The pandemic is driving the digital transformation of bankers

Customers of Simmons First National Corp. who attempt to open a new checking account through the bank’s website encounter an unusual experience: they are encouraged to use their mobile phone instead of their desktop computer.

Using the bank’s mobile phone app, opening an account takes less than five minutes and only requires three basic pieces of information: email address and phone and social security numbers. Customers can complete the process in the time it takes to get dressed, find the car keys, and leave the house.

“We believe the best experience we can give you is through a mobile device,” said Alex Carriles, chief digital officer at Simmons, one of the state’s largest banks. “It allows you to do a lot of other things that you couldn’t do on your desktop.” Simmons’ approach highlights the digital transformation of the banking industry that has accelerated during the pandemic, with customers shifting from traditional in-person banking to the rapid convenience of online and mobile services.

“Many banks have said they’ve changed the way they serve their customers forever and they’re not coming back,” said Charles Potts, chief innovation officer at Independent Community Bankers of America, a national trade group. which represents approximately 5,000 small businesses. and medium-sized banks across the country.

The two-year pandemic has been a catalyst for the digital explosion, fueling shifts in customer behavior. Covid-forced branch closures prompted many customers to try online and mobile banking for the first time.

“A lot of people weren’t ready to go digital, with some of them stuck in their ways,” said Matt Olney, banking industry analyst at Stephens Inc. of Little Rock. “With covid, branches closed and many consumers didn’t want to leave their homes, it kind of forced them to figure out how to bank online.” Consumer acceptance has grown and accelerated the evolution of digital banking.

“Throughout this process, the bankers took the strategic plan that they came up with in 2019 … and basically threw it in the trash and said we had to do in a few months what we had planned to do in years,” Potts added. “To a large extent, it was out of necessity – customers demanded it. Digital evolution has accelerated at an unprecedented rate in my 40 years of doing this.

MOBILE FIRST

Banks in Arkansas have taken the plunge.

Lenders large and small are increasingly relying on mobile banking to sell their services and attract customers, with many using what Potts calls a “mobile-first strategy.” Overall, regardless of asset size, financial institutions in Arkansas report that digital transactions have increased significantly over the past two years.

Chris Gosnell, managing director of Farmers Bank & Trust, a $2.5 billion asset bank in Magnolia, said the pandemic was a “slap in the face” that prompted the banking industry to accelerate the rollout of mobile services and digital. “It moved us forward about five years,” Gosnell said. “We planned to tackle it and all of a sudden you have to do it now.” Arkansas State Bank Commissioner Susannah Marshall notes bankers were working to improve their digital experience before the pandemic, but also cites covid-forced branch closures as a key factor in accelerating these initiatives.

“Many banks were already starting to transition to a digital banking presence before the pandemic and we’ve certainly seen customers more willing to adopt and utilize digital service offerings during the pandemic, and this has continued ever since,” Marshall said. “Our banks have done an excellent job of meeting customer expectations today.” Today, banks are rushing to implement more robust mobile banking options, including a full range of products and services ranging from opening new accounts, applying for loans, payment options real time and record for trust and investment or cryptocurrency. support — services that previously required customers to visit a local branch for assistance.

Global research firm Kearney reports that more than 40% of consumers have increased their use of mobile banking apps or websites during the pandemic, and 85% said they will continue to rely on channels digital in the future. Similarly, the American Bankers Association found that digital account opening activity more than doubled from pre-pandemic levels.

Arkansas lenders are also reporting rapid numerical growth.

Simmons Bank says digital transactions grew by 40% from March 2021 to the end of March this year, with around 71% of customer transactions taking place through digital channels. Similarly, mobile deposit dollars grew 31% at Simmons over the same period.

Arvest Bank of Benton-ville, the state’s largest private institution with assets of $26.6 billion, says customers who bank exclusively using digital channels have increased from 17% to 29% from December 2019 to the end of May this year. Agency-only usage fell from 27% to 18% over the same period. The overall penetration of digital services in all consumer households increased from 63% to 69%.

First Bank & Trust of Jacksonville, with just under $1 billion in assets, said digital transactions more than doubled from 2020-21. FB&T installed 18 interactive ATMs, allowing customers to interact with cashiers via two-way video, in all of its locations just before the pandemic hit to expand its digital efforts. “Obviously, our customers were benefiting from the investment we had made in newer technology,” said Larry Wilson, president and CEO of the bank.

Digital transactions at Stone Bank, a $600 million-plus asset bank chartered in Stone County, have grown 15% over the past two years, according to chief executive Marnie Oldner.

At Farmers Bank of Magnolia, the number of mobile banking customers has skyrocketed over the past five years, soaring 263%, Gosnell said. Online account openings jumped 34% over the same period.

Similar forces are at play for credit unions, which are also seeing an increase in digital usage. Online transactions grew 15% a year before covid and are now up to 45% at the Arkansas Federal Credit Union (AFCU), the largest in the state with $1.9 billion in assets.

These increases have led to increased investment in digital products and services. “We’ve added a lot of features,” said Nicole Matsoukas, AFCU’s chief information officer, who said the credit union increased its investment in digital technology by 45% over last year. .

With friendlier consumer behavior comes higher expectations – customers are demanding digital services and an experience on par with those offered by the world’s top tech companies: Amazon, Apple and Google, bankers and finance officials say ‘industry.

“The experience becomes really critical,” Carriles said. “The reality is that you have a chance of succeeding. If the experience isn’t great, you’re going to lose that customer.

DIGITAL TRANSFORMATION

These results are prompting financial institutions to invest more in digital enhancements, drawing funds from branch network growth. “In terms of the additional dollars that banks are going to spend, it’s going 100% toward digital transformation, shifting spending from branches to digital transformation,” Stephens’ Olney said.

State banks are investing more to meet the demands of digital customers.

In 2018, Simmons committed $100 million to technology advancements – including mobile banking and infrastructure improvements – to position the bank for future growth and to keep pace with the changing world. digital landscape.

Farmers Bank has increased its annual investment in digital banking technology by 15%.

The warm reception of digital by consumers is putting pressure on branch networks, and industry officials cite online and mobile expansions as key factors leading to a reduction in branches across the country.

“Banks accelerated their plans to consolidate their branch footprints as the covid-19 pandemic spurred consumer adoption of mobile and digital channels,” S&P Global Market Intelligence reported earlier this year.

Nationally, there was a net loss of 2,126 bank branches in 2020 and a record 2,927 net branch reductions in 2021, representing a 38% year-over-year increase , S&P found. Arkansas lost 22 net local branches during the same period, according to research by the global financial services data firm.

However, bankers note that tipsters have been predicting the death of bank branches for more than 50 years since ATMs were introduced.

Community banks, with a commitment to local areas and small businesses, say they are not turning away from branch investments.

“Branches are still pretty much relevant,” Stone Bank’s Oldner said. “We want to give customers the convenience of the mobile app, but we still want our bankers to meet the customer. I’m not changing our strategy at this point. Customers want to know they have the human touch where they need it. want.” Gosnell, CEO of Farmers Bank, says a local presence is vital for small banks. “It’s still a matter of relationships,” he added. “The challenge is how maintaining that relationship digitally.” The banking industry is at a critical inflection point in assessing where best to invest in growth, according to Potts.

“This is another great opportunity for our Community Bankers to rethink and reimagine the next evolution of their service and delivery strategy by combining the best of physical and digital approaches.”


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