The Three Things Every Digital-Card App Needs
Long before the pandemic, consumers were trending toward digital in their financial services relationships — experimenting with mobile wallets, digital cards, self-service mobile banking and digital gifting.
But then COVID-19 came along and sent the digitization of financial services into overdrive nearly overnight.
“The big difference from what we saw even just 10 or 12 months ago when it comes to digitization is that banks are really starting to understand this is where they want to invest,” Piatt said. “To bring it to a fine point, the pandemic has clearly separated institutions into two buckets — the digital haves and the have-nots. The folks that have formalized a digital strategy and have been executing on it were much more able to capitalize on these trends.”
He said the “haves” by and large have been the huge megabanks — Wells Fargo, J.P. Morgan Chase, Bank of America, etc. — and the digital challenger banks. Piatt said they’re “cleaning up right now” when it comes to signing on new accounts.
By contrast, he said he believes community banks run the risk of being left behind unless they partner quickly and wisely with the right technologists and raise their digital game. Piatt said smaller banks must meet the modern customer’s needs or risk losing them to rival banks that will.
“This is a full and tremendous shift to digital, [and] for small banks, this is an existential threat,” Piatt said. “If they don’t adapt to this new model of customer interaction, they just aren’t going to be around in a few years to take another shot at it.”
The Three Keys A Good Digital Offering Needs
Banks and the demographics they serve aren’t all identical or even all that similar. That means there isn’t a single page in the digital playbook that every firm can simply flip to.
But Piatt said that broadly speaking, small community banks and credit unions need to consider how what they offer will expand relationships with customers. Firms must position themselves to take that valuable top-of-wallet card location with consumers.
He said banks must do three key things to make that happen. First, they need to enable their cards for tokenization such that customers can easily place cards in Apple Wallets, Google Pay or other digital wallets.
“If you can get tokenization enabled in your platform, you’re able to encourage commerce right away in the digital space across all portfolios [and] all commerce channels,” Piatt said.
He said tokenization is the key tool that opens the horizons for cards’ use whenever and wherever a customer wants to use them.
Secondly, banks need a well-developed process so consumers can get instant help — often by themselves within an app — if something goes wrong, like a customer’s card getting lost or stolen.
He said the right solution allows customers to cancel their old cards and instantly place new ones in their digital wallets for immediate use. Ideally, a system will let consumers manage most of that themselves without calling customer service to get cards canceled and new physical ones sent out. Piatt said good systems will let clients handle that themselves in minutes, then get back to using their cards without seven-day waits for replacements to arrive by mail.
Lastly, he said that “you have to make people understand how their cards are secure” — all cards in all of their potential uses. Piatt said much of what holds back adoption of new tools are lingering consumer beliefs, like the idea that paper statements sent to mailboxes are more secure than the same statements sent over digitally encrypted rails to an inbox. Or, the idea that a credit card is always more secure in terms of getting one’s money back than a debit card is.
He said the key for small- and mid-sized institutions is to find partners that can help them get those digital tools in place, then make sure their customers understand what tools are there for their convenience.
Overcoming The Pull Of Inertia
Such changes do represent an investment of time, treasure and talent, which can be hard to persuade banks to expend in today’s economically difficult times.
But Piatt said the ultimate payoffs include more loyal customers, lower operating costs due to customer self-service, fewer call-center calls, better payment security and fewer fraud losses. He said that makes the necessary investments ultimately become cost savings.
Piatt added that one other concern Ondot occasionally hears from banks is that “my clients aren’t ready yet for this big a change.” But he said that’s a problematic viewpoint from two perspectives.
First, the odds are good that these banks are just wrong about what their clients are ready for. Second, what clients want today isn’t as relevant a question to ask as what they’ll want in the future.
Indeed, Piatt said the question banks should be asking is, “How do I bring in my next wave of long-term customers? How do we best evolve our concept of service to meet their needs instead of asking them to conform to ours?”
For instance, he said future customers might never want to come into a branch to engage face to face, or even over the phone.
“The technology is about serving the customers better and really understanding where some of these younger, next wave of wealth consumers are going — because in a few short years, that is going to be your core customer base,” Piatt said. “And if you aren’t focused on that, we think you have an existential question of whether or not you are going to be in business long term.”