Description

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Digitalization in the banking sector involves both consumer-facing innovations, such as mobile banking apps, as well as internal innovations around task automation, analytics and forecasting, and impact measurement and reporting. While mission-driven lenders excel at in-person services, digitalization is a key growth area to ensure these lenders can withstand market competition, streamline their operations, and deepen their social impact.

 

Key Insights:

 

• The pandemic accelerated the use of mobile and online banking, while visits to branches and ATMs have decreased substantially, particularly for Millennial and GenZ customers.

• Digitalization improves the customer experience and allows financial institutions to reduce administrative costs, streamline bank operations, and achieve better economies of scale.

• But digitalization is also heightening competition in the financial sector, and mission-driven lenders face an existential risk from large banks, fintechs, major retailers, and social media platforms, who are often further along on the digitalization journey. 

• Many mission-driven banks have struggled to keep up with the evolving spectrum of digitalization due to cost, capacity, and struggles around compliance and security.

 

Implications:

 

• There is a fleeting window for mission-driven lenders to embrace digitalization before they face headwinds that could ultimately deplete their market share. 

• Mission-driven lenders that embrace digitalization can find new opportunities to deepen their social impact while ensuring long-term financial stability amidst changing macro environments.

• To overcome barriers to digitalization, mission-driven lenders need direct support from the government, philanthropy, and the private sector – including capital investment, technical assistance, and clearer regulatory guidance.

Published April 26, 2023

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Download Navigating the Digital Frontier in Banking: Challenges and Opportunities for Mission-Driven Financial Institutions. 

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