Outpacing the Competition: How Financial Institutions Can Stay Ahead in the Digital Race

The materials available in this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your own advisors with questions regarding digital transformation for financial institutions. The opinions expressed in this article are the opinions of the individual authors and may not reflect the opinions of MeridianLink, Inc.

Caught in a high-stakes race for relevance, traditional banks and credit unions are contending with a tide of fintech disruptors and alternative financing options. These challengers are speeding ahead with technology that delivers faster, more efficient, and hyper-personalized services. McKinsey research shows that revenues in the fintech industry are expected to grow almost three times faster than those in the traditional banking sector by 2028.

But don't worry, just as other industries have adapted and thrived, so can financial institutions (FIs) - and you don't have to do it alone. With 25 years of experience, a data-driven platform, marketplace partnerships, and in-depth expertise from customer engagements, MeridianLink is on a mission to help our financial institution customers digitally progress their standing in the race for relevance.

Let's start by taking a look at the five key pillars for outpacing the competition.

1. Instant Decisioning

In the race for consumer attention, timing and experience are everything. The 2024 State of Digital Lending Report shows that less than 50% of FI respondents can handle their products digitally from start to finish. And even among those with digital lending processes, many find them slow and fragmented.

That level of inefficiency simply won't cut it. Think about how ride-share apps let you track your driver in real time - showing their car, license plate, rating, and estimated arrival. Why wouldn't something as important as a lending decision deliver similar speed and precision? Automated credit-decisioning can accelerate loan approvals to meet the demand for instant service. By tailoring lending parameters to individual profiles, financial institutions can offer personalized experiences that secure business before competitors have a chance to act.

2. Consumer Experience

A BAI outlook study reveals that enhancing the digital consumer experience is a key focus for financial institutions - ranking as their third-largest business challenge and second-highest investment priority over the next two years.

Think about how effortlessly your go-to social media app suggests content you'll love based on your interactions. In banking, delivering this level of personalization is essential to create seamless, intuitive customer experiences. By focusing on a consumer-first approach, financial institutions can foster deeper relationships, better understand individual needs, and offer relevant solutions at every step of the journey. Investing in creating positive consumer journeys can transform casual users into dedicated advocates, enhancing overall satisfaction and customer retention.

3. Share-Of-Wallet Growth

With deposit growth a clear front-runner for priorities right now, it's not enough to just seek out new consumers, you need to focus on creating more business with the accountholders you already acquired.

Think about the streaming service that keeps you engaged with tailored recommendations and fresh content. Banks and credit unions can apply a similar strategy by focusing on expanding existing consumer relationships. By capturing a larger portion of a consumer's financial activities, institutions can foster greater loyalty, open new revenue streams, and protect these hard-earned relationships from drifting away.

4. Process Automation

The 2024 Capgemini's World Banking Report paints a telling picture: FI staff typically devote a staggering 70% of their time to operational activities, leaving a mere 30% for meaningful consumer interactions.

Everyday automation simplifies many aspects of life. Thermostats adjust your home's temperature automatically. Voice assistants manage shopping lists and reminders seamlessly. Automatic bill payments handle expenses without hassle. Subscription services ensure essential items arrive on time with minimal effort.

Automation isn't just a nice-to-have; it's essential for modern banking. It accelerates funding processes, improves efficiency, and enhances consumer satisfaction by removing manual tasks like data entry. This reduces operational costs and minimizes errors, creating a smoother experience for consumers and employees alike. It also helps your institution stand out with greater precision and reliability.

5. Data Centricity

Enhanced data and AI capabilities are the standout trends this year - and for good reason.

Data is more than mere numbers. Effectively using data helps institutions boost profitability, navigate risks, and build stronger, more resilient operations. Think about how your favorite online retailer uses an algorithm to recommend items tailored to your previous purchases. Financial institutions can apply similar data-driven strategies. By analyzing consumer data and behavior patterns, banks and credit unions can refine their offerings to anticipate individual needs and offer products and services to support those needs before the consumer shops around. Plus, data-driven insights can enhance risk management, from spotting fraud to making better credit decisions and forecasting liquidity.

How does your financial institution measure up in the digital race?

Take our Digital Progression Assessment to discover your current standing and uncover strategies to advance ahead of the competition.

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