Banks' New Digital Battlefront: The Customer Experience

AUSTIN, Texas — Banks are failing to give customers what they want, and that disappointment jeopardizes their business models, some industry executives say.

"Customer expectations are shifting dramatically," said Jim Smith, executive vice president of virtual channels at Wells Fargo. "They are not being shaped by peer-competitor banks. They are being shaped by Apple. They are being shaped by Google. They are being shaped by Amazon.

"Too often, as an industry, we are not living up to expectations."

Speaking at SourceMedia's Digital Banking Summit held this week, Smith was joined by numerous bankers who spoke passionately about the need for financial institutions to create intuitive digital-money experiences.

Jeff Dennes, chief digital banking officer and head of business development and digital transformation at BBVA Compass, said consumers continue to have underwhelming banking interactions.

"I read it, see it and feel it myself," said Dennes, who recently was surprised to find out his FICO score had dropped, and then got an inadequate explanation from the bank as to why. He has also seen messages in mobile banking apps like "sorry, come back tomorrow. We're down right now" when consumers expect things to work 24/7.

There is a mounting fear that the banking equivalent of an Uber or Airbnb — low-overhead companies that pose a rising threat to traditional taxi companies and hotel chains — will emerge.

"Can you imagine it? I can," Dennes told an audience of bankers. "We are moving into an experience economy."

The bankers worry that a nonbank competitor's app will provide better service than they can.

"We are trying to disrupt ourselves before we get disrupted," said Niti Badarinath, senior vice president and head of digital strategy and mobile banking at U.S. Bank. "We are all concerned about an Uber of banking."

The warnings coincide with research that shows young adults view banks as lemmings. A survey from a division of Viacom Media found that 53% of millennials think their bank does not offer anything different than other banks.

Banks Step It Up

Some banks are tackling the problem. Bill pay, for instance, is getting rewritten for mobile phones to make the process a snap by using the cameras to input data.

At the summit, various panelists spoke about their efforts to simplify customer-ID checks and to ease the ways in which people access their money digitally.

Wells Fargo, for example, is working to expand a "click-for-care" feature that lets customers click a phone icon on a mobile banking app to connect with call center agents to discuss problems they are having. The feature, in pilot phase, is seen as a way to shorten the wait times on 1-800 numbers. Rivals like Bank of America and USAA have already made a similar feature available.

Such developments sound simple, but they point to a newer way banks are trying to help channel-hopping consumers: the enhancement, after all, would save consumers the hassle of identifying themselves again. Wells said it hopes to have the enhancement rolled out to its nearly 15 million mobile customers before yearend.

Biometrics could make identifying customers easier. The technology, talked about for decades, is increasingly seen as a way for banks to spare consumers from having to remember passwords and lessen reliance on account credentials that are easily lost or stolen. USAA is ahead of the curve in that it has incorporated biometrics into its mobile apps. The app includes facial and voice recognition. Already, the financial services company said it has a roughly 16% biometric enrollment rate.

"The feedback is overwhelmingly positive," said Gary McAlum, chief security officer at USAA.

Beyond identity, banks are working to better crunch data to improve the customer experience in the areas of deals, offers and financial-health-related features.

U.S. Bank, for example, is readying an app called "Your Community," which will include offers and content tied to local events. Think happenings at nearby museums, for example. Capital One has also quietly been testing an "Ideas" app that recommends deals and events consumers might like.

Watch banking is also seen as a way to shake up a retail banking experience that continues to thrive on overdraft fees. U.S. Bank, for example, is testing a watch banking experience that would change the colors of the watch's hands (red, yellow, green) to indicate the wearer's financial health. Citigroup, which made an Apple Watch app available at the smart watch's launch, already includes a money management feature that is meant to help people understand their spending at a glance.

Such efforts underscore the ways in which banks are trying to engage consumers with their financial data.

BBVA's Dennes envisions a world in which banks help customers prepare for scenarios like having to pay for weddings or divorces.

"As an industry, in my opinion, we need to get after this," Dennes said. "We know what people are doing with their money."