Banks and their vendors often throw around the buzzword "digital engagement" to describe the next phase of banking's technological transformation.
While it is largely a marketing term, it speaks to a deep and growing challenge across banking: how to satisfy customers' ever-growing appetite for digital products and services.
"The only thing that is outpacing the product development cycle in our institution is the pace of expectations from our clients that we deliver them something new and insightful," said Sarah Biller, chief operating officer of innovation at State Street's Global Exchange, in a recent interview.
While State Street is a custody bank with little retail presence, Biller's remarks apply equally well to the consumer market and banking overall. Although digital engagement may have been a nice thing for banks to talk about at industry conferences in the past, it appears to be evolving into something more substantive. Banks are on the hunt for ways to expand their digital technology, and the vendors that serve them frequently cite digital engagement solutions as a key growth area looking ahead to 2016.
Bank of the West, a subsidiary of BNP Paribas based in San Francisco, now has an internal digital-engagement steering committee that meets monthly. Not just tech or "innovation" people sit on the committee — executives from all across the organization do, said Bank of the West's head of multichannel banking, Jamie Armistead.
"We haven't struggled to capture the attention and imagination of the board or CEO; they're very bullish on digital and have made a deliberate decision to be more progressive as it relates to digital customers," he added.
Armistead said customers who engage with the bank in digital channels tend to have more products, higher balances and in general are more profitable customers.
"When we look at digital engagement, it's about of how you drive adoption of digital products and services, because customers that use these products tend to be more engaged and sticky," Armistead said.
Some initiatives Bank of the West has launched in the past year along these lines include a service allowing customers to scan a bill on a mobile device and add the biller directly to their bill pay; a newly redesigned online banking platform including personal financial management capabilities; and a dedicated tablet banking app.
Looking ahead, Armistead said the bank is taking this approach to the branch environment. Bank of the West recently redesigned its flagship branch in San Francisco to incorporate video walls, and replaced traditional tellers with "universal bankers" who wield tablets and can offer a more consultative approach with customers than the traditional transaction-focused function of tellers. Armistead said next on the agenda is a pilot program incorporating videoconferencing so specialists in one area can serve multiple branches.
Wells Fargo is experimenting with "reimagining customer interactions with money and across channels," said Brett Pitts, head of digital for virtual channels at the San Francisco bank. Those experiments may include how customers balance a bank account via a smartwatch, transfer money in a connected car or consult with a mortgage adviser through a smart TV.
The real power of mobile may be in taking advantage of its ability to interact and integrate with other channels to enhance the customer experience, Pitts said.
"Monitoring balances, making deposits, transferring funds are all transactions that mobile technology has made more 'real-time' for consumers, so their expectation is that the information they have access to is also in real time," he said.
Wells most recent pieces of digital engagement strategy include its "Click for Care" mobile service. When customers say, "I want help" from their mobile devices, they'll then be passed onto a call center employee for a phone chat already authenticated, expediting the overall experience.
Banks have long been over-reliant on branches for sales and customer engagement, but now the focus should be on learning how to sell to and engage customers digitally, said Bob Meara, a senior analyst with Celent's banking practice.
"How many products do banks sell digitally? It's a small number, and until very recently, they haven't really tried," Meara said. " At first, banks just knew they had to have a presence in this space. Now the shift you're starting to see is to transact in digital channels."
Ultimately, Meara said, banks that are the most successful will be the ones that enable digital to work in conjunction with other channels to create a "customized but consistent experience wherever the customer is."
Vendors, of course, are also focused on building out digital products that will help their bank customers improve their offerings.
FIS reported it had double-digit growth for its digital solutions, one of its most robust business segments in the third quarter. As well, software giant Oracle this month launched a new suite of products called the Oracle Banking Digital Experience, which the company says is designed to help banks pursue their digital strategies including launching new digital brands, digitizing processes, modernizing digital experiences and launching new digital products such as mobile payments and digital wallets.
And partnering with financial institutions on their digital engagement initiatives is a key strategy for Fiserv, Jeff Yabuki, the company's chief executive, said during a conference call to discuss its third-quarter results.
"We continue to believe digital transformation is still early in the cycle, and expect to see even more growth in the future as demand for digital services continues," Yabuki said.
Robert Barba contributed to this report.