By Roy Urrico
Machine learning has some room to grow with 42% of financial institutions (FIs) having deployed the technology, but by the end of 2024, over half of FIs will have deployed generative artificial intelligence (AI), which can create new content and ideas. Those are findings in the 2024 Digital Banking Performance Metrics report from Alkami Technology and Cornerstone Advisors.
The Plano, Texas-based Alkami, a cloud-based digital banking solutions provider for credit unions and banks, in partnership with Scottsdale, Ariz. Financial technology consultants Cornerstone Advisors and its Chief Research Officer Ron Shevlin, compiled the analysis. The self-reported data was collected in fiscal year 2023 from a sample of 81 financial institutions, including 39 banks and 42 credit unions with an average asset size of $4.6 billion. It looks at the qualities that make a high-performing FI and provides digital investment and performance metrics to support credit union and bank leaders.
Some other key takeaways include:
Ninety percent of banks and 95% of credit unions are currently pursuing a digital transformation strategy.
The quality and effectiveness of [digital banking] initiatives also depends on other factors. Such as an institution with strong financial performance may not necessarily have a well-designed and user-friendly digital banking platform. Conversely, a company with average financial performance may have a highly effective digital banking strategy that drives growth and improves consumer experience.
The success of digital banking initiatives also depends on factors such as understanding of customer needs, the ability to innovate and keep up with technological advancements and to execute and effectively market digital banking services.
Financial institutions with live chat increased to 63% from 51% last year.
“As community and regional banks and credit unions face increased competition from megabanks, as well as fintechs and alternative banking options, it is crucial for them to understand how their digital and mobile banking offerings are performing,” said Allison Cerra, chief marketing officer at Alkami. “Industry benchmarks, such as those included in this report, can help financial institutions make informed decisions about their digital investments and resources.”
Said Shevlin, “The future of banking lies with technology and understanding how it can further enhance the accountholder experience and transform the organization. Overall, the metrics in this report are intended to give financial institution executives perspective on the industry’s digital banking performance. Banks and credit unions should adopt a digital banking metric framework to ensure measurement aligns with strategy.”
Gauging Progress
To identify the high-performing institutions, the report segmented participating banks and credit unions into three groups based on 2023 financial performance: 1) high performers, accounting for 28% of the institutions; 2) middle of the pack, representing 47% of the institutions; and 3) low performers, which comprise 25% of the sample.
The report revealed “the ongoing sophistication of digital banking technology in conjunction with evolving consumer preferences and behaviors has accelerated the uptake of digital banking services, with more consumers than ever choosing to open accounts at fintechs as opposed to traditional banks and credit unions.”
This report aims to outline the array of digital banking metrics and interpret them within the broader environment. “With increased industry emphasis on digital offerings and expanded technology capabilities, banks and credit unions must keep pace to stay competitive, but that requires insight into what offerings account holders want most today.”
Adopting Digital Banking Technology
Stronger business results can certainly contribute to superior digital banking results, but it is not always a direct relationship. “While a bank’s or credit union’s financial success can help fund and drive investment in digital banking initiatives, the quality and effectiveness of those initiatives also depend on other factors,” the report maintained.
The Digital Banking Performance Metrics report provided an example: As noted earlier, an institution with strong financial performance may not necessarily have a well-designed and user-friendly digital banking platform. Conversely, a company with average financial performance may have a highly effective digital banking strategy that drives growth and improves customer experience.
Digital Investment Metrics
Generally speaking, digital transformation efforts are prevalent among mid-size financial institutions — 90% of banks and 95% of credit unions are currently pursuing a digital transformation strategy — and accordingly, digital investments have risen for the third year in a row, noted the report.
In 2022, the average digital spend per $1 billion in assets was just over $200,000. That has roughly doubled in each of the past two years to nearly $780,000. Among institutions that participated in the study the past two years, the average increase in digital spend per $1 billion in assets was 310%.
Other highlights:
Digital banking overall. Active digital banking users as a percentage of checking accounts increased year over year to 77% in 2024. Low performers led the way at 79% but not far ahead of high performers and middle-of-the-pack performers. Although there is little difference in digital banking spend as a percentage of total IT spend across the groups, the data indicates that low performers are spending more per digital banking user to ensure they are active digital users at $47 per user.
Online banking. Total active online banking users (defined as having used the digital banking system within the past 90 days) as a percentage of checking accounts dropped 8% from 2023. High performers lagged other groups at 56%, and low performers led the way at a mere 64%.
Mobile banking. The overall percentage of checking account holders who are active mobile banking users increased 1% between 2023 and 2024, which suggests that mobile banking adoption has stagnated. A financial institution’s overall financial performance or investment into digital banking does not necessarily correlate with checking account holders who are also active mobile banking users.
Mobile deposit. Overall, mobile deposit adoption inched up year over year, from 52% in 2023 to 54% in 2024. The high performers led the way with 57% of active mobile deposit users as a percentage of active digital banking users, but not by much with middle of the pack and low performers at 52% and 55%, respectively. However, utilization increased, with the average number of checks deposited each month growing from 1.16 to 1.34. High performers led the other institutions in adoption but lagged in terms of utilization.
Digital deposit account opening. “Digital deposit account opening continues to disappoint,” expressed the report. Twenty-nine percent of banks planned to select a new or replacement consumer digital account opening system in 2023, yet only 19% did. Among credit unions, 32% anticipated making a digital account opening selection in 2023, but only 12% actually did.
Mobile payments. Among financial institutions that reported mobile payment activity, the percentage of digital banking users making mobile payments on (or through) their bank’s or credit union’s mobile app grew from 22% to 34%, year over year. The average number of monthly transactions dipped slightly from 5.20 to 4.82 transactions.
Digital lending. The percentage of digital consumer loan applications as a percentage of total applications dropped to 41% from 47% the previous year.
Digital support. Reflecting increased consumer adoption of digital support capabilities, financial institutions providing live agent chat increased from 51% to 63% from the previous year, and the average number of monthly live agent chat sessions grew by nearly 20%. In addition, the percentage of study participants offering a chatbot nearly tripled. However, the average number of chatbot sessions decreased only slightly from 2023, suggesting that the newly deployed chatbots quickly got up to speed.
Digital payments. The minority of institutions providing (and reporting) mobile payment metrics saw a healthy gain in adoption — from 22% to 34% of digital banking users — and a steady use of their mobile payments offering year over year. In addition, although overall adoption of peer-to-peer payments (P2P) did not grow appreciably, P2P payments usage nearly doubled among consumers using their financial institutions’ P2P payment options. “The increases in utilization were no easy feat as consumer payment behavior continues to splinter to many different payment options and capabilities., the report stated.
