Digital banking: Once-steady shift now moving at lightning speed

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In the early weeks of the pandemicas branches shut down and bankers moved their workspaces from their offices to their homes — banks with robust digital strategies tailored their products and services to meet the needs of retail and commercial customers they could no longer help in person. Those going into the crisis with less ambitious digital banking plans had to scramble even more.

Now, given the likelihood of many permanent branch closings and an increase in customers preferring to bank remotely, the once slow-but-steady shift toward digital banking is moving at lightning speed.

Banks are seeing a surge in customers enrolling in online or mobile banking, particularly among baby boomers who had been slow to embrace digital options, but are now suddenly paying bills online and depositing checks using their mobile phones. A recent survey from FIS found that 45% of consumers overall, and 49% of baby boomers, have changed how they interact with their banks since the start of the pandemic.

“What we’re seeing is the greatest acceleration of digital banking in history,” said Mike Mayo, an analyst at Wells Fargo Securities who covers big banks. “What’s taken place over the last few months may have taken place over two to 10 years” if the pandemic had not come along.

“That’s because habits are breaking,” he added.

At M&T Bank, for example, an appointment-setting pilot program set up last year in Maryland is now offered throughout the Buffalo, N.Y., company’s footprint.

Chairman and Chief Executive René Jones said the tech upgrades M&T has made since the start of the pandemic are equivalent to what the bank would normally accomplish over a five-year period.

“Our ability to move really quickly to meet the needs [of customers] has been enhanced tremendously,” Jones told investors in May. “It’s given us lots of confidence.”

He predicted a “huge” shift in customer preferences from the pandemic, but did not get specific, saying “it’s too early to see what they are."

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But others cited several lasting changes that they anticipate in the way retail and commercial customers bank.

Gina DeCorla, senior analyst at Informa Financial Intelligence, studies digital banking trends. She said the pandemic has served as a catalyst for banks to “adopt existing trends as well as reinvest and push for further disruptions in technology” that customers may not have been ready to embrace before March.

So what’s here to stay?

For starters, depositing a check remotely — by taking a photograph of a paper check with a mobile device and digitally transferring that photograph to the bank — will become routine. So too will electronic signature capabilities, which allow customers to sign and send documents from afar.

Client appointments at branches will be commonplace. Chatbot tools will become prevalent.

But it’s the area of digital sales, specifically consumers and businesses opening accounts and applying for loans online, that will explode, experts say.

The digital banks Chime and Stash had record numbers of account openings in April and other banks say they are now opening more accounts online than in branches.

After stay-at-home orders went into effect in March, Citigroup reported a 300% increase in the number of corporate clients who opened accounts online. The bank saw similar trends in April and May.

Sankar Krishnan, the executive vice president of banking and capital markets at Capgemini, said banks that have been slow to offer digital account openings or online lending have no choice but to accelerate their investment in such technology. Younger generations already expect to be able to do everything with mobile apps, but now even onetime holdouts want to interact with their banks using digital tools.

The need will only increase “as we come out of the pandemic, because no one is going to rush into a bank.”

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