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The transformation of retail banking has been felt since the 1960s, with the introduction of ATMs.
What followed was the rise of personal computing in the 80s, smartphones in the 2000s, and now the age of digital banking.
These themes were discussed in a NextGen’s Second generation technology: Banking on the next transformation report, in collaboration with AFR Intelligence.
Going beyond a helpful offering, digital banking is now used in 99.1 per cent of all banking interactions, making it a crucial offering.
On the other hand, just 0.6 per cent of interactions were made at branches and 0.3 per cent via phone and chatbot.
Upholding these systems is what can help keep customers around, as 53 per cent of consumers said they were likely to switch banks due to a poor digital experience.
Seventy-six per cent of consumers are looking for digital banking that is intuitive and provides customised user interfaces and tools that make it easy to complete tasks.
“Consumer experience is vital to banks and making this next generation of digitalisation work means switching strategic thinking to focus on what consumers want and need, versus the traditional transactional, IT-driven approach,” said Beyond Bank chief customer officer Nick May.
Helping propel the popularity of digital banking was the COVID-19 pandemic. While these platforms were certainly used prior to the disruption, they were relied upon far more heavily during this period.
The report said that this helped digital banking become “mainstream.” Now, digital banking is far more than a competitive differentiator.
The increased popularity has decreased the need for face-to-face banking, as in-person transactions have fallen by 47 per cent over the past five years.
So too has phone banking fallen by 26 per cent in the same period. Meanwhile, online and app banking has grown by 39 per cent and chatbot usage has grown by a whopping 1,236 per cent, according to an Australian Banking Association (ABA) report.
This rise in popularity has made way for more fintech companies and “huge advances” in the systems available, said NextGen.
Many of these innovations are boosted through the use of AI and machine learning. This tech is set to disrupt the industry immensely, especially things like customer service and home loan processing.
“Driven by evolving customer demands and advancements in technology, there appears to be a second generation of digitisation occurring in banks [that] aims to fundamentally transform the banking experience,” said Dr Michael Baumann, executive general manager, home buying at CBA.
The implementation of AI across consumer banking has been promoted by the vast majority of banks.
The report said that 83 per cent of Australian banking executives are implementing the technology in their operations, making the sector an Australian AI leader.
“The appeal to retail banks is immediate. AI can help find and identify patterns more accurately and far faster than any human, and can be applied to improve a broad range of retail banking functions, from call centres, to home loan processing and fraud prevention. The language and machine learning capabilities of present generative AI technology mean that algorithms can also be used to further refine banks’ credit score modelling for improved lending decisions by rapidly analysing vast financial datasets and strengthening risk assessments and financial forecasts,” said the report.
Severely hindering banks’ growth are legacy systems. These are outdated computer systems, software, or technology that are still in use, despite the availability of newer alternatives, often due to their critical role in business operations or the high cost of replacement.
In fact, the report said that legacy systems could end up costing banks as much as $90.3 billion globally by 2028, if left unresolved.
It’s clear that digital banking and up-to-date technology have become a key priority for the modern bank. Consumers won’t compromise, so neither should banks.
[Related: Lendi Group is investing in tech, but ‘keeping home loans human’]
