Finovate Award Winner MANTL Publishes Report Warning Traditional FIs to Digitize Now or Lose Later
By W.B. King
It has been a busy few months for the New York City-based MANTL. The banking technology firm, which offers financial institutions an omnichannel account opening platform, took home the 2021 Finovate Award for “Best Back Office/Core Services Solution.”
Co-founder and CEO Nathaniel Harley said the late-September designation is a “shared achievement” across the entire company, which counts “multiple credit unions” as clients. This figure, he said, has continued to increase since the firm opened its doors in 2016.
Among reasons MANTL nabbed the Finovate Award is that its platform enables customers to open accounts from anywhere, on any device and at any time. Users can open a new account through its white-labeled platform in as little as 2 minutes 37 seconds, noted Harley.
“Through our flagship account opening software, MANTL has optimized the consumer onboarding experience and helped community institutions — many of which are competing online for the first time — establish efficient and profitable digital operations,” said Harley. “As a result, our customers onboard hundreds of thousands of new customers and raise billions of dollars in core deposits each year.”
The Cost of Not Modernizing
In an effort to better understand the banking demographics its serves, MANTL, in association with Wakefield Research, recently published “The 2021 Banking Impact Report: New trends redefining the role of community banks and credit unions in the U.S. financial system.”
The report’s goal was to identify how evolving banking trends impact the local community and the role that banks and credit unions play in the U.S. financial system. To this end, the report surveyed three key demographics: 1,000-plus consumers, aged 18 and over with a bank account; 500 U.S. small business owners with a bank account (defined as those with annual revenue of $25 million or less); and 100 community banking executives and 50 credit union executives, defined as those vice president and above, who manage between $500 million and $50 billion in assets.
Among topical findings is that despite the rise in neobanks, the traditional banking model remains resistant against this emerging trend. To this end, only 7% of consumers and 8% of businesses trust neobanks over a traditional bank. The report, however, also found that it might only be a matter time before traditional financial institutions lose members and customers to emerging digital-first competition.
Currently, 43% of community banks and credit unions do not offer online account opening for consumers and that figure is even higher for businesses, the report stated. More than half of consumers (58%) and small business owners (57%) “will not do business with an institution that doesn’t offer online account opening,” regardless of whether the account is opened in-person or online.
“Credit unions must recognize that the opportunity cost of not modernizing is now a matter of survival and they must not only offer the services — but the superior digital experiences — that consumers now expect,” said Harley. “The top three banking experiences that consumers expect their financial institution to offer are mobile transfers and check deposits; notifications for fraud, bills due and large purchases; and online account opening.”
With 48% of consumers and 50% of small business owner (SBO) respondents likely to open an account at a community bank or credit union in the next 12 months, the report stated this “will severely limit new customer acquisition, particularly among younger demographics and high-earning SBOs, for institutions that do not offer it.”
Harley noted that 73% of millennials said they “simply wouldn’t use a bank or credit union that doesn’t offer online account opening” and 74% of Generation Z agreed. “Notably, 77% of SBOs with over 50 employees and more than half of SBOs (59%) with $1 million to $25 million in revenue also require online account opening to do business,” the report stated.
The biggest threat to traditional banks and credit unions is not neobanks, Harley offered, “but the opportunity cost of not keeping pace with increased demands for digital banking.”
Meeting Members Where They Are
While traditional banks and credit unions will continue to compete against challenger banks, the good news is that the report found that neobanks ranked the lowest on providing personalized service. Additionally, nearly two-thirds of bank executives (61%) observed an increase in fraudulent activity with accounts held at neobanks in the past 12 months. The highest report metric (13%) supporting neobanks were respondents citing they were “more convenient.”
And while the report did find that 42% of consumers listed physical locations as a top-three banking need, these institutions can’t only rely on personal connections with members and customers. Rather, these organizations have to find the balance between a member-facing and digital-first approach, especially when it comes to account opening.
Forty-four percent of consumers and 46% of business owners prefer to open an account online, the report found. For both audiences, that number increases with younger demographics. For Gen Z, 57% of consumers and 91% of SBOs prefer to open an account online. And for millennials, 60% of consumers and 55% of SBOs prefer to open an account online.
“The report findings underscore the resilience of the traditional banking model in generating trust and delivering personalized service, but foreshadow how rising digital expectations among consumers and small businesses owners might eclipse other banking needs,” said Harley. “Credit unions must act now to meet the digital demands of an economy that will be fully millennial-led by 2030 or risk losing out on younger customers with long-standing earning potential.”
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