[vc_row][vc_column][vc_column_text]Read time: 8 minutes
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Introduction
The banking and financial services industry has evolved in the past decade. With the emergence of digital banks and marketplace lenders, banks and credit unions are no longer the first port of call for credit and banking needs. The biggest challenge being faced by the industry is the changing customer expectation. A typical millennial does not want to visit a bank and wants all banking services on their smartphone. So traditional financial services players are required to power all banking activities such as fund transfer, loan application, opening an account and other activities digitally.
Banks and credit unions understand that the landscape has changed and is now investing in innovative technologies like automated credit underwriting, digital onboarding, blockchain, and real-time data analytics. But there are still multiple challenges that Banks and Credit Unions are starting to face and will continue to face in 2o20, as they compete and partner with digital upstarts.
5 Key Challenges that Banks & Credit Unions will face the most in 2020
Given below are the challenges which are being faced by the banks and credit unions due to the emergence of digitization- [/vc_column_text][vc_column_text]
1. Meeting the digital expectations of customers
Due to innovations in banking and digital technology, customers are not ready to stand in queues for banking services or wait for months before a credit officer decides whether they will be granted a loan. If you cannot serve this digital generation in the next 5 minutes, you have most probably lost the customer.
As per the 2019 State of Digital Sales in Banking report, there is a major chasm between the bigger banks and smaller banks with respect to digital capabilities. Big banks like JP Morgan have been able to plow billions of dollars in tech to compete with Silicon Valley but smaller banks are finding it difficult to compete.[/vc_column_text][vc_single_image image=”10221″ img_size=”full” alignment=”center”][vc_row_inner][vc_column_inner][vc_column_text]The numbers shown above are still paltry but the improvement is substantial and the percentage is further expected to skew towards mobile account opening.
2. For Credit: Digital is not enough
In its 2018 Digital Banking Consumer Study, PwC reports 50% of customers now primarily rely on mobile banking. And though banks have taken substantial steps for the same, it is not enough if they are looking to make inroads in the burgeoning online lending space. Personal loan originations by fintechs have topped banks in terms of new originations. [/vc_column_text][vc_column_text]I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_single_image image=”10220″ img_size=”large” add_caption=”yes” alignment=”center”][vc_row_inner][vc_column_inner][vc_column_text]Fintechs now own 38% of the market, which as recently as 2013 was dominated by banks with a 40% share and credit unions with a 31% share. Fintechs now has a commanding lead at 38% as compared to 28% and 21% for banks and credit unions, respectively.
3. Dealing with security issues
[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_single_image image=”10219″ img_size=”large” alignment=”center”][vc_column_text]Going digital and uploading all your customer data to the cloud is the easy part. Making sure you do not lose that data to hackers and suffer million-dollar fines is another story.
Recent data breaches:
- Capital One Data Breach has affected more than 100 million customers
- Desjardins, Canada’s largest credit union had former employees remove the information of 2.9 million customers without authorization.
- Over 400 customers at Philadelphia Federal Credit Union reported a wide range of fraudulent transactions ranging in hundreds of dollars per transaction.
Financial institutions not only take a monetary hit but also suffer a huge reputational loss due to any security breach. With Facebook data breach a constant headline, banks and credit unions need to ensure their data clouds are secure.
4. Marketing
Doing business in today’s highly competitive digital-first world is challenging for many smaller brick-and-mortar banks and credit unions. PwC’s Consumer Digital Banking Survey 2019 paints a grim picture for “branch” focused banking. [/vc_column_text][vc_single_image image=”10218″ img_size=”large” alignment=”center”][vc_column_text]For Millennial and Gen Z, local presence weighs less than 30% for opening a primary bank account. Recommendations account for over 60%. And how is this positive experience shared? Digitally via social media networks and online reviews. So a small credit union needs to be in touch with its customer base in 2020 via emails, social media, online rankings and review sites. This 360-degree digital presence is critical for brand augmentation and customer acquisition.
5. Training employees
Although digitalization allows for large-scale training and standardized messaging at the same time it has increased the training cost of banks. The banks have had to reinvest in trainings related to new technology, digital payment systems, etc. According to the FIS survey of over 1,500 senior executives, the top 20% of firms are changing policies to promote and emphasize digital innovation. Many employees were rendered unsuitable because of their unwillingness to adopt new technology. Making sure your organization is ready for a digital future is critical for the success in 2020 and for the long-term success of the organization.
Takeaways
The above stated are the challenges that are being faced by the banks and credit unions after the emergence of digitalization. The writing is on the wall. According to an ABA survey, the age group of 18-29 is the most active mobile banking user group. Surprisingly, online banking was also the first choice of more than half of those over 65.
Being digital-focused alone is not enough for banks and credit unions to survive in 2020 and beyond. Digital capabilities should be the core of how banks and credit unions serve their customer base. Relationship banking will remain important, but only if you can also power all types of services through the customer’s smartphones. From cybersecurity to cloud underwriting, all are critical to ensure that the financial institution remains relevant in 2020 and in the future. [/vc_column_text][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_custom_heading text=”Request MonJa’s Statement Spreading Software Demo” font_container=”tag:h5|font_size:20|text_align:left” google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal”][vc_custom_heading text=”MonJa Smart Scan Technology speeds up commercial loan underwriting by up to 70%.” font_container=”tag:p|font_size:15|text_align:left|color:%23000000″ google_fonts=”font_family:Raleway%3A100%2C200%2C300%2Cregular%2C500%2C600%2C700%2C800%2C900|font_style:700%20bold%20regular%3A700%3Anormal” css_animation=”bounceInUp”][/vc_column][vc_column width=”1/2″][vc_column_text][yikes-mailchimp form=”10″ submit=”Request Demo”][/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][/vc_column][/vc_row]