According to the PEW research center, 56 million Millennials (ages 23-37) were working or looking for work in 2017, making them the largest portion of the U.S. labor force. This means millennials are becoming the largest drivers of the economy. Millennials are on average more technologically savvy than the previous generations and have driven growth towards a more digital economy.
Banks and other financial institutions must adapt to account for this new trend. Digital banking users have increased from 26% to 51% between the years 2012 and 2017, according to the U.S. Federal Reserve. Consumers are banking digitally, meaning through desktops, laptops, tablets and smartphones.
82% of consumers ages 18-24 were using mobile banking platforms in 2017, indicating a shift towards a more personalized banking experience. They also want to sign up for banking services without needing to visit a physical branch.
Based on a 2018 survey, PwC, a professional services firm, found that mobile users grew from 10% in 2017 to 15% in 2018. This means mobile banking is becoming more popular as time passes.
Taking all of these statistics into account, banks should adjust their priorities towards increasing and personalizing digital banking services.
There is growing competitive pressure coming from companies like Alibaba and financial startups to go digital in terms of how companies should function and engage with customers.
The goal is to make banking services available to people in remote locations where they may others be unable to access local branches.
Digitalization is also far less expensive than banking in a traditional brick-and-mortar branch. PwC ‘s report titled Bank of the future: Finding the right path to digital transformation, mentions how some banks create full on digital native banks that use completely digital customer interface and back end.
The report also says, that branch transactions cost about $4 each, while online and mobile transactions cost $0.09 and mobile transactions cost $0.19. Automation is the biggest channel in terms of growth for many businesses across the board.
Going digital makes banks more agile as well. It allows them to quickly adapt to changing customer trends and tastes. Going digital will provide for a testing ground for new services and products where a bank would otherwise have to commit to a strategy and hope it’s successful.
It’s possible to use modern IT infrastructure to set up a digital bank using third party architecture, also known as cloud services or cloud computing. In other words, one can set up an entirely digital bank without the need for internal IT, which would be a huge financial barrier. Instead, one may outsource hardware, software and maintenance to a cloud provider, further decreasing costs and risks.
Nerds Support has 17+ years of experience helping financial institutions digitalize while meeting important IT compliance.
It’s important to understand that digitizing everything is not necessarily the best option. Each bank is different and has different strengths and core capabilities. You might not be in a place to fully digital overhaul.
In order to succeed in digitizing where others fail is to define and evaluate your long term strategy. PwC suggests you consider the questions:
• What do we want to be known for?
• What consumer segments are we targeting?
- What are our core capabilities and how can a digital strategy strengthen them?
Many industries are also on the way towards digitization in order to appeal to the Millennial and Gen -Z that’s following behind. This also means that adopting a digital infrastructure is going to be pivotal in business-to-business (B2B) interactions.
Having outdated or incompatible business models may become a deterrent to industries you want to service and conversely, an updated, innovative structure may appeal to start-ups or bigger companies that are looking to change and want to work with work with institutions that they feel will help them achieve their goals.
Contact Nerds Support today for a complimentary IT assessment where we identify gaps and areas of opportunities in your IT infrastructure.
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