BID Daily Newsletter
July 07, 2014

BID Daily Newsletter

July 07, 2014

Fostering Commitment

Aside from humans, there are a number of animals that mate for life. Swans, black vultures, gibbons, turtle doves and beavers are among those animals highly committed to their mates. Unfortunately for bankers, studies show customers aren't nearly as monogamous. In fact, research repeatedly shows customers aren't shy about switching banks for reasons that include: better rates, lower fees or superior product selection to name a few.
One area of particular concern to banks these days is attracting and keeping younger customers--the so-called Millennial or Gen Y market that many Baby Boomers and Gen Xers find so incredibly hard to predict and understand. This younger crowd is ambitious and tech-savvy and they have high expectations. While these customers haven't completely abandoned traditional banks, there's a sense that banks have to work harder than ever to earn and keep their business.
Consider a recent report from Accenture that shows younger bank customers are nearly twice as likely as older customers to consider switching to a branchless bank and to consider banking with major technology players if those companies offered banking services. Among consumers ages 18 to 34, 40% said they would consider banking with Google, 37% would entertain banking with Amazon and 34% would think about banking with Apple. We don't anticipate a mass exodus happening tomorrow, but over time banks are going to have to do more than rest on their laurels if they want to attract and keep younger customers.
Studies have also shown that younger customers make fewer trips to traditional branches than their older banking counterparts. So the question becomes what are banks going to do to entice younger customers to come into the branch and do business with us, as well as keep attrition rates low? The short answer is to give them more of what they want.
It goes almost without saying that younger customers expect banks to offer mobile banking and other high-tech capabilities. But beyond this, it turns out that younger customers want more advice-type services from their bank than you might think.
According to Accenture, 55% of respondents age 18 to 34 said they would like their bank to help with the "heavy lifting" of car-buying and provide discounts in that process. More than half of the younger respondents (57%) said they would welcome more help from their bank in the home-buying process. And 68% of younger respondents said they'd welcome real-time analysis of their spending, including "safe-to-spend" forecasts. Not surprisingly, two-thirds of young respondents said these types of advisory services would make them more loyal to their bank. While this is a retail customer analysis, we would venture to day business owners likely also want more help from banks on all matters financial.
Consider another survey by Novantas that explored the role and usage of personal financial management tools. Here, 46% of bank account shoppers under 30 said they were interested in these types of capabilities, vs. 21% of those shoppers ages 50 or older. Many banks don't currently offer these tools, leaving customers to turn to third-party sites to get help organizing and categorizing their spending.
As these surveys show, banks might gain more traction with the younger crowd by offering more of what these customers say they want. After all is said and done, it may be difficult to build solid and long-lasting relationships, but taking actions now might help discourage current customers and prospects from fleeing into the arms of another financial services provider and instead increase their commitment to you.