Lee Wetherington, Director of Strategic Insight for Jack Henry & Associates, provided his insightful viewpoint as part of AFT’s digital banking special interest group at the 2018 AFT Fall Summit at Hilton Head, S.C.
“I've seen a shift in the way in which we are framing conversations around digital banking,” Wetherington said, “but it may be crucially deficient for purposes of a lot of the stakeholders represented in this room.”
Wetherington suggested deposit wars are driving, shaping and transforming digital strategy most clearly with the biggest banks in the United States. But it is also filtering down into smaller, mid-tier banks as well. He also spoke of what he considered the two most defining current trends: the commoditization and robotization of digital banking by the largest banks and how this creates opportunity for differentiation by smaller financial institutions.
In addition, he insisted there is a false dichotomy pitting branches against digital, “I'm not so sure that that's the most helpful way to talk about it any longer.” Wetherington pointed out, the most exciting, meaningful, purposeful opportunity is to make the digital channel more personal, by literally providing more human to human contact. “I think that is the thing that smaller financial institutions will be able to do to uniquely differentiate them.”
Another trend Wetherington observed is a digital strategy driven by a war for low cost core deposits. What's really exacerbating this issue, especially for smaller and midsize banks, is the deposit displacement coming by way of P2P, stored value play, and services such as Venmo, Square and Apple Pay.
There is also the $2 billion sitting inside of a Starbucks apps, and $45 billion in health savings accounts. “If you're a bank or credit union that doesn't have an HSA offering, then that's money that is no longer sitting inside of that particular institution.” In addition, robo advisory services have siphoned off $1.1 million that would've otherwise been sitting in the checking account to banks and credit unions around the country.
Wetherington also detailed what he’s seeing, sometimes paradoxically: the use of digital to replace what's inside the branch; using digital to drive more customers out of the branch completely; making technology so good on the outside that nobody would step foot in a branches because it's an inferior experience; using digital to draw customers back to the branch; using data to recommend things; utilizing digital to make banking personal, more human to human at the limits of self service; and make banking more personal than it was ever capable of becoming previously inside a branch.
“Historically, this is what we've been. This, this is how we framed the digital banking discussions. Are you brand centric or you really hip and digital, right? Or are you somewhere in between? We leave all the banks and credit unions to figure out where they are on this mutually exclusive continuum between these two poles,” Wetherington told the SIG gathering. “I'm not so sure that that's the right lens through which to look at – and approach and evolve – digital banking.” He suggested maybe it's not so much about branch versus digital. “Maybe it's human versus automation, right?”
He recommended using the digital channel to bring more human, more meaningful experiences. “Not just at the limits of self service, but because it has to do with their money and people are funny about their money.”