The State of Banking in 2021 According to Bankers and Consumers

As we head into 2021, the financial industry is faced with a new set of challenges from budget cuts and increased competition to growing demand for digital-first consumer experiences. But if these challenges are planned for successfully, they can turn into some of the greatest opportunities in the new year and beyond. 

Let’s be honest, things as we know them have changed forever, but there’s no use looking back and pining over the “good old days.” In fact, standing still and waiting to see where things land can be costly. But predicting how the year will go is no simple task, and coming out of a year like 2020 only adds to the uncertainty of it all. The good news is, you’re not alone. To get a better understanding of how the landscape is changing from 2020 to 2021, we surveyed 200 financial institutions and according to our findings, 97% of the bankers said their 2020 plans have shifted due to COVID-19. 

Perhaps if there’s any silver lining in this past year, it’s that it has taught many financial institutions how to adapt to a digital-first environment — fast. Now it’s time to take all the learnings and lessons of this past year and apply them effectively to 2021.

In other words, now’s the time to focus on the future. As we already know, the way we interact with just about every aspect of our lives has changed. A recent survey found “that 87% of those who have increased digital usage during the pandemic expect to continue using digital channels at the same level even when branches reopen.”¹ Not only that, but according to another recent survey, ”63% of consumers are open to the new nontraditional financial services players, such as Google, Apple, PayPal, Facebook and others.”¹ This brings us back to our original point: how do financial institutions prioritize their focus, and how do they ensure they’re on the right track? It all starts with putting consumers first. 

How aligned are consumers and financial institutions in 2021? 

A critical part of staying ahead in 2021 is how well financial institutions understand consumers’ needs and demands, and how closely those needs align with the institution’s investment in resources. In that vein, we also surveyed over 1000 consumers to see what they’re expecting to see from their financial institutions in the coming year. Here’s how closely aligned financial institutions are with consumers when it comes to prioritization. 

The common themes: Financial wellness, Digital experience, and Better data 

At the beginning of 2020, 29% of respondents said their biggest objective was financial wellness tools, followed closely by 22% who said digital experience initiatives. When asked about how those goals are projected to change in 2021, we saw a slight shift with digital experience initiatives taking the lead with 29% of respondents making that their focus, followed by 25% who said financial wellness tools was their main priority. So far so good, as these were also the two areas of improvement that consumers are seeking from their financial providers. In our consumer survey, 78% of respondents said that they want their bank to prioritize digital (online and mobile banking) strategies above physical banking ( branch and ATMs) in 2021. Furthermore, 63% of consumers surveyed said that they’d like for their bank to send them proactive, personalized messages and alerts that help them manage their finances. When it comes to data, consumers also expressed interest in having a streamlined banking experience where they can see all their finances in one place. 

Financial Wellness 

Diving deeper into financial wellness, we found that 68% of consumers would like their banking experience to be similar to the experience they have with Netflix, Amazon, and other tech companies that understand their needs and offer recommendations based on their information. In other words, consumers want to be seen and heard — and in general, one-size-fits-all offers simply don’t work. Consumers have become so accustomed to everything being tailored to their specific needs, from shows and playlists to purchase recommendations that they want their financial institution to anticipate what they’re looking for and provide them with hyper-personalized products and offers to match their needs at a specific point in time. 

But that’s only a part of the picture. Our consumer survey also shows that 79% of respondents said that they’d like for their bank to help them understand how they can invest and grow their money. This is a huge opportunity for growth for financial institutions. And luckily, consumers are hungry for it. As the economy continues to cause uncertainty, consumers naturally want to make their money go further. Financial institutions can use consumers’ interest to create more financially stable and wealthier customers that, in turn, invest in their products and services.

Digital Experience 

Digital adoption and the proliferation of digital devices as a primary means of interaction has been happening for years. COVID-19 just sped up the process, dramatically. So it’s no surprise that when we asked consumers what their primary form of banking would be in 2021, 78% said that mobile would be their prefered choice. That means the majority of people don’t plan on going back to the branch — at least not as frequently. However, what is surprising is that although financial institutions found branch closures to negatively impact their bank in 2020, 63% of consumers surveyed said that branch closures didn’t negatively impact their relationship with their bank. 

This seems to track with other questions in the survey. When we asked consumers if physical branches will play a critical role in how they interact with their bank in 2021, 57% said no. But can you blame them? Consumers are all about convenience. If there’s an easier, faster, simpler way to do something — it’s going to win, every time. In general, when mobile and online banking are done right, the branch simply can't compete, and it shouldn't have to.  Surprisingly, however, even though branches were not a main focus or priority in 2021, 36% of bankers strongly agree, and 49% agree that physical branches will play a critical role in maintaining customer engagement in 2021. Perhaps it’s more about rethinking how the branch fits into the whole value-add equation. If financial institutions empower consumers to handle their day-to-day banking needs on their own, they can transform branches into hubs that handle more complicated issues that require personal assistance. And as it seems, financial institutions seem to be on board that mobile and online banking are the future. Our findings show that 46% strongly agree, and 49% agree that creating a consistent and reliable user experience across platforms is a priority for their institution in 2021. What’s more, 55% said that progress and interest in digital experience initiatives will continue to accelerate in the coming year. 

Better Data & The Financial Feed

Data is the best way to know your customers. It’s that simple. As we continue to move towards a digital-first world, data is key to creating the same level of personalization that was previously only possible in person. The more data you have on a customer, the better you’re able to understand their needs and provide relevant solutions for their financial situation at any given point in time. So it’s no surprise that 95% of the bankers we surveyed said that easily accessible and actionable data is essential to success in 2021.

What’s more, 54% of bankers said their data strategy initiatives have progressed and interest has accelerated for 2021. And 93% agree that the expansion of effective data usage throughout their organization is critical in the coming year. This all seems to track with where we see the financial industry going in 2021 and beyond. When it comes down to it, consumers are busy, and they want solutions that are simple, intuitive, and practical — solutions that work with their lifestyles. Data-driven experiences are exactly what financial institutions need to deliver on. In fact, 91% of consumers surveyed said that it is important for them that their bank offers the ability to connect all their accounts in one place. They want one convenient place to see all their credit cards, loans, and bills with the ability to create budgets, receive proactive notifications and manage their entire financial lives with a few clicks on their mobile devices. 

Financial institutions need to create a financial feed that allows their customers to easily move, view, and interact with their money from one place. In turn, financial institutions can use this platform, coupled with data, to present their customers with more relevant offers. With so much competition and little to no friction to switch providers, financial institutions have to find ways to stay competitive with their product offers by using better data. When we asked consumers what would be one of the primary reasons for switching banking providers, 69% said competitive offers. Adding to that, 69% of consumers said they want better savings rates from their banks in 2021. 

How MX Can Help

When it comes to banking services it seems that consumers and bankers are largely aligned with the main focus areas of 2021 being around financial wellness, digital experiences, and better use of data. But executing against these goals and delivering on consumers’ demands will be the make it or break it moment for financial institutions that succeed and those that are left behind. 

At MX, we provide financial institutions and tech companies with tech-savvy solutions and innovative products that enable their customers to always stay in the know when it comes to their finances.

Resources:
1. https://www.forbes.com/sites/forbesfinancecouncil/2020/12/04/three-key-factors-for-effective-2021-planning-in-financial-services/?sh=32a07f8821df

2 MX Data