Fintech focus: Why digital banking is the future of finserve

The answer to the question “What would you save if your house burned down?” is always used to show a lot about the respondent’s personality. Pragmatists might choose insurance or other documents related to financial security, while sentimentalists would save photo albums from the flames. But in 2022, there’s a good chance that most people, when asked this question, will simply answer “I wanted to save my smartphone.”

This would not be a performative inflection for the big tech heads of social media companies. Instead, it is a reflection that our lives are now controlled by these handheld computers. For sentimentalists, their family stories are stored in picture galleries. For pragmatists, the cogs that make the world go round are all there in app form – and that includes managing their finances.

What customers want from digital banking

Recent research commissioned by IDnow suggests that well over 60% of 2,001 UK adult banking customers surveyed believed that digital processes – which could include remote account opening, online banking options or an easy-to-use app – were either extremely important or important when it came to deciding which bank they should hand over their money to.

The importance of digital was further underlined by the top three answers respondents gave to questions about what annoyed them about managing the economy. Limited opening hours, lengthy processes and having to go to a branch to open an account can be mitigated by appropriate digital provisions.

It is therefore clear that traditional mainstream banks and their disruptive challenger counterparts could all learn something if they listened to the potential customers they are trying to attract.

Safety first

British consumers are not naive. They know that while digital is the preferred way forward for banking, it is not without its dangers. 53% of respondents had opened a bank account online, with the same number saying they felt safe doing so. But that obviously leaves 47% who didn’t, and of those, more than a third cited cybercrime and digital banking fraud as the cause of their unease.

It doesn’t matter if the bank is a well-established name in town or if it was founded last week, while customers want digital, they also want their money to be safe, and it’s up to the institution to ensure that by put the highest safety standards in place.

Safety and a friction-free process also matter right from the start. 15% of respondents were worried about making a mistake when remotely signing up for a new account, and 13% had actually canceled or abandoned the process of opening an account this way.

Traditional incumbents versus fintech

They’ve been a buzzword in the financial sector for a while now, but challenger banks aren’t quite giving traditional bank bosses sleepless nights just yet. Although their use is increasing, just under a quarter of respondents banked with a challenger bank, but for respondents in the London metropolitan area this figure rose to almost a third.

The past two and a half years have obviously acted as an important catalyst for digital adoption across every sector. What came about out of necessity is now the standard. Despite this, it is interesting to see that most of those surveyed still work with a traditional bank, but with the tandem demand for digital. There is a huge opportunity for those institutions equipped with and prepared to embrace the technologies expected of them.

The age-old question

Although digital was brought to the fore by the pandemic, it’s not surprising to hear that adoption was driven by the younger generation, who are more tech-savvy across the board.

37% of survey respondents aged 55 or older had opened an online bank account, compared to 63% of 18- to 24-year-olds, 62% of 25- to 34-year-olds, and 63% of 35- to 44- year olds.

There is therefore still a need for the main street, which a customer of all ages can visit and get answers to questions about financial management. Freedom of choice remains an important factor for banks and institutions to consider before being swallowed into a wormhole that emphasizes digital as the most important factor.

Although digital bank accounts were most popular among 18- to 24-year-olds, the same age group was also the most likely to stop opening an account online. Their knowledge of living life online means they have higher expectations for a frictionless onboarding experience, but they’re also more likely to know when something in the onboarding process isn’t right and their security has possibly been compromised.

Security is the key to unlocking your potential

Cyber ​​threats seem likely to continue unless institutions increase security levels and educate customers about the need to protect their personal information.

If banks and financial institutions are to overcome these security issues and capitalize on what their customers want, it is critical that they invest in the right technologies that deliver the highest level of security at every stage of the digital banking process. When they combine this with meeting the demand for smoother and simpler user experiences, there is a path to a successful digital banking future for everyone.

About the author: Mike Kiely is Director of Financial Services Sales at IDnow, a leading identity verification platform based in Germany