and ready to respond to market changes - quickly.
At Alogent, our digital banking team includes dedicated experts that closely monitor the industry trends linked to both immediate happenings and longer-term events. These teams work in lockstep with our product and implementation teams, dedicated to navigating these unpredictable waters and providing insights that make our partner institutions more competitive and relevant. Sitting at the heart of a financial institution’s digital ecosystem, NXT is an online, mobile and digital banking platform that lowers the total cost of ownership for banks and credit unions and delivers a secure, flexible, and customizable digital banking platform for consumers and businesses. With its SDK-driven platform, modern tech stack, open architecture and robust set of pre-built integrations, financial institutions can go-to-market fast and pivot quickly to address market changes and account holder needs – all backed by an intuitive user journey and robust digital banking ecosystem packed with data analytics, insights and reporting.
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