Banks play catch-up as customer shift to digital accelerates

Bank executives made one thing perfectly clear to their peers at the Digital Banking Conference hosted by American Banker: You’re dreaming if you think customers will go back to the old way of doing business once the pandemic subsides.

Representatives from financial institutions of all sizes — from Midwest BankCentre in St. Louis to Bank of America, and several companies in between — said they plan to deemphasize paper transactions and branch visits and instead focus on strengthening their mobile and online offerings for consumers and business clients.

“When you go into a COVID lockdown like this, all of a sudden, people are changing habits,” Dale Oberkfell, president and chief financial officer of the $2 billion-asset Midwest BankCentre, said at the virtual conference last week.

Oberkfell is also president of Rising Bank, the digital-only bank his company started last year with the technology firm Mantl to cater to younger customers. Rising Bank originally offered savings accounts and certificates of deposit, and this year it added checking accounts.

“Our goal is to make sure digital comes across as a human channel to our customers,” says Nandita Bakhshi, president and CEO of Bank of the West.

Nandita Bakhshi, president and CEO Bank of the West in San Francisco, said she expects customers will still go to branches for complex products and services, but she acknowledged that foot traffic has decreased and many customers have moved to digital.

“Our goal is to make sure digital comes across as a human channel to our customers,” she said.

The way to do that, she said, is to “anticipate the customers’ needs and present solutions to them even before they’ve thought about them,” said Bakhshi, whose company has $96 billion of assets. “Artificial intelligence, data management and data mining come in handy here. Customers have always told us, show me you know me. And we banks haven’t been good at that. But I think that got a boost in the arm because of COVID-19. That’s a great silver lining for us.”

Aditya Bhasin, chief information officer and head of consumer technology for wealth management technology and operations at Bank of America, said the company’s AI-driven virtual assistant, Erica, is rapidly gaining popularity.

Erica now has 16.7 million users; 6.4 million of those customers started using it this year. During the past eight months, BofA developers programmed Erica to understand more than 60,000 coronavirus-related terms and questions.

Bank of America also recently released a new feature within Erica called Spendpath.

“An Erica insight now tells you here’s the rate you’re spending, [and] if you’re spending at a higher clip than normal you might want to know that so you can rein it in before the end of the month,” Bhasin said.

Or if a user is saving well, Spendpath might suggest putting the extra funds in a savings account or a 529 college savings plan.

Bank of America customers’ use of the bank-owned Zelle person-to-person network has also been rising during quarantine, Bhasin said. In the third quarter, more than 12 million active Zelle users at BofA sent and received more than 117 million payment transfers, a 70% increase year over year.

More than 800,000 people became new mobile check deposit users in the third quarter, about 20% of whom were baby boomers and seniors. Bank of America is averaging 14 million mobile deposits a month this year.

Some older customers are adopting digital channels for the first time: 23% of new logins to online and mobile products were by seniors and boomers this year, Bhasin said.

At Synovus Financial in Columbus, Ga., business customers increased their use of mobile banking 200% this year. They’re also using electronic payments far more than they used to, according to Katherine Weislogel, executive director and head of treasury and payment solutions at the $53 billion-asset company.

“We’re seeing a huge trend from paper into electronic payments,” she said. “We’re seeing big moves in to the automated clearinghouse channel. Not having to touch paper has become a very big theme among all our customers.”

This shift is permanent, Weislogel said.

“When things began opening up back up again in the Southeast, we started seeing people go back to the office, so we anticipated seeing those channels go backward, back to the paper,” she said. “But what we found was people are not going back. They are still shifting into digital channels. People are seeing the benefits of getting their deposits quicker, in a more streamlined way and reconciled earlier in the day.”

John Schulte, chief information officer at Mercantile Bank of Michigan in Grand Rapids, said he sees the same trends among his $4.4 billion-asset company’s commercial customers.

“COVID forced a lot of digital laggards on the business side that had been married to paper for so long to finally adopt online, mobile and e-signature,” he said. “Branch traffic has peaked at our bank. I don’t know that we’ll ever get to the numbers of people coming into the branch, and that’s OK.”

Both banks have used the software firm Q2 to help them sign up and serve business customers online.

Schulte observed that until recently, clumsy processes and legacy rules around e-signatures had prevented some businesses from using digital banking.

“A lot of things have been barriers to digital end-to-end onboarding, especially for real estate, small-business lending and things that we just couldn’t get away from paper for whatever reason, that’s finally changing,” Schulte said. “We’re starting to see change permanently.”


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