The Value of Digital Adoption and Engagement in Banking

Henry Ford, an American industrialist and founder of the Ford Motor Company, who developed the assembly line technique of mass automobile production, said, “If it doesn’t add value, it’s waste.” Ford’s approach to creating the first automobile that middle-class Americans could afford resulted in many technical and business innovations. These innovations coupled with consumer’s adoption of the automobile, revolutionized transportation. 

The digital transformation of the financial industry today is similar in many ways to the metamorphosis of automobile manufacturing led by Ford in the early 1900s. The way consumers engage with their financial institutions is rapidly evolving. Dr. Wei Ke, Head of Financial Services at Simon-Kucher & Partners, stated, “people are increasingly getting more comfortable with digital, but it’s driven by how consumer technology has evolved,” in a discussion on innovation in the banking industry with Meaghan O'Brien at Launchfire. Dr. Wei Ke went on to discuss how consumer’s comfort with digital technology continues to increase. As consumers become more comfortable with digital technology, their digital adoption – the use of technology for the desired intent and to its fullest capacity – also grows exponentially more valuable.

Increased Digital Adoption = Increased ROI

A consumer’s digital adoption of the technology you offer is critical for maintaining a competitive advantage, differentiating your company from competitors, and maximizing the return on your technology investment. In the Forbes article, What Is Digital Adoption And Why You Really Need To Know About It, columnist Lilach Bullock explains that “adopting technology to its fullest extent will essentially allow you to get a return on investment (ROI) on your digital assets; in other words, you’re not just spending money on the latest tools and technologies but you’re actually taking full advantage of them and getting all the benefits you can get.”

Engaged Consumers Maintain Higher Deposit Accounts

Analysis of MX data — which represents data from thousands of financial institutions across the U.S. and Canada — shows that consumers who are digitally engaged with their financial institutions maintain higher deposits than consumers who have only signed in once to adopt the technology. Furthermore, according to internal MX data, engaged consumers maintain deposit levels over five times more than individuals who have not adopted digital banking solutions.

_{Note: An engaged consumer is defined as an individual who interacts with their financial institution’s digital tools consecutively for the last three months and has aggregated a minimum of one external account. An adopted consumer is defined as an individual who has interacted with their financial institution’s digital tools at least once in the last 60 days and has at least one open account.}

Engaged Consumers Manage Debt Better

Over the course of 24 months, MX data shows that consumers engaged with their institutions' digital solutions pay down mortgage balances by $3,900, decrease term loan balances by $1,305, and pay down credit card balances by $227 (on a monthly basis). These consumers present a lower risk to financial institutions because they are more regular on their credit payments.

Individually, these consumers increase their financial strength over time by saving more, borrowing less, and paying down debt balances more quickly. This aggregated increase in personal financial wellness has a significant positive impact on the financial institutions they do business with.

Engaged Consumers Produce More Revenue

Consumer engagement with digital solutions correlates highly with deposit balances and a financial institution’s profitability. As users engage regularly, they increase their personal financial strength, which in turn benefits the financial institution. How? With increased credit performance and deposit maintenance, these consumers qualify for larger loan amounts that build greater long-term value (including mortgages and HELOCs) for the financial institution.  

As illustrated in the graph below, engaged consumers generate an average of $477 per year in annual interest and fee revenue for financial institutions. Consumers who have adopted digital solutions but don’t use them frequently generate an average of $357 per year in annual interest and fee revenue. And those individuals who don’t engage digitally at all generate an average of only $79—less than one-sixth of the revenue an engaged user creates. Higher engagement equates to more revenue for financial institutions. 

_{Note: An engaged consumer is defined as an individual who interacts with their financial institution’s digital tools consecutively for the last three months and has aggregated a minimum of one external account. An adopted consumer is defined as an individual who has interacted with their financial institution’s digital tools at least once in the last 60 days and has at least one open account.}

Using Data to Increase Digital Adoption and Engagement

Financial institutions fall short in recognizing the value that digital adoption and engagement offer. Often it’s because the value of engaged versus not-engaged consumers is hard to quantify. Systems, technology, culture, access to consumer data, and knowledge on how to use the data are just a few of the challenges institutions face when trying to quantify the value of engagement. As a result, getting the resources needed (expertise and budget) to increase consumer engagement becomes extremely difficult.

Using data to transform opinions on the value of user engagement is just the beginning. Financial institutions must implement a strategic, data-driven plan, focused on identifying and serving the needs of their consumers before they can provide exceptional experiences through personalized recommendations, products and services.

Jim Marous, Co-Publisher of The Financial Brand, CEO of the Digital Banking Report and host of the Banking Transformed podcast, wrote in a recent article, “In order to take advantage of the opportunities presented by these vast amounts of data, financial institutions must invest in competencies around data and analytics, customer experience, content, and digital technologies.” Marous went on to say, “They also need the analytical skills – either internally or through external partners – to turn raw data into insights. Most importantly, organizations need a data-driven culture, with top management support, that will commit to the investment in the technology and support of the vision of becoming a data-centric organization.”

Bridging the Gap Between Data and Engagement

MX's professional services team offers an Adoption Marketing Playbook which helps financial institutions identify and articulate the value of adoption and engagement through analysis of their data. The results of this analysis provides custom insights into how consumers are engaging, what channels and services they’re using, and how their usage compares to peer institutions. This information can then be used to power exceptional consumer experiences that encourage and support brand loyalty.

Additionally, the Adoption Marketing Playbook leverages the MX team’s expertise and experience working with institutions across the industry to bridge the gap between identifying what is possible and knowing how to successfully implement the solution. Start leveraging the most proven and impactful strategies and tactics for increasing adoption and engagement with a personalized, data-driven Adoption Marketing Playbook.