Fintech Disruption: Retail Banks vs. Online-Only Banks

Busy schedules make it difficult for many people to fit a bank branch visit during the day. They need flexible accessibility, which online-only banks offer via 24/7 hours. Their customers don't have to wait around in line at lunch time, with everyone else struggling with banker's hours.

Fintech Disruption Series Part 1: Retail Banks vs. Online-Only Banks

Banking customers had no other options outside of retail banks before the fintech disruption. When this traditional industry started going through a digital transformation, online-only banks offered consumers a tech-forward choice. The lack of physical branches keeps the online bank's overhead costs low, so they have a significant budget to invest in innovative solutions. What features draw customers to online-only banks, and how can your retail bank adapt to this new landscape?

Online-Only Banks -- The Convenience Factor

Forbes found that 80 percent of consumers interacted with their bank via self-service channels, such as websites and phone support. These customers look for user-friendly features designed to improve their banking experience. Digital native generations, such as millennials, want seamless processes when they need to access their money, sign up for loans or check their account. They're frustrated with their retail banks due to subpar online or mobile support, and are exploring online-only banks for several reasons.

Lower Fees

Online-only banks typically offer lower fees since they don't have to maintain physical branches. They can pass these savings on to their customers and make it difficult for your retail bank to compete based on pricing. Your retail bank might not be capable of beating them across the board on fees, but you may have select areas you can excel in.

24/7 Accessibility

Busy schedules make it difficult for many people to fit a bank branch visit during the day. They need flexible accessibility, which online-only banks offer via 24/7 hours. Their customers don't have to wait around in line at lunch time, with everyone else struggling with banker's hours.

Quality Digital Experience

You have to split your attention between retail bank branches and the digital experience, while online-only banks get to put all of their resources on the supporting technology. They offer online and mobile banking features designed for ease of use. Digital native consumers have high expectations for service, and online banks offer a user-focused style drawing on the apps and websites.

Retail Banks -- The Human Element

You still see 60 percent of your customers in a retail bank branch, according to US News. Online-only banks may have the upper hand with their fintech disruption, but you have your own set of benefits with the human element.

Face-to-Face Reassurance

Your retail bank customers depend on you for their financial health. You protect their money, provide quality services and act as their primary lifeline when they run into major problems. Face-to-face engagement with your bank tellers helps calm customers down and resolve the issues as quickly as possible.

Complex Interactions

Complex bank services may be difficult or impossible to address with online-only banks. Consumers searching for help with uncommon problems often go into a branch to seek out expert financial advice. You give them the option of going straight to people with the resources to help, rather than bouncing between email, chat and phone support in hopes of getting higher-level assistance.

Personal Relationships

Customers go through a lot of hassle when they want to switch banks. They have to change direct deposit information, auto-pay debit cards and encounter other frustrations. Outside of resistance to change, your customers also value the personal relationships they build up over time with tellers, loan officers and other bank employees. You can't get the same experience from online-only banks.

How Can Retail Banks Embrace Digital Transformation

Your retail bank's digital transformation strategy needs to merge your in-person advantages with the features drawing consumers to online-only banks. Younger generations don't want to wait in line for a bank teller or not have mobile banking. They seek out convenient access to the services and features they use the most and they're willing to go online-only to get that. Here are a few ways you can attract this demographic and position your traditional retail bank for long-term growth.

Retail Banks With Mobile Tech On-Location

The Wall Street Journal found that 35 percent of consumers value going in-branch for their banking activities. Incorporate innovative technology for the in-person interactions to make this a customer service differentiator. For example, self-service kiosks cut down on the lines for people needing basic bank functionality.

Strong Resource Education

Many retail banks offer strong online and mobile services, but they fail to build awareness with their customers. Proper education starts with a highly knowledgeable workforce. Complement your bank employees' expertise with material designed to help consumers understand the available options.

Omnichannel Experience

Can your branch access customer interactions from any channel? An omnichannel experience brings all relevant data together in one place, so it doesn't matter whether an interaction occurred on mobile, phone, in-person or the app. You make it easier for the in-person staff to provide the appropriate support without requesting repeated information.Traditional retail banks embrace online and mobile banking, but they don't always take the extra steps necessary to support their digital transformation. Examine online-only banks and understand how they emphasize customer-focused design throughout the entire process. They can't replace the in-person element many people expect when they're dealing with financial matters, but they do give you a good look into the near future of banking. Don't get left behind by today's fintech disruption.