3 lessons digital banks can teach us about CX

Once upon a time, we thought digital banks were going to eat traditional banks’ lunch. Well, we were wrong. So very wrong. Time and time again, we’ve seen proof that the big banks are here to stay.

And if you aren’t totally convinced, here’s something to mull over. Millennials, the first generation of so-called digital natives, prefer megabanks—and by a wide margin, too. Nearly 50% of them do business with Bank of America and Chase. By the way, Gen Z also shares this preference, just in case you were wondering.

So, what of neobanks, then? To put it simply, they’ve still got game. 7% of Millennials are neobank customers, and nearly a third of them use their bank as a single provider. Which is nothing to scoff at.

Traditional banks, big and small, have consumers on their side (for now), but they should still be wary. The fact is, there’s plenty to learn from upstart digital challengers. So, in the interest of helping traditional banks improve their position in the marketplace, let’s unpack some of these important lessons.

Chase and Finn: a tale of two banks

In June 2018, JP Morgan Chase launched its own digital bank, Finn, across the U.S. It would join a list of other banks with digital-only alternatives, like Santander and Openbank or Scotiabank and Tangerine.

Unfortunately, only a year later, Finn was shuttered. It’s estimated that Finn only onboarded 47,000 customers over that period. So, what happened?

Industry analysts cite the lack of differentiation between JP Morgan Chase’s mobile banking app and its neobank. At the same time Finn was launched, JP Morgan Chase opened 400 new branches, reducing the need for a branchless alternative. Finally, their neobank couldn’t compete with the quality of service offered by preexisting fintechs.

This is an important lesson. First off, Finn wasn’t aligned with consumer needs or expectations off the get-go. JP Morgan Chase didn’t have to spin off their own neobank to compete in the marketplace. In fact, there’s no reason traditional banks can’t offer many of the same benefits fintechs do.

One look at the top reasons U.S. consumers adopt fintech solutions proves this. It also proves another thing. Namely, that if there’s one thing traditional banks can learn from neobanks it’s that they need to improve customer experience.

Why consumers adopt fintechs - chart

Digital banks and the CX advantage

Lesson #1: make onboarding as easy as possible

Fact: on average, a person’s relationship with their bank or credit union will last longer than their relationship with a partner. That’s why customer acquisition is such a big deal. When you’ve onboarded a new customer, they’re likely to stick around for a long time.

But if onboarding is a long and tortuous experience… well, you can kiss those new customers goodbye. And when it comes to onboarding, digital challenger banks are clear winners.

Number of business days for an active account - graph
Number of clicks to open an account - graph

Out of twelve banks tested, neobanks clearly have an edge up. In fact, not only did it take far less business days to open a new account, but far less clicks, too. Five times less, to be exact, when comparing the neobank that required the least amount of effort to the bank that required the most.

So, if you’re a traditional bank, what can you learn from digital challengers to close the gap? Peter Ramsay, founder of the UX site Built for Mars, has some keen tips.

  1. Let customers onboard through your app
  2. Provide digital ID authentication, so that customers can scan appropriate documentation, instead of having to show up to a branch with their passport
  3. Only ask for the information you need, like the minimum address history to run a credit check
  4. Finally, differentiate yourself with a welcome letter that’s compelling

Lesson #2: offer better products and services

When we say better, more innovative, or a greater variety of products and services what we really mean are products and services that align to your customer’s needs. This is where digital-only banks are making huge gains.

Look no further than MoneyLion, for example. They have a specialized suite of products tailored to the $50,000 household. WealthSimple, a fintech, has the same targeted approach, only for Millennials. The point is that these companies have a bottom-up approach, building products with a very specific customer in mind.

While traditional banks are improving in this area, there’s still plenty of work to do. If you’re looking for specific pointers, these are a great place to start:

  1. Improve how you collect and use consumer data, so that customers get the products and services they need, not just the ones you need to sell
  2. Provide the right experience to the right customer by implementing personalization across every channel
  3. Look to mobile as your primary point of engagement with customers, from onboarding to customer support—digital banks are doing it, and so should you

Lesson #3: provide a better service

Again, let’s turn to Peter Ramsay’s UX blog. When it comes to good service, he created two customer service scenarios and tracked the results. The first, how long it took him to speak with a customer support agent on the phone. The second, how long it took them to respond to live chat during off-hours.

Range of time to speak with a customer support representative - graph

In the example above, out of an average of five calls, online banks make a strong showing. When it comes to live chat, the results were mostly the same, though slightly more of a mixed bag.


Range of time to respond to a live chat during off-hours (minutes) - graph

If you’re looking to improve your customer support, here are some key takeaways:

  1. Lose call routing and let customers get help in your app, with in-app questions or a variable number to reach the right team for your customer’s problem
  2. Provide live updates on phone queue times—while they’re on the phone or via push
  3. Lose hold music
  4. If a customer needs to reauthenticate due to inactivity and they’re in live chat, don’t make them re-enter live chat

Digital banks have carved out a niche for themselves in today’s marketplace. Whether or not they increase share will largely depend on how traditional banks respond. With COVID-19 and the increasing need for branchless banking, that response will likely need to come sooner rather than later.

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