by Dave Gardner
Inclusion of advancing technologies, balancing the scale between security and convenience, and the pursuit of market opportunities from an onslaught of cyber-proficient millennials mark the challenges now being faced by the nation’s financial services companies.
Jeff Wozniak, senior vice president and information security officer with First Keystone Community Bank, confirmed fundamental changes are ongoing in regard to the way banks handle their IT processes. He clearly remembers how at one time his organization utilized an in-house computer center, but this system has given way to bank IT systems now referred to as “cores” which are located inside “clouds” operated by specialty providers.
According to Wozniak, this new approach frees each bank from the need for its own IT system, while delivering faster submission of data, vastly reduced errors, efficient error correction when necessary, and the reality of quick disaster recovery.
“Our data is stored and processed within the cloud at multiple locations, which is part of overall enhanced security,” said Wozniak.
Digital imaging of checks is another technology cited as a game-changer by Wozniak. With this, system checks do not need to be circulated through a federal clearing house, creating a great time-saver for the transactions.
This change has allowed First Keystone to have its teller lines open until 4 p.m. with almost instant file reports available.
However, as with all technologies, the sword has two edges.
“The checks themselves processed with digital imaging are not returned to the customer, and this can cause a problem,” said Wozniak.
On the banking retail front, the development of mobile phone apps is a game changer. First Keystone delivers one cyber-page for all devices scaled to different screen sizes, and the associated artificial intelligence can often identify problems as transactions are scored with a risk rating.
“We have had strong tech spending for security with firewalls and user authenticity, but we always have to be concerned about the pain threshold security systems can inflict on a customer,” said Wozniak.
He explained that apps such as CardValet can restrict use and geography of mobile payment systems, thereby protecting debit and credit cards while also issuing appropriate alerts. Each user manages their cyber-risk by defining when, where and how the app is used.
Another financial app, Apple Pay, allows users to make a variety of encrypted purchases. They also can send and receive money from other users through messages.
Wozniak added that his organization has been fairly strict in its use of cyber technologies to market to millennials. Keystone maintains a social media presence, but the company delivers no sales and marketing through it.
“All of our social media delivery is very focused,” he said. “We use the social media for awareness, but not direct marketing.”
From a big-picture standpoint, modern technology is making it increasingly easier to manage money, according to Linda Morris, retail branch executive with the PNC Financial Services Group. She noted the banking industry has created hour-by-hour transparency through new technology, and that routine to high-volume transactions can be conducted conveniently with mobile apps and digital check deposits.
In fact, the onrushing locomotive of mobile apps have created a need for far fewer bank teller transactions, with ATMs also able to offer more services such as choice of currency denominations with a withdrawal. Express funds can make a deposit available immediately, but cyber-fraud detection is creating a constant struggle as each new app brings an opportunity for fraud attempts.
“Technologies such as the use of biometrics to identify a user’s palm print are great measures against fraud,” said Morris. “Every time you add a ‘layer’ within the transactions there’s more protection.”
With the advent of mobile technologies spreading, millennials as a group do not go into the branches, according to Morris. However, at PNC during 2018, a full 80% of all products were still purchased at branch offices, often after the customer conducted product research online.
According to Morris, these buyer choices are particularly acute with millennial customers, creating a sort of hybrid financial market where shopping is done online but buying is completed face-to-face. Looking ahead, online digital purchases of financial products are sure to increase.
“The millennials also have, as a group, a strong fraud awareness and realistic view that can make them very wary of cyberspace,” said Morris. “Meeting in-person within a bank creates assurance and helps them cope with the overwhelming amount of information out there in the digital world. They also do contact our call centers by phone more than people would expect.”
A full 76% of customers dealing with NBT Bank use online banking services, according to Joe Stagliano, president of retail community banking. Convenience with information access and subsequent transactions is one of the primary draws, with personal payment apps such as Zelle allowing customers to instantly send money to their acquaintances, including mundane transactions such as luncheon costs.
“This expansion of mobile payment apps is all about meeting customer demands,” said Stagliano. “Even with all of this new technology, this is still business.”
Tom McEntee, NBT’s chief marketing officer, noted up to 78% of the bank’s customers are engaged with mobile devices, and product evaluation and education are critical parts of the information they stream before product choices are made. He also agrees with his industry peers that, after using cyber technology for product awareness and research, bank customers, including millennials, will enter a branch to actually make larger transactions.
McEntee emphasized millennial customers do not just seek out cyber convenience in the search for financial services. As a group, these young adults are socially conscious, and they expect their providers to behave in the same manner.
“Because of this fact, we maintain a strong emphasis on volunteerism by our bank because the kids want this,” said McEntee. “We also offer instructional education information targeted to people with the ages of each 15-24, which is a segment of our drive for financial literacy.”
When it comes to marketing financial services to cyber-whiz millennials, agreement within the industry indicates that as a group millennials can be very conservative with their money. They are connected to their market, socially conscious and expect the vendors they patronize to act in a similar manner.
Banks, seeking new customers, utilize a variety of business plans to attract these young adults. However, it is common to hear bank management declare they do not treat millennials fundamentally different from any other customer.
Abhijit Roy, DBA, professor of management, marketing and entrepreneurship at The University of Scranton, pointed out there are 45 million millennials in the country, creating a huge block of potential customers for financial services.
He noted this group, as a whole, is carrying a crushing student debt of $1.5 trillion. In addition, they are coping with another $500 billion of other debt, and although millennial employment is strong, these youth are having a tough time with finances.
“The millennials’ earnings are often directed to paying off this debt, and anyone trying to do business with them must understand this,” said Roy. “Because of this financial pressure, home buying and marriage often takes place later than in previous generations.”
He also pointed out that, according to a Gallup survey, millennials do not display the same vendor loyalty as previous generations, including with financial services. They are likely to switch banks if a better situation appears, which mirrors the similar changes in the retail industry as it evolves to sell to millennials.
The millennials and the incorporation of new technologies is also legendary. Roy stated the pace of change within commerce, while always incremental, is now happening faster than ever.
In some cases, despite societal claims of American superiority, inclusion of profitable technologies have lagged. This is creating a market where opportunities to sell products, such as financial services are being deterred.
“China in particular is a world leader in mobile payment systems, and the United States simply is not ‘tops” with this,” said Roy. “Another leader is the nation of Kenya, and compared to the United States we are not at their level.”