Financial institutions are facing obstacles unlike any they’ve seen before. From rapid technical innovations to disruptive consumer engagement models, the financial services sector continues to evolve at breakneck speed. How do you keep pace?
Investing in the right technology and re-evaluating your existing business practices can help your team stay ahead of the curve.
Today, financial institutions need to be able to pivot and adapt to changes within the industry if they want to maintain a competitive edge and retain customers. The issue is that engaging and retaining today's customers is often easier said than done, especially for companies that are still reliant on legacy systems. A new approach to financial services will be necessary for these institutions' success moving forward among these modern challenges.
01
Increasing Regulatory Requirements
Finance is a heavily regulated industry, with new and amended regulations constantly being released at all levels of government. As failure to comply can cost your institution thousands or even millions of dollars in penalties, it's fair to say that regulatory requirements continue to be one of the biggest challenges for financial services organizations today.
Investing in an automated financial services compliance software system can help streamline time-consuming compliance management tasks like:
Adopting software tools that can automate these tasks frees up your compliance team to focus on more complex responsibilities and better prepare your institution for future audits.
It's also important to perform due diligence before investing in any third-party software solutions, as they must also comply with key industry regulations for you to remain compliant.
02
Declining Trust in Financial Institutions
Your institution directly handles people's money and financial data — it's only natural customers need to feel they can trust you before they do business with your company. However, due to a series of high-profile data breaches at some of the nation's most well-known financial institutions, American consumers are losing trust in the sector as a whole.
Between 2021 and 2023, trust in US based financial institutions dropped by eight percentage points. Feelings of mistrust rose by five percentage points over the same period. So, how can banks and credit unions rebuild that trust?
Online reviews are one of the biggest influencers of consumer behavior today, so investing time and resources into reputation management initiatives can help you improve your public perception. Here are some examples of actions you can take right now to enhance your reputation:
These actions can help you demonstrate your commitment to delivering the best possible experience to your customers, which is essential for maintaining their trust.
The way your institution handles security and personal information also matters, as almost 70% of customers prioritize trust when choosing a primary financial institution. Offering a service like Privacy Protect from Array to your customers can also help you build a more trusting relationship with them by identifying and removing exposed private information from People Search and Data Broker sites across the web.
03
Changing Customer Expectations
Customers may have been content to wait in lines at your branch office in decades past, but the traditional banking model is on its way out. Today's customers expect convenient, tailored banking experiences that don't require them to go out of their way to complete basic tasks like checking their account balances or depositing funds.
The biggest contributing factor to shifting expectations is the rapid pace of technological advancement. New devices, tools and applications are constantly hitting the market pushing businesses across industries to adopt them as quickly as possible to keep up.
Shifting demographics are another major factor driving change, as older digital natives are now in the workforce and taking ownership of their finances for the first time. Adopting new technologies can give your institution the agility it needs to adapt to today's customer's wants and needs, including:
Personalization: According to one recent survey, 92% of respondents said they're more likely to shop from brands that offer tailored customer offers in real time. That sentiment certainly extends to financial services. Integrating data analytics and targeting tools into your mobile app and digital experiences lets you send customers the right offers at the right times to increase conversion rates and create a more satisfactory experience for the customer.
Convenience: With the rise in mobile banking and fintech solutions, customers expect the same level of streamlined digital service from every company, regardless of where they go. Expanding functionality for your products and services through all-in-one mobile apps and simplified web pages is critical to creating the experience your customers want and expect while banking.
Transparency: Your customers want to know they can rely on your institution to be open and honest with how you handle their data and finances. Digital solutions enable smooth two-way communication and provide greater visibility into customers' accounts and transactions, which can help put them at ease knowing you are working as a steward for their financial well-being.
When evaluating different applications, it's important to identify a solution that integrates into your existing tech stack. Integration is critical for creating a seamless flow of data across all your systems, streamlining everything from data analytics to communication with customers.
04
Cultural Shift Toward Digital Technology
The vast majority of customers today prefer to manage their money via digital banking tools, such as mobile apps and web portals, and many financial institutions are scrambling to keep up.
That said, catering to customer preferences is only one of the driving factors behind the increased need for digital transformation (DX) in consumer banking. Some of the other benefits of digitizing your operations include:
Sustainability: DX allows your institution to significantly reduce paper waste by digitizing documentation like account statements and marketing offers, which can help your institution achieve sustainability goals and appeal to environmentally conscious consumers.
Efficiency: Digital tools like workflow automation, artificial intelligence (AI), and data analytics streamline complex financial tasks for both your staff and your customers, which can help boost customer satisfaction.
Profitability: Using digital tools unlocks more opportunities for revenue generation through new virtual services, potentially boosting the bottom line.
Of course, while DX is important for survival in the industry, your institution needs to take a strategic approach for long-lasting success. Financial institutions frequently underestimate the costs and resources involved in a full digital transformation—and many miss the mark as a result.
05
Economic Instability
While the market has always had some degree of volatility, the pace of change has accelerated in recent years due to domestic and international events. Traditional revenue streams are under increasing pressure due to evolving economic issues, such as:
Financial institutions need to become more agile and pivot toward new revenue streams as the market begins to shift.
Expanding your digital offerings is one way to improve your institution's agility and resilience. For example, you could implement a white-label subscription-manager tool into your bank's mobile app as a premium service to boost revenue as traditional fee income growth are being squeezed.
06
Customer Attrition
When today's customers don't feel that your institution is meeting their needs, they'll take their business elsewhere. Engaging these customers is tricky when you're working with complex legacy systems that limit their agency, especially for marginalized and underbanked communities.
The best strategy you can take to attract and engage more customers is to broaden your approach to financial inclusion, which involves giving your customers access to the services and tools they need to consolidate all their financial assets under one roof. Access to these services enables customers, regardless of zip code, to build a strong empowerment strategy, which is essential to building long-term financial health for families and communities.
Some aspects of a strong financial inclusion strategy include:
A secure transaction account: Customers need access to secure, affordable checking accounts to take care of recurring transactions like direct deposits and bill payment. A mobile-friendly digital experience expands this access beyond your branch office by allowing customers to manage their account information any time of day and from any geographic location.
Avenues for building credit: A strong credit history is critical for getting approved for loans, mortgages, and other credit products. Offering a service that regularly furnishes payment data to the relevant credit bureaus is a great option for helping your customers improve their credit scores and boost all-around financial health.
Comprehensive visibility: A holistic platform that allows customers to see and manage all their financial assets — including active subscriptions, account balances, and credit scores — empowers them to make more informed decisions and eliminates the need to go to another institution.
Streamlined self-service platforms like mobile banking apps and secure personal web portals give customers greater control over their financial health, and integrated premium services add value by turning your digital experience into a convenient one-stop personal financial management shop.
07
Outdated Digital Experiences
Younger consumers are especially savvy when it comes to today’s financial technologies, as most grew up with smartphones and access to the internet. They expect the companies they do business with to use the most recent tech available, but many financial institutions still rely on legacy systems that struggle to keep up with the speed of emerging fintech applications.
Fortunately, there are many ways you can update your digital experience to be more competitive:
Mobile-first design: Did you know 60.8% of all web traffic now comes from mobile devices? Optimizing your web pages for mobile devices will create a smoother, more enjoyable banking experience for customers on tablets and smartphones.
Integrations with branch offices: Although younger customers increasingly prefer digital interactions, the human touch is still a vital part of banking. Innovative solutions that merge the digital with the physical, such as self-service kiosks in your branch office, can help boost customer satisfaction and engagement.
Accessible support: When customers run into obstacles while using your services, they want a quick and easy solution. Integrated features like AI chatbots and easily accessible knowledge bases can help direct users to the information they need to solve their problems or send them to your customer support team.
If you and your team find yourselves stuck on the best move to make, look to the data for answers. For example, what digital services do customers use most often? How many times per month are they returning to these tools? Which products and services see less activity?
You can also survey your customers to get direct feedback on which offerings need the most improvement and why. The data you collect from this survey can be incredibly valuable, as generating insights on customer satisfaction can be difficult for anyone who does not regularly use the customer-facing side of your digital experience.
As more financial information moves online and cyber threats become more sophisticated, it's only natural that cybersecurity will become a bigger concern for customers and institutions moving forward.
Suffering a data breach is one of the easiest ways to erode customer trust, but taking preventive measures to mitigate risk and secure your customers' information can help reduce your risk. Some common examples of cybersecurity solutions include:
End-to-end encryption (E2EE): Encrypted communications are highly secure because they scramble all included data so that only the user who has the cryptographic key can read the message. This prevents sensitive information from falling into the wrong hands.
Authentication technologies: Your institution can significantly reduce the risk of fraud and identity theft with advanced authentication systems like multifactor authentication, which uses multiple identifiers to ensure users are who they say they are when they log in.
Address verification services: This technology compares the address provided at the time of a transaction against the recorded billing address of the cardholder to catch identity thieves in action.
Identity protection: A solution like Identity Protect from Array detects abnormal activity targeting your customers' personally identifiable information to minimize the impact of identity theft. The Identity Restoration service also helps your customers recover from an attack which gives them further comfort knowing they are protected no matter what.
Before adopting a cybersecurity solution, be sure to do your research. You want to work with vendors and IT professionals who have experience working with the unique compliance needs of the financial services sector.
The industry has seen massive disruption over the past decade. While technologies like blockchain, 5G, and AI are still relatively new, they will dramatically impact how financial institutions operate over the coming years. Companies will need to adopt new tools and business practices to keep pace with these advancements, such as:
Data-driven decision-making: Harnessing the power of big data with advanced analytics and reporting tools can help your financial institution make sense of customer data. You can make more informed business decisions that position your institution to better serve your customers.
Open collaboration: While fintech organizations compete with established financial institutions in many ways, taking advantage of opportunities to collaborate gives financial institutions access to the technologies and expertise necessary for staying competitive.
Customer-centric business model: Customer expectations are constantly changing, especially now that technology is changing so rapidly. Embracing data-driven applications will enable greater personalization and convenience, making it easier to deliver the level of service your customers want and need.
Continuous improvement: Embracing a culture of continuous improvement helps your institution better adapt to the technological and economic changes you'll face moving forward. This cultural change can also help you identify new opportunities for creating revenue and enhance customer service as a result.
Although it's clear how innovative tech solutions can help future-proof your operation, it's still important to remember the role your software vendor plays in this investment.
Before you finalize a deal with any vendor, consider whether they're a good fit for your needs and strategic goals. Do they offer ongoing support to help you solve any problems you encounter while using their software? Can their product easily scale to accommodate changing business needs? These are just a few questions you and your team can pose when researching vendors.
At Array, we build user-friendly digital financial tools that boost competitiveness, unlock new revenue streams, and add value for your customers. We ensure our solutions are:
Embeddable: We designed our components for easy implementation, so you can launch new offerings as quickly as in six to eight weeks.
Private label: You can customize our tools to match your institution's branding and voice thus providing your customers with a more consistent digital experience.
Integrated: Whether you prefer to deploy our solutions via API or through your own app, our software integrates seamlessly into your existing tech stack for a streamlined data flow across the organization.
Compliant: We ensure our data practices comply with the Fair Credit Reporting Act, so you can have peace of mind working with Array.
Scalable: Our solutions grow with your institution, allowing you to add more customers without needing to invest in additional tech.
Continuously improving: Array is committed to developing new, innovative products and upgrading our existing offerings to better meet evolving client needs across various audience segments.
These characteristics allow you to improve your internal operations and connect with your customer base on a deeper level by expanding their ability to take ownership of their financial health. Don't just take our word for it. Read our customer stories to see how our market-proven digital solutions have helped real institutions like yours boost engagement and drive revenue.
At Array, we're dedicated to creating a future-focused financial sector. That's why we designed our products to be intuitive and easy to implement — so you can get ahead of the curve and make a faster return on your investment.
Differentiate your institution from the competition with our market-proven software solutions. Contact us today to schedule your free demo.
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Editorial Note: This content is the author’s opinion, expression, and/or recommendation(s)