The Strategist

Study: Successful digital banking is impossible without offline services

05/08/2018 - 12:25

According to a study by JD Power, about 30% of surveyed retail customers of American banks use only digital channels of interaction, that is, mobile and online banking. However, these clients are also one of the most dissatisfied with the quality of service. At the same time, the number of dissatisfied among those customers who communicate with their banks “offline”, that is, visit the offices, turned out to be much less.

AMISOM Public Information
AMISOM Public Information
JD Power research company surveyed about 88 thousand retail banking customers in 200 American cities. The main outcome was that digital banking channels have already seized a significant share of consumers. Yet, the level of satisfaction with the services is lower among these consumers compared to those who use both digital and traditional channels. JD Power specifies that 28% of the respondents use only digital (online and mobile) banking, without visiting the offices at all. The level of satisfaction among such clients is 791 points out of 1000 possible. Among those who are serviced only in the offices and do not use digital channels, the level of satisfaction is 804 points out of 1,000 possible. The most satisfied are those who combine digital and traditional banking. 823 points out of 1 thousand were recorded in a group of consumers who visited the bank's branch at least twice during the last three months and at the same time they use online and mobile banking. 808 points out of 1 thousand were recorded in the group of consumers who use digital banking and have visited the bank's branch at least once in the past three months.

"Full-digital" bank customers explain that they are not satisfied with the following parameters: level of communication with the bank, new products and commissions, opening of new accounts. At the same time, representatives of generations X and millennials are dissatisfied the most often, which, according to the researchers, destroys already established stereotype that the young generation don’t like to visit the branches.

"There is no doubt that digital channels give banks huge opportunities to cut costs. But the risk is that by cutting costs, a bank may lose its customers," says Paul McAdam, JD Power’s Senior Director of Banking Research." At the moment, retail banks need to pay attention to the growing digital divide among consumers. If they manage to cope with this situation and find opportunities for a more personalized approach to the needs of their customers, which include the use of both digital and traditional channels, they can be sure that customers will be satisfied."

Not only American researchers are worried with consequences of overly active digital technologies lobby in the banking industry. In March, Head of the Swedish Central Bank Stefan Ingves said that massive use of non-cash settlements may lead the country to the next financial crisis.
As you know, Sweden is one of the world leaders in use of cashless payments. Currently, 85% of the local population has access to digital channels of retail banking services. Only 2% of transactions in Sweden are made with cash, and according to forecasts of Capgemini BNP Paribas, by 2020 this share will be less than 1%. Head of the Swedish Central Bank says that the amount of cash in circulation decreased from 112 billion Swedish kronor (€ 10.6 billion) in 2007 to 50 billion kronor (€ 4.7 billion) now. Swedish banks and shops are legally allowed to not accept payments in cash, which also leads to a reduction in the turnover of traditional money. Mr. Ingves fears that such a situation can lead to unpredictable consequences in case of an external or internal financial crisis or other extraordinary situations. "During crisis periods, population always looks for shelter assets such as cash, backed by the state. In this regard, shifting all responsibility to private commercial agents can be unsafe," Head of the Central Bank believes.

"As the alternative types of payments have developed very rapidly, we have also noticed a growing number of situations in which the use of cash is vital," Cecilia Skingsley, deputy head of the Swedish Central Bank, said in an interview with CNBC. According to her, such situations often arise with refugees or elderly people who, due to lack of a bank account, because of age or for health reasons, simply cannot use electronic payments, even when all other use cashless methods.

Swedish parliamentarians have already taken a notice of the Central Bank’s words. Currently, the inter-party parliamentary committee is studying the Swedish legislation on whether to oblige or somehow stimulate Swedish banks to use not only electronic, but also cash payments and provide customers with cash services. Currently, increasingly more Swedish banks are refusing such services, saying that interest of the population in the use of cash is falling.