The retail banking industry is at a crossroad that is filled with both risk and opportunity when it comes to customer acquisition, customer upsell, and and customer retention. Digital transformation, security, compliance, legal and privacy challenges, dealing with limited budgets and resources, technological disruption (bitcoin and the blockchain) are all risks that a quick Google search can uncover. Some of those risks also offer opportunities as the industry responds to the changing tides of bank customer expectations to avoid disaster and emerge a champion.
Using research collected from ForeSee’s recent FXI Banking Report, below are five such trends about today’s consumers that should inform a bank’s strategy.
1. Credit Unions beat large or national banks on satisfaction
It doesn’t take a rocket scientist to figure out why many people turn to credit unions over large bank chains. In our recent FXI: Banking study, customers of credit unions were more satisfied (86, on a 100-point scale) than those who use regional banks (82 points) or national banks (80 points).
Looking at why, one big reason comes down to fees. Last year, American consumers reportedly spent $15 billion on fees such as overdrawn checking accounts or bounced checks, according to Consumer Financial Protection Bureau data. Now, that’s just part of the business for big banks, but there should be some value in making sure those customers are still happy and aware of their options.
2. One-fifth of consumers are keen to ditch their current bank
When singer Neil Sedaka released the now classic tune, “Breaking Up Is Hard to Do” he wasn’t singing about banks. Nonetheless, it is just as difficult to break up with a bank as it is your high school sweetheart, which is why a sizable chunk of consumers haven’t switched even if they’re highly unsatisfied with their bank.
To be more specific, 21% of people said they would switch to a different bank if the process was easier. What’s more, a quarter of consumers said the only reason they were loyal to their bank was because of the difficulties in switching. Despite there being no regulatory or legislative plans in the pipeline to simplify this process, if it were to happen it could really hurt banks that are unprepared.
This is an interesting dynamic because wherever there is freedom of choice, customers will ultimately go where they are most satisfied. Banking customers have freedom of choice, but the cost of switching is enough to present a temporary hurdle from them making a move. I say temporary because the trend across all industries is decreasing switching costs whether they want it or not, and to this banks are not immune.
3. Breakup-shmakup. Generation Z is not afraid to play the field for banks
While younger generations are branded as quick to avoid complicated experiences, Generation Z consumers don’t feel this way about banking. Thus, 20% of Gen Zers have already left their bank once for greener pastures.
That’s not to say banks are without options to remain attractive, and even acquire a steady flow of new customers. That is, provided they’re tuned-in to the entire customer journey as well as how each stop along the way affects the overall experience. That brings me to the next big trend…
4. Branches aren’t dead (so don’t kill them!)
Believe it or not, banking customers still want to utilize physical branch locations as part of the overall experience. Despite the growing popularity of online banking, nearly half (49%) of customers still want access to a physical branch. Banking customers still want to utilize physical branch locations as part of the overall experience. Nearly two-thirds (61%) of customers start their journey in a digital channel (desktop and mobile web) when opening a new account. Yet, more than half of those customers (59%) who started their journey digitally end up finishing at a branch location.
5. Fintech services are in high demand
Granted that physical branches are only one component of the overall journey, banks could go on the offense against the rise in fintech services and apps that threaten to cut out the middleman (the banks). Mobile money transfer apps such as Venmo allow consumers to link their bank accounts and exchange payments to each other in a way that’s as easy as handing them cash.
In other words, banks may want to consider embracing these services rather than competing directly (which they are woefully behind on). We may also be at a point where disruptive fintech companies are also recognizing that it may be easier to partner with retail banks than to go it alone. Across the board, 53% of people would use fintech services through their bank if offered. Providing those sorts of integrations to fintech services that offer payments, budgeting tools, or financial advice could be a way to attract new customers or retain current ones. (Remember that thing about loyalty I mentioned earlier? This is one way to turn the tide.)
The demographic breakdown is less surprising. Younger consumers — 70% of millennials and 76% of Gen Z — tend to favor fintech services being offered by their primary banks. Older customers (29% of baby boomers and 20% of those born before 1946) are less interested, while Generation X customers are split down the middle at 50%.
Conclusion: banks can turn their futures from bleak to bright by taking action
The truth is, social contracts between banks and customers will always be shifting and transforming. The only real way to make sure these changes don’t negatively impact the business of banks is apply rigorous business discipline to the job of listening to consumers. This means measuring the entire customer journey rather than just established channels, and using the voice of the customer as a key component of the decision making process.
Want to learn more about today’s banking customer and banking CX strategy? Join us live for our webinar — Earned vs. Captive Loyalty: Customer Experience You Can Bank On — presented by American Banker on December 6.