15 December 2017
Michael Diamond

Fintech Forward

Michael Diamond - Mitek

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Digital Banking Trends

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How can a financial institution predict its future?

23 October 2017  |  4468 views  |  0

I’ve been working with FI’s for many years, and I have to say that (sometimes) I feel sorry for them. It must be tough to have writers and marketers constantly poking fun at your highly-regulated industry’s glacial pace at adopting whatever the “technology du jour” is. How many times have bankers heard a variation of this prophecy:

“If financial institutions don’t adopt (insert technology du jour) by (insert unrealistic date), then (insert highly valued social media company) will steal all their customers and they will be out of business.”

Today is no different, as the only thing better than using “AI”, “cryptocurrency”, and “blockchain” in three sentences is to use all three of them within the same sentence. Toss in some APIs along with the latest fintech disruptors and it’s no wonder that bank and credit union CEOs are forced to sound like tech entrepreneurs in their public comments.

And although there will always be prophets of doom for the FI’s, those who have been around the banking industry know that change happens incrementally and that the swirling vortex of new technologies can cause banks to take their eye off the ball and miss the opportunities in front of them today.

Recently, digital commerce research firm Futurion released their second annual Mobile Deposit Benchmark Report, and it demonstrated the opportunities for banks and how they can take advantage.#mce_temp_url#

For sure, jumping from “blockchain” to “checks” may seem like a whiplash-inducing transition, but there is reason to look at how banks handle checks and draw insights concerning their digital readiness for the new technologies.

In the report, Futurion revealed this eye-popping result from a nationwide survey of mobile deposit users: among all active mobile deposit users, a full 40% began using the service to deposit their checks in the last year alone.

Mobile deposit has been offered by FI’s for years, so this is not the sort of number that is meaningless because it builds upon nascent usage. Mobile Deposit has been a key element of FIs’ digital strategy for some time, so the fact that 40% of current users are new is an indicator of huge growth opportunities. 

According to a recent article, Bank of America has reported that 21% of their check deposits now occur in the mobile channel.  When BofA announces something like this to the public, you can be assured they believe that their number is better than most or all of their competitors – otherwise they wouldn’t mention it.

The second thought you might have is… “wow – you mean about 80% of all of their check deposits are coming in via branches or ATMs?”. 

If you think about it, 21% isn’t all that good given the effusive praise heaped upon FI’s by their customers (if you don’t believe me, check out your bank’s app store comments). 

It is here that the Futurion Report really shines. By rating fifteen top US FI’s, the Benchmark Report unlocks what elements of UX work, which banks are doing great, and which banks have room for improvement.

The way to tie “blockchain” and “check deposit” is the concept of a FI’s digital readiness.  A backward FI doesn’t suddenly leap ahead of their competitors in the field of distributed ledger technologies or AI. They need to first establish the culture of digital readiness. “Digital” isn’t a technology so much as a culture. 

Here’s a story to indicate how banks might think about this.

Someone I know in the industry was talking with one of the rated banks – a bank that had been rated low due to some bad UX principles. The bank exec said that the poor Mobile Deposit UX had cost the bank foregone cost savings (Mobile Deposits cost banks far less than other forms of check deposit), led to customer complaints and (emphasis mine) had cost the bank in digital transition across the board.

That’s a banker who gets it. If you want to lead the world in the latest digital technologies, you might first demonstrate you can get customers to use the technologies you have today. Although Bank of America should be congratulated for setting a standard in the industry, there’s no reason why mobile images shouldn’t account for a much higher percentage of their check deposits.

If you can’t get customers to take a photo using the app on the phone in their pocket, what makes you think they’ll use your Artificial Intelligence-infused chatbot to purchase a car loan?

According to the Federal Reserve Payment Study, over 17 billion checks were written in 2015, and the rate of decline has slowed. Innovation can mean incubating early-stage technologies – there’s nothing wrong from a bank of decent size putting many of the new technologies through their paces. But innovation also needs to “matter” to customers – to solve problems they have today and propel the institution toward the future. The Futurion report demonstrates the path.

 

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job title SVP, General Manager, Payments
location San Diego
member since 2017
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I'm currently the General Manager of the team that invented, patented, and now develops and markets the most exciting mobile product to hit banking: Mobile Check Deposit. Our payments team is committe...

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