Is the banking industry facing a digital revolution, or has it already happened? Research shows that 60% of bank customers prefer digital-first interactions, yet many banks have not made enough of their services available digitally. This gap leaves the door open for fintechs to engage customers and prospects directly on their mobile devices.
There are many reasons customers now prefer digital banking, starting with the simple fact that everyone carries access to all their accounts in their pocket. Digital banking connects customers to a bank’s ecosystem, providing access to cutting-edge services and helping banks serve their customers more effectively—available whenever and wherever those customers need them. These additional digital interactions can also boost a bank’s bottom line.
When banks fail to provide these services, fintechs are often ready to step in. Even common financial offerings are frequently overlooked by legacy banks, creating opportunities for more agile competitors.
“Most of the top 20 banks still don’t have built-in invoicing and payment acceptance,” said Ian Benton, Senior Analyst of Digital Banking at Javelin Strategy & Research. “The inability to have your mobile app out with a customer—to be able to create an invoice, send it to them and accept payment within the banking app—is one of the factors making them look elsewhere.”
Research from Galileo delves into this very topic, examining what customers now expect from digital banking services and where legacy financial institutions have fallen short. The good news is that even late adopters can leverage innovative products to attract new customers and increase engagement among their existing client base.
Prioritizing Seamless Experiences from the Start
A successful digital banking relationship starts at the very beginning, with a streamlined onboarding process. By ensuring that digital onboarding and activation occur almost simultaneously, there is no delay between account opening and money movement.
An often-overlooked option is issuing a virtual card to new customers instead of making them wait for a plastic card to arrive in the mail. People are naturally excited by something shiny and new, so giving them a card they can use immediately after opening an account is likely to drive immediate usage and help establish a fresh habit. According to Galileo, instant virtual cards increase engagement rates and transaction volume within just 14 days of activation and boost revenue per account by nearly 20%.
“Folks are really engaged with the bank immediately after they open the account and for the next 90 days,” said Benton. “That opens the door for a lot of post-application onboarding things, like getting subscriptions and other payments moved over to the new account.”
To take this a step further, many fintechs now offer push provisioning—a feature that lets customers add a card to their digital wallet with a single tap, instead of manually entering card details or uploading an image. This gives them instant access to their accounts through mobile wallets. While common among fintechs, as many as 45% of banks and credit unions have yet to adopt this capability.
Reducing Costs of Acquisitions
The advantages of a digital process start with more efficiently bringing on new customers. Galileo found that the median cost of digital customer acquisition is 44% lower than for non-digital acquisition.
“It’s taking the people out of the equation,” said Emmett Higdon, Director of Digital Banking at Javelin Strategy & Research. “Humans are always the most expensive part, so it makes a difference if I don’t have to pay that extra branch person to sit behind a desk and wait for you to come in. The pure process of doing it online, in more of a self-service model, takes out a big chunk of the cost.”
A streamlined digital approach to acquisitions can also help a bank attract more of the right customers. Resources previously dedicated to onboarding can instead be redirected toward marketing and outreach efforts focused on profitable segments, such as small businesses.
Engaging the Existing Customers
Banking customers are already curating their own suite of financial services through multiple providers. Gen Z and younger millennials, for example, use more than six financial tools or services—over half of them outside their primary financial institutions. Yet many banks continue to focus narrowly on a limited set of products.
Banks, however, are well-positioned to deliver highly curated services themselves. With their wealth of customer data, they have the ability to craft personalized experiences. Too often, though, banks fall back on a static suite of offerings instead of proactively serving customers in the way fintechs do. One example is goal setting—a role banks are uniquely positioned not just to capture, but to actively create with customized detail.
“When you go to a big bank today, you have the option to click here to open a savings account,” said Higdon. “But there’s very little guidance beyond that regardless of what the customer’s specific goal is. That’s not going to do squat for me if I’m looking for help in saving for my child’s college education or for retirement.”
The ultimate goal is to respond to customer needs before a request is even made. This requires systems with sophisticated algorithms that can anticipate and deliver a differentiated experience. Customers will not only be impressed by the bank’s ability to anticipate their needs, but they will also be able to execute transactions more quickly, making engagement with their bank seamless.
At the same time, banks can’t afford to waste resources offering products that customers don’t want or need. It’s not just a matter of inefficiency—those efforts dilute impact. Data from Accenture revealed that 91% of consumers are more likely to shop with brands that provide offers and recommendations relevant to them.
Empowering Customers with Innovative Tools
Products built around digital engagement offer banking customers a great deal of flexibility. In many cases, new offerings have improved on traditional, well-known services. Faster access to funds and more flexible spending options will always drive increased customer engagement.
However, until customers fully embrace digital banking, they can’t take advantage of these services—and banks can’t benefit from the resulting engagement.
Direct deposit is one example of this shift. What began as an added benefit has now become an expectation. On average, direct deposit increases lifetime customer value by more than 50% per account by driving higher transaction volume and sustained usage.
Now that feature has been compounded by digital advances like Galileo’s early access capability, which allows direct deposit customers to access their pay as soon as their employer deposits wages into their accounts—typically up to two days before the scheduled payday. Accessing these funds earlier can increase account use, drive adoption of other products, and boost card spend.
Another wave of digital innovations is reshaping how customers borrow, spend, and manage their accounts. Although buy now, pay later loans are a relatively new offering, advanced banks and fintechs are now enabling post-purchase BNPL. By allowing consumers to convert settled transactions into BNPL loans, this option extends financing to debit customers, who were previously limited to credit accounts.
At the same time, customers often face the dilemma of choosing whether to keep cash in their demand deposit account (DDA) for debit card use or in a collateral account to support secured credit. Galileo’s Secured Credit with Dynamic Funding resolves this by automating the movement of funds between accounts, allowing customers to manage their money in one place. This eliminates the need for manual transfers when making larger purchases.
Fraud protection is also being reimagined. With 96% of respondents citing security as the top reason for choosing a banking provider, the importance of safety is clear. Galileo’s Instant Verification process directly addresses this need by providing real-time verification of external bank accounts and ownership. It cuts verification times from days to seconds while detecting fraud attempts before they occur.
In truth, the digital banking revolution is already here. Customers increasingly expect every transaction to happen digitally and within seconds, and they cannot understand why it should be any other way.
