The dynamics of financial institution customer loyalty are changing — banks and credit unions must take notice.
All modern banking customers and members want to be sure they can access their money easily and quickly. They also want some form of a meaningful relationship with their bank or credit union. In the old days, this meant face-to-face interactions with bankers. Yet now, digitization across the financial services industry is growing fast, and that trend will continue. The COVID-19 pandemic has accelerated the adoption of digital banking and forced banks and credit unions to evolve at an exponential speed to create more effective and efficient ways to meet these consumer needs. It was a shift that was already underway — or should have already been underway from the perspective of banks and credit unions that want to remain competitive. But the industry is at a crossroads. Loyalty dynamics are changing, with the inclination to embrace digitization and modernization now coming directly from younger customer demographics.
According to a BAI Banking report, millennials and Gen Z demographics indicated their primary financial services organizations understand their financial needs. While 83 percent of millennials and 70 percent of Gen Z said they and their banks and credit unions are on the same page, the damaged economy from the pandemic has shaken trust in financial institutions in these key demographics. The research also indicated each demographic is somewhat less likely to be with their primary financial services organization a year from now. About one of every four consumer reports that they will be switching to a new bank or credit union in the next six months. More than half of new customer and member acquisition will come from 18-to-34-year-olds.
Although older demographics control most of the deposits, millennials make up half of the global workforce (the oldest segment of the millennial generation is now entering their 40s!) and Gen Z is the largest generation on the planet that is on the cusp of breaking into being an economically powerful group of decision-makers. This has been a tumultuous time to say the least, with assumptions challenged like never before. For banks and credit unions, acquiring the right account holders in the essential millennial and Gen Z demographic involves leaning into rapid digitization.
There is an opportunity to create account holder experiences that are essential to consumers’ financial lives, anticipating their needs, and giving them control and confidence in their financial futures; yet there are now more financial choices than ever, which means there is a highly competitive financial services ecosystem vying for these key audiences. Non-traditional fintech entrants introduce new alternatives all the time, and barriers to try something new are much lower.
The pressure to adapt financial services to better serve incoming generations is nothing new. But, in today’s economic climate, banks and credit unions cannot afford to ignore the call for digital innovation and integrated services. It will be up to those financial institutions to meet their entirely different set of consumer priorities and expectations while effectively and efficiently attracting the right demographics at this opportune moment.
There is certainly a massive opportunity to acquire new account holders during the rest of this year into 2022 — but how?
Brands must make sure to identify the consumers who show a behavior to switch their financial institution or start a first-time relationship with a financial institution. But being able to identify the right kind of consumer that they want to target is essential. Banks and credit unions cannot target just anybody, they must target somebody who’s going to have a deep product need and balanced relationship with an institution that is ultimately going to generate a profitable return for the bank or credit union.
One of the main challenges with acquisition campaigns is that financial institutions in the past felt like they’ve gotten burned in the sense that they’ve attracted many account holders, but not valuable ones. So partnering with a third party to utilize comprehensive data analytic capabilities can target the best candidates out of the larger pool.
Reaching qualified demographics requires an orchestrated and personalized experience thoughtfully delivered across channels. Deep, intelligent consumer insights, connect behavior-based signals and deliver a personalized experience at the right time with the right digitization-friendly message. This includes touchpoints like emails, text messages, digital, or direct mail.
To effectively reach the right younger consumers primed for acquisition means knowing what’s going to resonate from a creative perspective and how to deliver that messaging to the appropriate audience.
The gap between banks and credit unions versus tech-enabled upstarts is rapidly narrowing. millennials and Gen Z customers are tech-savvy, smartphone-native thinkers that come to expect an always-on digital world. They represent the best potential customers or members banks and credit unions have seen in decades. It will be up to those financial institutions to meet their entirely different set of consumer priorities and expectations for digital-forward customer acquisitions.