If you work in retail banking, you know this to be true: Today’s customer expects seamless, convenient, and personalized services. Younger customers especially are digital natives, having grown up in a world of constant technological innovation. Financial institutions (FIs) are facing new demands and pressures to keep pace with these expectations.
To stay competitive in 2025, banks and credit unions need to prioritize scalable strategies to deliver excellent service, both digitally and in-branch. From branch design to adopting new technologies, FIs must address physical, technological, regulatory, and competitive challenges.
We have some great ideas for helping you meet these retail banking challenges head-on. Let’s get started.
top 10 banking challenges for 2025 [tips + solutions]
1. understanding customer expectations
The current generation of digital natives expects fast, personalized services, both in-person and digitally. Today’s customers want seamless, tailored experiences, and many expect their bank or credit union to anticipate their needs before they even ask.
With 216.8 million digital banking users projected in the US by 2025, digital interactions are becoming the primary way customers engage with their financial institutions. However, the demand for security in mobile banking remains high, signaling that trust is still a key factor for customers.
To meet these expectations, FIs should:
- Enhance digital security: Focus on delivering a seamless mobile experience with top-tier security measures to build trust and protect customer data.
- Offer a hybrid approach: Combine the speed and convenience of mobile banking with personalized, human-led advice in-branch to cater to both tech-savvy customers and those who value in-person interactions.
2. optimizing the mobile experience
In-branch banking challenges have increased with the rise of mobile banking, as customers now favor mobile solutions for routine transactions, and banks without robust digital offerings risk falling behind. However, the user experience (UX) must be seamless, or customers will look elsewhere.
In 2025, prioritize:
- User-friendly interfaces:Continue refining mobile banking apps to ensure easy navigation, particularly for popular tools like Zelle and Apple Pay. This means both ensuring that these third-party apps integrate smoothly with your mobile banking platform and that your app offers a user experience that meets or exceeds the convenience these tools provide.
- Two-way video banking: Offer video banking options to maintain the human connection while providing digital convenience.
3. driving foot traffic back into branches
While mobile banking thrives, the challenge post-COVID has shifted to bringing customers back into physical branches. Many FIs have seen drive-thru transactions remain popular, with some branches handling 75% of their routine transactions this way. To counter this, a combined approach using both in-branch strategies, social media, and technologies like interactive teller machines (ITMs) can be highly effective.
To boost foot traffic:
- Create incentives: Offer in-branch promotions, exclusive consultations, or community events that encourage customers to visit your physical locations.
- Transform the space: Make branches more interactive with modern amenities like touchscreen technology, digital signage, and ITMs to enhance the in-branch experience. ITMs combine the convenience of digital transactions with the personal touch of teller assistance, bridging the gap between in-person and digital banking.
- Leverage social media: Run promotions and contests on social platforms, featuring giveaways, event promotions, and user-generated content using branded hashtags.
- Integrate digital elements: Extend the digital experience into your branch with video walls, touchscreens, and other interactive features that provide a seamless transition from online engagement to in-branch visits.
4. security and authentication
Security breaches continue to be a significant concern, especially with the increased reliance on mobile platforms. Customers expect that the same level of security offered in branches extends to their digital interactions.
For 2025, FIs should:
- Implement robust authentication: Secure both mobile and in-branch platforms to maintain trust. Examples include multi-factor authentication, biometric login options like facial recognition, and advanced encryption techniques to safeguard customer data.
- Educate customers: Provide security training and tips to help customers protect themselves from digital threats.
5. fintech competition
Among the most pressing banking challenges is the rise of fintech, which continues to challenge traditional banks and credit unions. From cryptocurrency to peer-to-peer payment platforms, fintech innovations often provide faster, more convenient financial services.
To remain competitive in 2025:
- Partner with fintech companies: Consider forming partnerships or sponsoring fintech development programs to leverage their innovations.
- Offer niche solutions: Differentiate your institution by providing personalized services that fintechs can’t offer, such as comprehensive financial planning.
6. omnichannel reach
In a world of numerous communication channels, it’s important for FIs to reach customers where they are — but not every channel is worth the effort.
To optimize omnichannel reach:
- Focus on key channels: Use data-driven insights to determine which channels your customers actually use. Then allocate resources to engage them effectively on those platforms.
- Seamlessly integrate channels: Ensure customers can transition smoothly between online, mobile, and in-branch interactions.
7. internal change
Digital transformation requires internal change. As financial institutions continue to adopt new technologies, roles within the industry must evolve from a transactional approach to a consultative approach to better meet customer needs.
To foster internal change:
- Cross-train employees: The “universal banker” role is gaining popularity, blending teller responsibilities with the ability to offer more advanced financial services.
- Focus on digital expertise: Recruit for digital expertise and offer ongoing training to ensure your staff can handle both in-person and digital customer interactions.
8. adopting ai
Artificial intelligence (AI) is being increasingly used in finance to predict customer preferences and make risk assessments. However, many (especially smaller) banks and credit unions struggle to adopt AI because they lack a clear AI strategy. There is also the pervasive fear, and not just in the banking industry, that robots will replace humans in providing important services.
For the best results:
- Adopt AI with caution: Implement AI solutions that improve customer experience without replacing human discretion.
- Focus on education: Invest in training programs to ensure employees understand how AI tools work and how to enhance them with their expertise.
9. regulatory compliance
With regulations constantly evolving, financial institutions must allocate substantial resources to stay compliant. From data security regulations to anti-money laundering (AML) rules, the compliance landscape in 2025 remains complex. Financial institutions need scalable processes and technology solutions to manage the growing compliance demands efficiently.
To manage regulatory compliance effectively:
- Invest in compliance technology: Automation tools can help monitor and ensure compliance with complex regulatory requirements.
- Create scalable systems: Ensure your institution has adaptable processes and staffing to meet evolving compliance standards without stretching resources thin.
10. increasing pressure from competition
The competition between traditional financial institutions and non-banking providers continues to grow. According to Accenture’s 2023 Global Banking Consumer Study, 59% of consumers switched to a new financial services provider in the past year, with younger consumers being the most likely to switch. Additionally, 52% of consumers now hold a product with a digital-only bank, highlighting the rise of non-banking competitors.
To stay competitive:
- Promote human expertise: Highlight your institution’s human touch and personalized financial advice. As digital-only banks gain traction, your staff can offer the personalized, human-centered solutions that digital services lack.
- Stay agile: With consumer preferences rapidly shifting, traditional banks must remain flexible in responding to the growing influence of tech-driven financial services companies, such as Apple and other non-banking platforms.
how element can help
At Element, branch transformation means a lot more than an interior design makeover — our goal is to create a physical space that will align and grow with changing demands, coming from both customers and the industry. Mobile solutions aside, your in-branch experience can communicate your commitment to listening and responding to your customers’ and members’ wishes.
If you’re looking to stay ahead of the top banking challenges in 2025 and beyond, the Element team can help you reach and retain customers and members through memorable, innovative solutions. Our services include:
- Streamlining your brand identity across your network for a cohesive experience at every branch.
- Location analysis to identify your key demographic and the channels through which to engage them.
- Market research to help you understand your competition and capitalize on your unique advantages.
- Incorporating local elements into your branch to communicate a sense of place and build community connections.
- Training employees to deliver a holistic customer experience in the branch.
- Promotional marketing tactics that support your in-branch experience.
Ready to meet the challenges of 2025? Start a conversation with the Element team today.
