We've all read them: confidently written articles by researchers presuming that a single survey constitutes the definitive last word on a topic.
I've been the guilty party too but learned my lesson (I think) from a community banker a few years ago. After patiently listening to my summary of findings, he responded with something like, “But, my customers ... .” In other words, “Your fancy research doesn't apply to my market.”
We all are susceptible to confirmation bias — a tendency to interpret and recall information that supports our beliefs. Entrenched confirmation bias is at work among many community bankers when it comes to customers' changing preference for digital-first engagement. Let me explain.
In July, Celent collaborated with Arizent, the parent company of American Banker, on
Read more about the lasting change this year will have on the industry:
CFIs don't seem to appreciate just how far behind the large and midsize banks they already are. The pivot to digital is a big one, yet they seem unconcerned. Here are examples from the July survey.
The survey asked, “What are the top 3 challenges your organization is facing in its efforts to engage and support customers during the pandemic?” Among CFIs, 42% indicate "adhering to social distancing guidelines" is a challenge, versus 25% of regional banks and 9% of national banks.
In our view, this clearly shows that CFIs are too reliant on the branch channel for service and support. It could be that branch footfall declined more among larger institutions. Social distancing is less challenging when lobbies aren't crowded.
Large banks, which lead the industry in customers' use of digital, are yet the most concerned about achieving even higher levels of digital engagement (30%). Large banks get it; digital return on investment is maximized only when customer use is also maximized. CFIs are far less concerned (18%) about increasing their customers' digital use, despite the fact that the digital use at these banks is demonstrably lower than it is for larger competitors.
The survey also asked, "How important will the following technologies be in advancing future industry disruption?" Three things stood out.
The first is the sheer number of technologies banks consider important. A majority of banks deemed 14 of the 18 surveyed technologies critically or very important. For example, enhanced security and fraud mitigation was "critically important" to two-thirds of banks — the most of any technology. Banks broadly understand the imperative of safeguarding customer information in an increasingly digital world.
The second is that CFIs don't value technology the same way larger banks do. In nearly every case, fewer CFIs rated the technologies important compared with larger institutions. Cloud services, analytics, artificial intelligence and machine learning are just a few examples.
Now, believing a given technology is important doesn't mean a banker is investing in it. In fact, a minority of banks have implemented the technology that most say is "important" to furthering industry disruption. Consider cloud services: While 83% of surveyed banks assert that cloud is "critically important" or "very important," just 44% say they have implemented a cloud migration strategy (34% among CFIs), and another 16% plan to do so. (Read American Banker’s coverage of the full survey
Lastly, perceived obstacles to the investment in digital customer engagement technologies weren't as we expected. Beyond the usual barriers of cost and data privacy concerns, some of the most frequently cited obstacles by CFIs remind me of that "But, my customers ... " comment.
Only this time, I'm not buying it. Nearly two-thirds of CFIs cite "customer preference for in-person engagement" as a reason not to invest, followed by 55% citing "problems with customer access to technology," implying a persistent digital divide.
In other words, customers wouldn't use the stuff even if CFIs made it available. This sounds like confirmation bias to me — or wishful thinking.
