The Top 10 Trends in the Digital Banking Industry

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions. What do you think about the trends below? Which one do you think rings most true for 2013 and 2014?

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1. U.S. Consumers continue to favor large financial institutions. There are over 13,000 chartered financial institutions in the United States, yet close to three-quarters of all deposit dollars are held by just 100 financial institutions. Although deposits are flowing into large national banks, an opportunity exists to gain market share for regional & community financial institutions by offering consumers the most relevant services available in the market today.

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2. The U.S. population is aging and changing banking behaviors. 39% of the U.S. population over the age of 44, compared to 34% 10 years ago. New consumers opening their first account at a financial institution represent a demographic that is different than five to 10 years ago, meaning an “older” consumer is opening up their first account with the bank and/or credit union.

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3. Younger generations are becoming more active bill pay users. Although the population is aging, the age of active bill pay consumers is declining, with Gen Y consumers becoming more active bill payment users. In addition, mobile banking consumers are 14 years younger than offline bankers.

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4. Boomers and Seniors are engaging in digital banking. Although Boomers and Seniors have tended to be late to technological adoption, these groups are showing an increasing willingness to engage in digital banking! The traditional product curve for online banking reveals early adopters are younger demographics who embrace technology, have grown up with a computer and internet access, and value anytime/anywhere convenience. Technology services such as email, Skype and eBay have become increasingly popular with Boomers & Seniors, and as their technology comfort level grows, so does their adoption of online banking.

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5. Consumers are moving to mobile-only banking. More and more consumers are starting to “ditch” their PC and rely solely on their phone and/or tablet to conduct their banking needs. Mobile-only banking is increasing, while PC-only banking has declined over the past year. One challenge that financial institutions face from mobile banking is the inability to grow cross-selling opportunities through the online and branch channels.

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6. Mobile bankers are early adopters. The majority of mobile users become engaged in mobile banking early in their digital banking lifecycle. Of new consumers who adopt mobile, 62 percent adopt within 90 days of registering for Internet Banking. Mobile banking leads to higher engagement for financial institutions’ customers. Over a month-long span, the average offline banker visits the branch two times and the ATM three times; a total of five touch points. When compared to an engaged online banker, the financial institution has three times the opportunity to cross sell to this customer.

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7. Digital bankers user multiple devices to connect with financial institutions. Now more than ever digital banking consumers are using multiple ways to interact with their primary financial institution, and the trend of consumers using multiple “touch points” continues to rise. Approximately 40 percent of digital bankers are using multiple devices to access their financial information.

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8. More devices means more time online. As consumers use more devices to interact with their financial institution, they spend more time on their financial institutions’ website. This provides financial institutions additional opportunities to cross-sell their most profitable products to their customers. Online bankers spend approximately 38 minutes per month on financial institutions’ websites.

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9. Mobile remote deposit capture is changing consumer behavior. Mobile features, such as mobile remote deposit, are changing how consumers interact with their financial institutions. For banking and credit unions, cross-sell opportunities will become increasingly relevant as more consumers rely on the digital banking channel to conduct transactions and become less dependent on brick and mortar visits. Consumers who adopt mobile remote deposit capture display similar deposit activity to consumers who never use remote deposit, but once mobile remote deposit consumers start actively using the service, they quickly become less dependent on the branch.

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10. Personal financial management users are more engaged with their financial institution. The percent of consumers aggregating outside accounts into their online banking experience has doubled in three years. Consumers are able to see their entire financial picture in personal financial management (PFM) solutions, which means intelligent cross-sell opportunities are growing dramatically. Consumers who enrolled in FinanceWorks (Digital Insight’s PFM offering) in 2012 were two-times more likely to aggregate outside accounts than consumers who enrolled in 2009. FinanceWorks consumers log-in 54 percent more frequently than online bankers without FinanceWorks.

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About Heather Youngo:  Heather is a business analyst with Digital Insight and leads the initiative on generating and maintaining the accuracy of financial institution profitability data.  Heather holds a Bachelor of Business Administration degree in marketing from the University of Georgia.

The data used for this article was analyzed by the following Digital Insight team members: Jason Weinick, manager of analytics, Ann Gladstone, business analyst, Fatai Bamidele, senior business analyst, Brenda Shimmons, manager of analytics and Denis Kimondo, senior marketing analyst.

Mobile Only Banking: The Pros & Cons for Financial Institutions

If you commute to work, go to the grocery store or walk down a busy street, chances are you will see someone using their smartphone. As a mobile-only lifestyle becomes more common, financial institutions have started offering additional mobile products to keep customers engaged across a variety of platforms. But, with this shift to mobile only banking comes a challenge to financial institutions: the ability to effectively cross-sell, especially as mobile users rely predominately on their mobile devices to conduct banking tasks and visit the bank branch less frequently.

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According to the Online Banking Report[1], “We are almost at the peak of online access, with just one million new online households added last year, the fewest annual total since Internet banking came on the scene in 1995. The growth going forward will almost all be on the mobile front.  It’s been a fantastic five years in mobile, growing from less than 1 million U.S. households to about 28 million.”

Adding to this, a Digital Insight study of financial institution customers found that mobile only consumers are more actively accessing their financial information than consumers who only use a PC.  Online only logins per customer average 9.96, while mobile only logins per customer average 16.6.[2]

Mobile banking has many of the same benefits that are commonly used in PC banking, such as transaction history, bill payment and transferring money between accounts. Other positive outcomes to promoting mobile only banking include a lower cost to the financial institution per customer, as well as sustaining the generational aptitude to use mobile banking products. Javelin[3] “estimates that each in‐person transaction at a bank branch costs financial institutions an average of $4.25, while use of the online channel averages $0.19 per transaction and the mobile channel averages a mere $0.10.”

There are also many benefits to the financial institution to promote mobile only banking as the upcoming generation is focused on mobile and have a higher earning potential compared to older generations. An internal Digital Insight study of 27 financial institutions[4] found that 84 percent of mobile bankers are Gen Y and Gen X, and Javelin pointed out that by 2025[5], Gen Y will account for almost half of the nation’s personal income (46 percent). Targeting these specific users is a strong opportunity for revenue growth for financial institutions in the future.

Financial institutions will need to consider altering their branch banking methods as more consumers switch to mobile only banking versus online only. One challenge that financial institutions face from mobile banking is the inability to grow cross-sell opportunities through the online and/or branch channel, especially to Gen X and Gen Y.  These generations are the future of banking.  Mobile vendors are working on features to solve how financial institutions will handle cross-sell when fewer customers are entering the branch and less are logging online because mobile only is taking over.

Ilya Shalman, a Senior Certified Project Manager at Cap Tech Ventures wrote[6], “Financial institutions continue to struggle with creating cross-selling opportunities across their mobile channels… while the entire product offering from the online consumer site could be integrated into a mobile app, most options are not available. The failure to focus on cross-selling across channels is not only detrimental to your channel integration strategy but ultimately a threat to your bottom line.”

Ilya offers three threats to cross-sell on mobile banking: lack of mobile real estate, mobile platform immaturity, and code rigidity to incorporate. However, there are possible solutions for these threats. In addition, Andera’s Melanie Friedrichs wrote, “When it comes to cross-selling, experts suggest that less is more – consumers who haven’t thought about other products are likely to gloss over the heavy text and hit next as quickly as possible. If they are presented with a small number of choices and they can absorb the offer with only a few words, they are more likely to pause and consider the offer.”

A majority of the customers enter the branch for deposit only interactions. The issue with deposit only transactions at the financial institution is that once mobile remote deposit capture grows and the younger generation begins to deposit checks through their mobile device versus the branch, branch interactions will decline[7]. There will be a need for customer service representatives at banks and credit unions to morph into cross sell warriors, targeting those customers that still enter the branch.

As mobile only banking continues to grow, one cannot help but consider the positive and negative aspects this situation may bring. Mobile only banking will surely decrease transaction cost to the financial institution, as well as targeting a high earning potential market in the upcoming generations. However, the challenge of cross-sell efficiency will need to be combated with new practices. In addition, with the rise of Mobile Remote Deposit, comes declining deposit activity in the branch.  What do you think about the idea of mobile only banking? Will this become a strong benefit to the financial institution, or will it begin to cause challenges that the financial institution will have to consider and combat?

About Heather Youngo:  Heather is a business analyst with Digital Insight and leads the initiative on generating and maintaining the accuracy of financial institution profitability data.  Heather holds a Bachelor of Business Administration degree in marketing from the University of Georgia.

[1] Online Banking Report, Number 212, January 5, 2013, page 5

[2] Digital Insight Internal Internet Banking/Mobile study of 7 Digital Insight financial institution customers, February 2013

[3] Javelin Strategy & Research, A Tale of Two Gen Ys: On the Road to Long-Term Banking Profitability, page 6, January 2013

[4] Internal study of 33 Digital Insight financial institution customers, June 2010 through February 2013

[5] Javelin Strategy & Research, A Tale of Two Gen Ys: On the Road to Long-Term Banking Profitability, page 9, January 2013

[6] Ilya Shalman, with Michael Tevebaugh, Chris Crawford, Debbie Miller, Craig Miller: From “The Handheld Billboard – Cross Selling with Financial Services Mobile Applications”, from CapTech Blogs, July 2012

[7] Internal study of one Digital Insight financial institution client, November 2012