The news: Digital transformation is a major component of banks’ and credit unions’ near-term strategies. A new report from the cloud-based digital banking provider Alkami Technology highlights five trends banks and credit unions should be aware of during their digital evolution.
The Trends Driving the Digital Banking Landscape report is based on a survey of executives at 152 banks and credit unions.
Key stats: The COVID-19 pandemic accelerated banks’ and credit unions’ focus on digital transformation strategies. But the report shows that many financial institutions (FIs) still have a long way to go before their digital upgrades are complete.
- On a scale of 0 to 100, the average respondent ranked their digital transformation journey progress at 58.
- When asked which digital features their customers requested the most, 73% said digital account opening, 63% said loan applications, and 59% said peer-to-peer payments.
- When asked what the biggest challenges were to digital transformation, participants cited legacy systems (68%), organizational resistance to change (51%), and lack of digital literacy (41%), as the main factors.
Five trends: Participants’ responses uncovered a series of themes in digital banking that can inform FIs’ short- and long-term plans for digital transformation.
1. Contactless and cashless payments and transactions are becoming the default: The shift has been underway for quite some time, but the pandemic sped up the move.
- 60% of those surveyed said cashless transactions have increased at their institution by 20% or more over the past two years.
2. Major financial institutions are adopting cryptocurrency, albeit slowly: Banks are recognizing that digital currencies will continue to grow in popularity, and they are taking actions to become the bridge between the traditional banking world and the digital currency space.
- Just 21% of respondents said their customers are asking for Bitcoin and crypto products.
- But 35% of banks believe offering such products will give them a competitive advantage.
3. Banks are competing with fintechs. Some are partnering: FIs are recognizing the impact that fintech companies are having on customers, and some feel that partnering with the companies will help keep them relevant.
- 73% of the overall population trusts financial institutions with their personal information, according to The Financial Brand. But fintechs are not far behind, with 63% saying they trust the companies with their information.
- 50% of banks and 40% of credit unions have partnered with a fintech company within the past three years due to competitive pressure.
