Most clients accept that the future of banking is digital — but in order to feel secure, they are looking to traditional financial institutions to create it.
That and other actionable — if sometimes contradictory — nuggets for advisors are contained in “The Ultimate Guide to the Future of Banking,” authored by Jon Ogden, head of strategic content at consulting and data firm MX Technologies in Lehi, Utah.
For instance: when it comes to picking and choosing among the rapidly expanding array of digital banking services, the average client’s top priority is still getting the best rates, often from established financial institutions.
But the study also found that clients’ next top concern is the quality of their digital banking experiences.
“If you don’t have a good or an optimal digital experience, then you risk being completely outdated,” says Ogden.
Traditional financial institutions “still have trust on their side and that is a major advantage,” Ogden says, but only “as long as these companies capitalize on that trust while adapting for the digital age.”
The takeaway for advisors, says Brian Edelman, CEO of FCI Cyber in Bloomfield, New Jersey, is that they need to become increasingly aware of how the banks they use are meeting their clients’ expectations. Edelman, who was not involved in the research, consults with advisors and large firms on technology.
“Advisors have to know if they are working nine-to-five, that’s fine, as long as [clients] can get their question checkbox answered so they don’t have to wait” to get their banking done, he says.
The study, which surveyed 1,000 random banking customers, tracked the intersections of their use of digital and traditional banking practices.
It found, for example, that 86% of those surveyed were comfortable using payment services like PayPal and Apple Pay; that 58% were comfortable with credit monitoring services like Credit Karma and Credit Sesame; that 33% used investment fintechs like Wealthfront and Robinhood; while 31% used money management tools like Dave or Mint.
Yet, “when we asked which type of organization people trust most to securely manage their financial data, people overwhelmingly chose credit unions, community banks or big banks,” Ogden writes in the study. “Only 7% chose tech companies.”
And out of that 7%, about a quarter of respondents said they would trust their money with well-known giants Amazon, Apple, Google and Microsoft. Only 1% said they would trust their savings with Facebook. In fact, “people showed they overwhelmingly don’t trust Facebook,” according to the study.
Still, Ogden added in an interview, “when asked whether they felt physical branches or digital banking (online and mobile) represented the future of banking, 97% of respondents chose digital.” And more than half of respondents said they wish their financial institutions would invest more in mobile banking over online banking or physical branches.
When an advisor is hooking clients up with optimum banking services, a gut check can be useful, says Edelman, one which advisors can easily perform based on their own banking experiences.
When Edelman, for example, toggles between two TD Ameritrade apps — one for his brokerage account and one for his banking account — he wonders, “Shouldn’t they be linked? It’s so strange to me.”
When an insurer for a policy held by his wife needed a payment recently, Edelman says, and wanted to send him a check, he was incredulous. “Are they serious?” Edelman says. “I just wanted to hit an app and tie it to my bank account and have it be auto-provisioned.
Advisors should be looking for banks and large firms that provide these kinds of services, including, and in particular, data aggregation across clients’ many disparate accounts, no matter how many financial institutions they use, Ogden says.
Advisors also must stay abreast of the spread of these offerings because they are coming out quickly — so quickly that long-cherished assumptions about banking will soon cease to hold, he predicts.
“The technologies we are creating today are helping us create the technologies of tomorrow,” Ogden says. “It’s a feedback loop that means that change is happening faster and faster, which means that the past increasingly cannot predict the future.”
