Moving Beyond Basic Functionality: Customers Now Prefer a Completely Digital Banking Experience

Banks stepped up their digital game as the pandemic accelerated adoption of virtual banking. But an in-depth examination of their digital offerings and customer expectations reveals those gains may be fleeting—with non-traditional rivals like fintechs poised to swoop in.  

West Monroe asked banks in Q3 2021 to assess the maturity of their digital products and services. We then asked bank customers last quarter to tell us how they felt these efforts were going.    

Broadly speaking, the surveys revealed a tenuous alignment. Banks believed they were doing fairly well meeting digital needs, while customers overwhelmingly point to readiness for a comprehensive digital experience from their banks. 

To be sure, our survey revealed widespread satisfaction with basic mobile and online functionality. In aggregate, executives last year ranked their institutions’ digital maturity at 79%, while the vast majority of customers reported being very satisfied with their bank’s mobile and online offerings. 

But this rosy picture is complicated by additional findings from our customer survey. Banks are achieving high marks—but for only a limited and basic set of capabilities. Opportunities for new offerings are ripe for the taking. Looming over it all is the surge of non-traditional players, who are already providing services to 42% of customers we surveyed, with satisfaction levels on par with their legacy counterparts—and better when it comes to mobile capabilities.  

The bottom line? Customers may be satisfied now, but that doesn’t mean they won’t switch banks if they can find a better digital experience elsewhere. When asked, on a scale of zero to 10, how close they’ve come to switching financial institutions in the past year (with zero being “I never considered it” and 10 being “I made a switch”), 15% said they had switched and another 34% were leaning toward it to some degree, selecting within five and nine on that scale. 

In what follows, we’ll dig into our surveys to help banks decide where they should go next in their digital journey, how to differentiate from their competitors, and what they can do to deliver new digital products and grow their relationships with customers.  

Satisfaction is high—but for basic and limited functions 

Most respondents said their financial institutions were meeting their needs and that mobile and online offerings were a key reason for not switching banks.  

But a deeper look shows that the digital functions used most frequently—by consumer and commercial customers alike—are relatively basic: checking account balances, transactions, and statements; transferring funds from account-to-account, bank-to-bank, or person-to-person; and paying bills.  

It’s reassuring for traditional banks that customers are broadly satisfied with these offerings. It’s also promising that the majority of customers use all of the above functions frequently (generally speaking, if customers are using a function, they are more often using them frequently than occasionally, which is a telling indicator of the utility that digital banking provides).  

But many customers aren’t using a range of other functions—some of which are also relatively basic—nearly as much. For example, roughly half or less of all respondents said they were using cleared check images, remote deposit capture, fraud alerts, account alerts, and credit card payments, though online consumer customers reported higher usage levels. What’s more, online use of these functions was higher than mobile use, leaving banks vulnerable to encroachment from non-traditional players, which had higher satisfaction scores for their mobile applications than legacy players (see below). And consumers reported using the above functions slightly more than their commercial counterparts.  

A host of other functions are currently in use by: 

• Less than half of all respondents (e.g., ATM or branch locator, card control services, loan payments) 
• Less than 20% of all respondents (e.g., payroll, touch and face ID, chat with a banker, account openings, credit card applications) 
• Less than 10% of all respondents (e.g., loan applications) 

Where banks can make improvements—and what customers want next

Respondents say the biggest room for improvement in digital products and services is in the functions/products offered and the usability of those products. More than 60% of customers said both categories either required improvement or needed the most improvement. Aesthetics don’t seem to matter as much as these two key factors, suggesting that customers are prioritizing fundamentals and user experience over surface-level design elements. 

Additionally, our customer survey uncovered new digital opportunities for banks, including: 

Loan applications

More than 60% of commercial and 50% of consumer customers want to apply for their next loan via an online or mobile platform. This is a marked jump from industry-wide statistics citing 12% of consumer using online mortgage loans in 2021 and 32% of small businesses applying for loans from online vendors.   Mobile capabilities lag behind even further, particularly for commercial customers, 47% of whom said their mobile app didn’t offer business loan applications.

Banks looking to adopt the next wave of digital functionalities would do well to explore this service. Fortunately, they’re aware of the shortfall: Lending applications were among the areas where banks told us in Q3 that they needed the most improvement. Moving forward, such offerings would ideally involve a differentiated experience by which customers are able to see the status of the loan they applied for throughout all stages of the process.

Remote deposits

The top reason customers still visit their physical bank location is to deposit checks. Consequently, this presents a significant opportunity for online/mobile applications—yet only about half of all customers currently use their digital platform’s remote deposit capture function. This is largely a result of banks not offering it or poor functionality, but a significant percentage of respondents (roughly 40%) said they didn’t use such products “for no reason.” This underscores that part of the challenge for banks is not simply offering a usable function but also driving awareness of it as well.  

Credit card payments

Among those who use applications to make credit card payments, the majority of respondents (72%) do so frequently rather than occasionally. Our Q3 survey found that this area ranks among lowers in terms of digital maturity—but given the response rate, banks would be well served to focus on improving their credit card payment offerings and usability.  

Fraud alerts

Nearly half (46%) of respondents indicated this is something they want in the future, and more than half who don’t currently use such alerts say it’s “for no reason.” This points to a broader question around optionality. Given the prevalence of fraud and increase cyber risk, these types of features should be embedded in the digital experience. There are inherent features akin to fraud alerts that banks should no longer wait for their customers to request. Given the acceleration to digital, banks need to rethink what is truly optional from a functionality perspective.  

Treasury management

For commercial customers, our Q3 study found the largest gap in digital experiences was in treasury management, an area which also had one of the lowest rankings in terms of digital maturity. This presents yet another place where banks can look to gain some ground in the year to come.

Threats from non-traditional players  

The rise of non-traditional players like fintechs continues to skyrocket, with the global fintech market projected to grow from $112.5 billion in 2021 to more than $330 billion in 2028—at a compound annual growth rate of nearly 20%.  

These digital-native organizations present real threats in an increasingly virtual banking landscape. More than 40% of customers we surveyed who currently use a traditional bank also use a non-traditional provider—and report broadly equal levels of satisfaction between the two.    

Non-traditional players were even found to deliver superior experiences in key areas. For instance, these organizations have higher satisfaction scores for their mobile applications (both commercial and consumer). Their mortgage lending offerings—where banks’ digital functionalities are currently falling short—are booming, according to an IMF report. The top two areas where respondents indicated banks have room to improve (functions/products offered and usability of those products) are also key reasons they would likely pick a non-traditional bank over a traditional one.  

Given this new landscape, traditional financial institutions must face a difficult truth: Even if customers are broadly content with their current provider, their loyalty will likely shift once they see something better elsewhere—and chances are that something better will come from a non-traditional player moving forward. As we mentioned, 15% of respondents switched financial institutions last year and another 34% seriously considered it despite current high satisfaction levels. 

Riding the next digital wave

Traditional banks have much to be proud of when it comes to their digital offerings. Their customers feel valued, express high levels of satisfaction, and would recommend their bank to a friend. Getting to this stage is no easy feat, particularly amid the disruptions of a global pandemic.  

But the widespread shift to digital banking has only just begun, and customers increasingly want a comprehensive digital experience: 73% of respondents to our customer survey said a completely digital experience would improve their banking experience. 

Now is the time to address critical roadblocks to effective digital transformation such as managing projects and gathering the necessary requirements for new solutions—hurdles that banks say they encountered more than 70% of the time in such efforts, according to our survey.  

The good news is that if their current customer satisfaction levels are any indication, banks have all the tools at their disposal to successfully take the next step in their digital journeys.