The Era of Digital-first Banking
Banking has transitioned from a product-driven, branch-centric model to a digitally-driven, customer-first ecosystem. Today’s customers no longer interact with their bank only when they need a loan or visit a branch. Instead, their relationship with financial services is embedded into their daily lives through mobile apps, digital wallets, AI-powered chatbots, and intuitive personal finance tools. The driving force behind this shift is digital banking transformation—a phenomenon that alters service delivery and redefines customer behaviors in banking, expectations, and loyalty.
In this rapidly evolving environment, a key question surfaces for traditional banks and fintech disruptors: how permanent or ‘sticky’ are these newly formed behaviors? Understanding this customer shift in banking is critical to reshaping customer strategy, investing in the right innovations, and sustaining long-term relevance through ongoing digital banking innovation in a fiercely competitive market.
Understanding the Modern Customer Behavior in Banking
Today’s banking customers are digitally savvy, constantly connected, and driven by experience rather than legacy brand loyalty. The rise of mobile banking has cultivated habits centered around instant access, zero friction, and 24/7 availability. A growing number of customers, particularly Millennials and Gen Z, prefer to use apps rather than walking into a bank branch to check balances, pay bills, invest, or even apply for loans.
However, this customer shift in banking is not limited to younger generations. Older consumers, once hesitant about digital services, adapted rapidly during the COVID-19 pandemic. The surge in online and mobile banking during that period catalyzed a behavioral change in banking that persists even today. What once started as a response to necessity has now become a preference and, in many cases, an expectation.
Moreover, modern customers are less tolerant of generic offerings. They seek products and services that align with their lifestyle, values, and financial goals. Whether it’s AI-driven spending insights, ESG-compliant investment options, or real-time fraud alerts, hyper-personalization is no longer a luxury but a necessity in delivering better customer experiences in banking.
Digital Stickiness: Beyond Technology Adoption
While many institutions measure the success of digital banking transformation through the download of mobile banking apps or login frequency, true stickiness is measured by sustained engagement, and customer loyalty and satisfaction. Sticky behaviors are those that continue even when the initial drivers, such as lockdowns or incentives, fade away.
For example, the shift to mobile payments, once an alternative, is now the preferred mode of transaction for millions. Features like biometric login, cardless withdrawals, voice-based navigation, and integrated wealth dashboards have created digital ecosystems that are hard to walk away from. As these tools become embedded in customers’ everyday routines, their reliance on them increases, making the behaviors more ingrained.
Nevertheless, stickiness is not guaranteed. If digital experiences fall short due to technical glitches, generic interfaces, or a lack of support, customers will quickly abandon these platforms in favor of more agile competitors. The bar is high, and customer loyalty in digital-first banking must be earned continuously.
What’s Driving the Shift in Customer Expectations?
Several forces are converging to reshape customer expectations in banking:
- Consumerization of Financial Services: Customers now compare their banking experiences to the experiences offered by Amazon, Uber, or Netflix. They expect intuitive design, instant responses, and seamless navigation.
- Rise of Embedded Finance: Financial services are increasingly integrated into non-banking platforms like retail, travel, or gaming apps. This trend creates a customer experience where banking becomes invisible, yet omnipresent.
- Real-time Banking: Delays in transactions or approvals are no longer tolerated. Customers expect real-time balance updates, payments, loan decisions, and support, especially with the advent of instant payment systems and AI chatbots.
- Financial Wellness and Control: More customers want to feel empowered and educated about their finances. They seek tools that provide insights into their spending, savings goals, and financial health.
- Hyper-personalization and AI: From dynamic product recommendations to contextual notifications, customers respond positively to offerings that are customized to their behaviour, preferences, and life stage.
Also read: Generative AI in Banking: The Future of Personalized Services
What Financial Institutions Must Do to Stay Relevant
To meet these evolving behaviors, banks need to shift from being mere service providers to becoming digital partners in their customers’ financial lives. This involves several strategic imperatives:
- Reimagine Digital Channels
Banks must continually invest in improving digital touchpoints to match competitor offerings and anticipate customer needs. This includes rethinking app user experience (UX), simplifying onboarding journeys, enabling omnichannel interactions, and offering features that proactively assist customers rather than just reacting to their needs.
- Leverage Data to Drive Hyper-personalization
The new banking experience is built on the foundation of data. By harnessing data responsibly and intelligently, banks can provide recommendations, nudge savings, anticipate churn, and deliver tailored experiences that increase relevance and customer loyalty.
- Bridge Digital and Human Touchpoints
Even as digitalization dominates banking, human empathy remains vital. Banks that blend technology with human advice through video banking, co-browsing, or AI-native/AI-enhanced call centers can serve a broader customer base without losing the human connection.
- Commitment to Continuous Innovation
Digital behavior is fluid. What’s sticky today may be irrelevant tomorrow. Institutions must foster a culture of ongoing digital banking innovation that allows them to test, iterate, and evolve offerings in sync with changing customer expectations.
- Prioritize Trust and Transparency
Building trust is critical amid the increasing concerns around privacy, AI bias, and data misuse. Customers need clarity on how their data is used and protected. Transparency in fees, terms, and service conditions also significantly influences behavioral loyalty.
Will These New Behaviors Last?
Evidence suggests that many of these behavioral shifts are not temporary but part of a long-term transformation. Once customers become accustomed to digital-first convenience, returning to queues, paperwork, or disconnected service models becomes undesirable.
Moreover, the increasing integration of banking into broader digital ecosystems through APIs, partnerships, and open banking initiatives reinforces these behaviors. As financial services become more personalized, intelligent, and anticipatory, customer expectations will only grow.
However, customer loyalty in the digital era is fluid. If banks become complacent, customers can and will move to a provider that offers better digital banking experiences, even if that means switching from an established institution to a fintech or a tech giant entering the financial space.
Designing for Behavioral Loyalty
The changes we see in customer behavior in banking are likely to remain. Consequently, banks and financial institutions must prioritize customer experience in banking and optimize their customers’ journeys.
At Hexaware, we’re committed to digital banking transformation. We help banks and financial institutions create, implement, and manage the right technologies to meet and exceed their customers’ needs now and well into the future.
To learn more about how Hexaware can help your organization with digital transformation and deal with the customer shift in banking to stay ahead of the curve, get in touch with us at marketing@hexaware.com today!
