Report: “Why digital-first banking does not mean digital-only” 

The surge in digital banking has redefined the financial services landscape, appealing particularly to tech-savvy younger generations. „As digital transactions and mobile apps become commonplace, banks are at a crossroads. They must navigate the shift to digital while maintaining essential human interactions.” – according to pymnts.com.

A PYMNTS Intelligence report “Why Digital-First Banking Does Not Mean Digital-Only” illustrated how this balance is crucial for retaining customers in a competitive market.

The Digital Boom and Customer Satisfaction

Digital banking’s popularity has soared, driven by the convenience of online transactions and the decline in physical branches during the pandemic. According to the report, 60% of millennials, 57% of Generation Z and 52% of Generation X primarily use mobile banking apps. This shift is not just about preferences but also about trust and satisfaction.

The report showed that 97% of customers rated their digital banking experiences positively. Additionally, 94% approved of their overall access to financial services, and 79% said new technologies have enhanced their banking access.

The technological landscape poses some challenges. Despite the growth of mobile banking —where 81% of customers manage their accounts via mobile devices monthly — issues like fraud and cybersecurity remain concerns. As of October 2023, 56% of banks have implemented eSignature verification for online transactions, an increase from the previous year’s 50%. This evolution illustrates banks’ efforts to secure digital transactions and ongoing consumer apprehension about digital security.

The Need for Human Touch in Digital Banking
While digital banking platforms are widely embraced, customers still value the human element, especially for complex financial transactions. The report revealed that 71% of consumers are anxious about generative AI in financial services, with only 58% feeling comfortable with banks using such technologies. Seventy-two percent of bank customers rated personalized services very highly, particularly in contexts like fee avoidance, where human advisers often outperform automated systems.

Customer Retention and the Risk of Switching
The imperative for banks to balance digital and in-person services is emphasized by customer behavior trends. According to the report, 25% of bank customers switched financial institutions in the past year, with 51% seeking better digital experiences and 39% desiring improved customer service. This customer churn rate highlights how crucial it is for banks to address digital and personal service aspects to avoid losing clients to competitors.

Additionally, banks face risks from digital friction. One study reported that 48% of customers experienced difficulties with online account applications, leading to 68% abandoning the process and 48% seeking alternative banks. Complex or frustrating digital experiences can directly impact customer retention, underscoring the need for banks to streamline their digital interfaces while ensuring robust support systems.