What it takes to lure—and keep—the newest generation of consumers
The whole point of the Internet is that it eliminates geographic boundaries. When we’re online, we can go anywhere, and surely do. That’s why digital capabilities have revolutionized every industry from retail and healthcare to banking—if the same services can be had from half a world away, and for a lower cost, why not avail of them?
No one understands this trend better than those pesky millennials. These digital-heavy, mobile-savvy youngsters feel free to eschew brand loyalty and shop around for options on a whim, and the constant emergence of new technologies supports fickle habits. It’s exhausting just trying to keep pace, let alone stay ahead. Every provider in every business feels the pinch.
It turns out, however, that it’s more complicated than that.
The newest banking survey from consulting giant Accenture confirms many existing notions about customer tastes and preferences, and the opportunities that await institutions able to process them. At the same time, it uncovers seemingly contradictory ideas regarding how best to lure this new customer base.
The report makes clear that while winning over millennial customers is hard enough, keeping them can be even harder. Again, this is a generation that goes against traditional concepts of brand loyalty: These individuals turn away from their primary financial services provider at nearly double the average rate of other age groups. The report survey reveals that 18% of consumers in this category switched their primary bank in just the past year, compared to 10% of customers 35 to 54, and just 3% of people 55 and older.
So where are they going? Some online-only startup, with operations based overseas?
Some might be, but it turns out that the big winners, at least in this iteration, are actually local and community banks, registering a 5% migration. Meanwhile, the large regional or national banks are the biggest losers, saying sayonara to 16% in this customer age group. At the same time, credit unions chalked up 3% growth in new millennial customers.
The reasons for this trend are surprisingly old-school: High fees and poor loyalty programs. Yes, the consumers seen as quitter disloyal definitely appreciate the merits of a good loyalty program. And don’t tune out the digital benefits just yet. Those same respondents also assert that they’re most likely to stay with their current bank if the online banking services offered bring true value.
In fact, this is the first time that this particular research effort has found that consumers rank online banking services (38%) ahead of both branch locations and low fees (both at 28%). In fact, the entire branch philosophy is in need of a major overhaul. It’s apparently just that big of a deal anymore—a massive 81% of millennials say they won’t switch banks if the local branch closes. This represents major shift in preferences. Only two years ago, 48% claimed they would find a new bank if their provider closed the local branch.
It gets more tricky when thinking about what it is these customers actually want from the bank. Commodity banking products and service are fine, but they often represent low-margin products. On the flip side, a majority of customers, 61%, choose other sources for brokerage accounts, 70% go elsewhere for auto loans, and more than half, 52%, find alternative providers for their home mortgages. That’s bad news on many fronts.
But then again, here’s a bright spot. As much as it seems customers are increasingly fickle, the Accenture survey actually suggests that banks have a strong foundation of customer trust. That’s a major advantage in this market.
In fact, while news of data breaches at recognizable brands often commands headlines, a stunning 86% of consumers trust their bank over all other institutions to securely manage their personal data. That’s far, far above mobile phone network providers, online retailers, consumer technology companies, and even social media providers.
Every survey is little more than a snapshot in time, but it still has valuable lessons to offer. Tis one from Accenture confirms that our industry has trust to count on, data to draw from, and innovation to build on. Most other businesses would love to have those advantages.