At this point, it's quite the understatement to say that cryptocurrencies and other digital financial products are reshaping the landscape of the banking industry. As a result, the relationship of customers to their banks, and the mass migration of even basic services to the online and mobile realms, is changing how people live their financial lives.
Recently, Motley Fool contributor Eric Volkman had a chance to interview Jamie Warder, executive vice president and head of digital banking at KeyCorp's (KEY -0.72%) core KeyBank unit. Here's what he had to say about where we are now, and where we're headed, with next-generation finance.
Eric Volkman: Your survey reveals that nearly 80% of Americans prefer to do their banking digitally. That's a large number -- why the heavy preference?
Jamie Warder: It's important to remember that the pandemic inspired a massive surge in digital banking adoption across the country as lockdowns were imposed. Many Americans who may have been hesitant to use digital tools before were suddenly forced to sign up because the in-person experience at their local branch ceased.
Our annual survey has seen the shift to digital for years now, and this year's found that nearly 1-in-4 survey respondents had more experience with digital banking in 2021 as compared to 2020.
What this shows is that the pandemic not only inspired many Americans to adopt digital banking tools, but that they have begun to integrate them into their lives. The ease of access provided by digital tools we and our banking peers offer are specifically tailored to improve accessibility and make banking a more convenient, personalized experience. For many Americans, this represents a massive improvement.
While many younger Americans may opt for a full digital banking experience, there remain many who prefer a combination of digital tools and in-person expert advice.
Warder: It's difficult to say to what extent the surge in popularity of crypto had to do with the increased digital banking usage we've seen.
While it's true that cryptocurrencies like Bitcoin and Ethereum have risen in popularity among younger Americans between 18 to 35 years of age, we are still seeing lagging interest for those that are older.
The appeal of a fully digital currency relates to the appeal of digital banking tools we provide, in that it allows Americans to control their assets without having to visit a physical location. Pandemic stimulus also played an impact, as the popularity of retail investing skyrocketed.
All in all, while it's fair to assume that the observable increase in digital adoption may relate in part to the rise of crypto, there are certainly other factors driving this step-change increase in digital usage.
Volkman: How do you see the sharp rise in the popularity of digital banking affecting your company's approach to customer relations?
Warder: We find that clients more and more expect their banking to be available, intuitive, and easy. Simply put, they want their digital banking to "just work" –- which is why KeyBank is investing heavily in our end-to-end digital banking.
That said, clients are also seeking solid advice and guidance. When we provide digital banking capabilities intertwined with access to the expertise wanted, it's a recipe for success. We don't expect that approach to change anytime soon.
Volkman: Do you think the rise in digital services will mean de-emphasizing in-person banking, and does this give you scope to reduce your branch footprint?
Warder: Two very different scenarios here.
On one hand, we expect our digital services [to] emphasize a greater experience toward in-person banking.
On the other hand, I don't think our branch footprint and digital expansions are dependent on each other as much as many people think. We constantly evaluate our branch network to make sure we are meeting the demands of the communities we support and will address our long-term strategies as the banking experience evolves.
Volkman: In the old days, physical proximity to customers was a key competitive advantage for banks. As this is becoming less the case thanks to digital services, how can a bank secure a competitive advantage with clients?
Warder: We know relying on just proximity is only a part of what clients expect with their banking experience in today's world. The banks that win will still be strategic toward their proximity, but also offer compelling and fair financial products, great digital tools, and competent advice when needed. We work hard to get this mix right, which is why we are gaining share in our communities.
Volkman: How will the rise of digital banking affect your own operations -- will you be taking on more personnel and managers in the tech field, or will your employment strategy remain largely the same?
Warder: We pride ourselves on recruiting, engaging, and retaining a digitally progressive team. As we build and improve more and more digital capabilities, we will continue to grow our team of digital product managers, software engineers, data analysts, and designers.