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The meteoric rise of digital engagement: Part one

How digital engagement is transforming the financial services sector

By: Keith Riddle, SVP, Chief Product Management Officer


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September 16, 2015 -- As I review an onslaught of articles and industry studies each day concerning the increasing levels of digital engagement from consumers, I contemplate how credit unions of all sizes are navigating through the dynamic rate of change mobile and digital platforms have introduced within the credit union’s operating environment.

Navigating these changes include evaluating potential enhancements to digital banking, payment, and onboarding platforms to differentiate service offerings from other financial and non-financial providers. The efforts associated with this strategic initiative are daunting, but based upon industry statistics, the potential impact to innovative credit unions can be tremendous. 

  • According to the 2014 study by Bain & Company, mobile banking interactions now comprise about a third of all interactions, more than any other channel, including online, automated-teller machines and branch visits.
  • In 2014, the Pew Research Institute project found 63% of adult phone owners use their phones to go online, and 34% of these consumers go online mostly using their phones instead of a desktop or laptop computer.
  • The Federal Reserve Bank of Boston recently completed an extensive mobile banking and payment study and concluded that the percentage of the U.S. population over 13 years of age owning a smart phone, which was recorded at 66.8% in 2014, had increased to 75.8% in 2015.
  • Mobile banking growth emulates the increases in device ownership and usage. In fact, the number of mobile bankers in the U.S. increased 40% within the last year, representing a gain of 27 million mobile bankers, as noted by Javelin Research & Strategy.
  • Javelin Strategy & Research estimates 63% of mobile consumers will be mobile bankers by 2018.
  • With respect to the non-financial impact of digital consumers, Facebook reports that in the U.S. alone, 38 million users only visit the site through mobile, and 45% of their 2013 revenue was generated via mobile.

These market statistics not only produce a resonating validation of explosive growth in digital and mobile banking activities but also provide the foundation for the next stage of a member’s digital journey: the convergence of digital banking and mobile payments.

Converging digital and payments

As discussed in our recent Digital Payments webinar on August 19, an array of digital payment platforms has either entered or will be introduced to the market over the coming months. Apple Pay, Samsung Pay, Google Wallet/Android Pay, MCX/CurrentC, Paypal/Paydiant, Visa Checkout, and MasterPass are digital payment and wallet brands that will continue to experience steady traction within the credit union industry.

What are the market dynamics driving the convergence of digital banking and payments? We have compiled a cursory list of market drivers below:

  • According to the Ayden quarterly payment index, online payments originated through mobile now account for 27% of all online payments. Last year, smartphones accounted for 11% of online transactions compared to 9% for tablets. This year, smartphones accounted for 16% of online transactions with tablets at 12%.
  • As listed in the mobile payment study conducted by Blackhawk Network, mobile payments now are used by 25% of smartphone owners. What do consumers place in their mobile wallets? 64% of users have debit cards in their mobile wallets, 58% have credit cards, and 45% have gift cards.
  • A Federal Reserve Bank study noted nearly 60% of financial institutions should be offering mobile payment services by the end of 2016, and 37% of credit unions noted “attract new members” as their primary reason for offering or planning to offer mobile payment solutions.
  • A recent Gallup Panel Web survey showed that the most engaged payment users were most likely to use their digital wallets at grocery stores (48% had done so in the last 30 days), along with department stores (27%), specialty stores (25%) and convenience stores (21%).

As credit unions leverage the convergence of digital banking and payment functionality to increase and retain membership, the next phase of the digital journey must be taken into account: the onboarding experience.

Stay tuned next month for part two of this series, which will discuss the pursuit of digital onboarding and how Corporate One is here to help our members develop a digital engagement strategy.

For questions or comments about digital payment strategy, feel free to contact me at kriddle@corporateone.org.

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