Retail banks wake up to digital lending this year

Fast food got even faster. Download an app to order McDonald’s meals from your smartphone. After logging in, your order is prepared and your payment processed. Have your food delivered to a curbside parking spot, jump the line inside and pick it up or check in at the drive-through using a four-digit code. It’s fast and easy. McDonald’s sees digital, mobile transactions as a way to win back customers after four straight years of traffic declines—especially to appeal to those customers who live on their smartphones. “The idea is to make customers’ lives easier, more convenient and more enjoyable,” said CEO Steve Easterbrook. “It’s not meant to be life-changing. It’s just meant to modernize the model… to embrace change to offer a better McDonald’s experience.” There’s more to it than the experience. Digital ordering speeds transaction times and reduces errors. If 20 percent of drive-through customers use curb side and another 20 percent use the lanes for pickup only, restaurants could serve another 20 cars per hour, Easterbrook said.1 Analysts liked the sound of that.

The company’s stock price hit an all time high as digital ordering—both mobile and with in-store kiosks— moved from testing to roll-out in 2017. “There’s no doubt we need to be part of the smartphone generation,” said one McDonald’s franchisee. Another said that “younger customers avoid quick-service restaurants due to lack of technology, and they don’t like dealing with people, so the app will help.” The banking industry has certainly seen the benefit with the exponential growth of online and mobile banking for day-to-day transactions, such as viewing account balances, making payments and transferring funds. According to Juniper Research, by 2021, half of all adults worldwide will use a smartphone, tablet, PC or smartwatch to access financial services— up 53 percent from 2017.2 Digital banking will continue to grow as customers flock to financial institutions that can offer faster, secure, omnichannel digital services. But are banks poised to take advantage, especially with their lending products? Traditional banks, particularly smaller ones, have typically lagged in technology adoption for lending, especially compared to upand-coming fintech players.

If you’re a glass-half-full person, this technology shortfall could be seen as an easy opportunity. Could digital automation for lending represent the next wellspring of growth for banks, and if so, what is the best way to get there?

Source: https://www.aba.com/Products/Endorsed/Documents/ABADigitalLending-Report.pdf