How Digital Investments Are Changing the Face of Banking

Investment in digital banking is driving increased customer acquisition, cross-selling and satisfaction while decreasing branch traffic and related costs.

By Jim Marous, Co-Publisher of The Financial Brand and Publisher of the Digital Banking Report

Since 2011, the usage rate of mobile banking apps has increased exponentially. Not only has mobile banking usage increased, but satisfaction with the mobile channel has also improved. In fact, mobile banking has surpassed all other channels and has become the most satisfying interaction channel, according to J.D. Power.

In line with this growth in mobile banking usage, the commitment to becoming a ‘digital bank’ is beginning to pay significant dividends in several key areas for some of the largest financial institutions. This was first seen in the J.D. Power 2016 U.S. Retail Banking Satisfaction Study, where the biggest banks had significantly improved in overall customer satisfaction, primarily due to digital offerings.

“The impact of the large banks’ (i.e., Bank of America, Chase, Wells Fargo) mobile banking strategies can best be seen by looking at bank satisfaction numbers among Millennials, stated Ron Shevlin, director of research at Cornerstone Advisors. “The large banks’ satisfaction scores increased by more than 50 points between 2012 and 2016, and is now slightly higher than the scores for both regional and mid-sized banks. Why? Increased investment in digital delivery by the largest banks has to be one important reason.”

This is confirmed by the J.D. Power research that showed that there is an immediate lift in overall satisfaction when customers use mobile banking (+27 points on a 1,000-point scale), and this impact increases even more when banks provide their mobile banking customers with a highly satisfying experience (+82). According to J.D. Power, “The outlook for Big Banks remains positive, driven by their (big banks) ability to invest in customer-centric innovations (e.g., digital channels, analytics, and branch transformation), as well as their success in growing customer segments.”

Digital Investment Drives Mobile Usage

Recent disclosures of mobile banking use by the big banks provides a glimpse of the impact of digital investment on mobile use. Of the three largest U.S. banks, JPMorgan Chase leads the way with nearly 25 million active mobile customers as of the second quarter. That was up 18% compared with the same period last year. Bank of America had the second most active mobile users, with 20.2 million monthly active app users, with Wells Fargo reporting 18 million active users. (These numbers are aligned with the relative size of these banks’ balance sheets.)

Usage continues to increase among all demographic segments. However, mobile banking is especially critical to customers in the Emerging Affluent segment, who are the heaviest users of mobile services overall and most likely to make mobile deposits. The impact on mobile deposits can be seen in the results of Bank of America, where mobile deposit growth mirrors mobile bank usage, and now represent 17% of all deposit transactions at the bank. This volume of mobile deposits is equivalent to 800 financial centers, with each mobile deposit costing Bank of America 90% less than an in-branch deposit ...

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