Digital banking is here. You can thank the pandemic

Bank heavyweights' metrics show an uptick in digital adoption by their customers

To borrow a description from Jennifer Piepszak, chief financial officer at JPMorgan Chase, it looks like the consumer shift toward digital banking will “persist.”

In their third-quarter earnings reports, JPMorgan Chase and the country’s three other banking heavyweights — Bank of America, Citi and Wells Fargo — supplied metrics showing an uptick in digital adoption by their customers. Executives credit pandemic-related shutdowns, including temporary closures of bank branches, for the spike in digital banking.

JPMorgan Chase noted 69% of its customers are now “digitally active.” This refers to all customers of online or mobile services within the past 90 days. That figure is up 3 percentage points from the third quarter of 2019 and is “accelerating,” Piepszak said during her company’s Oct. 13 earnings call. On the lending side, over half of mortgage applications were submitted digitally in the third quarter, up about 100% from the first quarter.

Here’s some more third-quarter evidence of the revved-up drive toward digital:

  • At Wells Fargo, the number of digitally active consumers climbed 6% year-over-year to 32 million, with the number of active mobile customers rising 7% to 25.9 million.
  • Bank of America tallied a 3% year-over-year increase in active users of digital banking to 39.3 million, while the number of active users of mobile banking shot up 7% to 30.6 million. “We’ve seen depth in penetration on digital engagement across the whole consumer business,” Bank of America CEO Brian Moynihan said during the company’s Oct. 14 earnings call.
  • Citi saw a 3% year-over-year jump in the number of active digital customers to 20 million and a 4% rise in the number of active mobile customers to 13 million.

Mark Mason, chief financial officer at Citi, may have summed up the sentiments of his mega-bank counterparts when he said the dollars his company put towards going digital “have turned out to be very wise investments as we manage through this crisis.”

“What are the opportunities to accelerate that type of spend as we go forward, given the acceptance of digitization has probably been accelerated by a couple of years now?” Mason asked rhetorically during Citi’s Oct. 13 earnings call.

For its part, Wells Fargo is investing in digital talent as well as fintech. Ather Williams is joining Wells Fargo this month to head a new group that oversees digital, strategic and innovation initiatives. Williams will report to CEO Charlie Scharf. Wells Fargo recruited Williams from Bank of America, where he led the business banking unit.

In a July news release, Scharf said Williams will sharpen the bank’s “strong focus on creating a more innovative, digitally enhanced company.” 

Consumers’ growing appetite for digital banking is forcing financial institutions of all sizes to intensify their focus on digital offerings.

According to the 2020 Digital Lending and Account Opening Report, released in September, the ability to apply for a loan online has improved, “but the banking industry isn’t keeping up with consumer expectations or fintech capabilities.” Less than half of banks and credit unions (46%) enable a customer to complete a loan application on a mobile device, even though the pandemic has heightened demand for digital services, the report notes.

“Financial institutions must focus on making their digital processes easier and more seamless,” the report says.

Further underscoring the digital gap in banking, the report found that 72% of financial institutions now allow consumers to complete the process of opening a checking account online, with mobile at just 46%.

“While encouraging, these numbers are still insufficient for a person who has now become accustomed to ordering groceries, selecting movies, communicating with dozens of people at once or buying anything imaginable (even a car) with a simple click of a button,” the report says.

Some consumers seem eager to incorporate digital into their banking lives. A recent survey by Skyes, a provider of demand generation and customer engagement services to fintech and other industries, showed that:

  • 15% of consumers had used mobile checking for the first time in response to the pandemic.
  • 11% of consumers had tried mobile payment apps for the time because of the pandemic.
  • 5% of consumers had signed up as new users of direct deposit due to the pandemic.

Those results align with findings, released in June, of an April survey conducted by Boston Consulting Group. In the survey, 24% of customers indicated they planned to use bank branches less or not at all once the pandemic is over.

“While it is likely that consumers will continue to switch from physical banking to online and mobile services, the personal touch provided by branch managers and customer service assistants remains important. Banks will need to rise to the challenge of embedding the benefits of in-branch, personal interactions within their digital offerings and, at the same time, improve on the holistic customer experience,” the consulting group said in a news release.

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