Feb
11
According to a recent story by Steve Cocheo in The Financial Brand, “Millennials, Gen X and even boomers will ditch banks for Amazon.”
Hold on. Even boomers? They’re the group that research usually shows as slowest to adopt nascent technology. But Cocheo cites a Novtantas report that …
… classified those who have switched banking providers in the last few months as “recent purchasers”. In the survey, nearly two-thirds of these switchers were either Millennials (47%) or Gen Z (15%). But one in five (20%) were Boomers, and an equal number were Gen X.
Moreover, writes Cocheo,
Part of the problem, according to Novantas, is that financial marketers overestimate the differences between generations, causing many banks and credit unions to drag their feet. Traditional institutions seem to think they can take their time responding to consumers’ digital preferences, assuming that older consumers are in no rush and will stick around. They are sorely mistaken.
It’s a fair point. A good deal of research indeed shows that younger generations adopt new technologies faster and in greater numbers. But it’s a mistake to infer that older generations are sitting idly by. “Faster and in greater numbers” in one group doesn’t necessarily mean “slow and few in number” in another. On the contrary, it seems to mean “not quite as fast and in not quite as great numbers.” One could well add, “… and not to be ignored.”
In the digital banking world, it’s prudent to recognize that the heat is on, and will only grow hotter. There’s no resting on laurels in the form of older generations while taking one’s time gearing up for the younger. And there’s no counting on the hassle once associated with changing financial institutions to slow the tide.
For that matter, the younger generations aren’t all that young anymore. Millennials and Gen X-ers were included in the Novantas study because they already account for significant numbers of customers. The wisest course is to pull out the stops to keep them—now—and not risk having to play catch-up to technology companies in hopes of winning them back.
The weakening of older retention strategies
Every financial services marketer knows that it’s easier and, therefore, more cost-effective to keep and grow a relationship than to hunt down a new one. We also know that (come on, let’s be honest) one bank’s array of products is pretty much like any other’s. That’s why in our industry we make customer retention a priority.
Of course, the best way to retain customers has always been to provide such great service that wild horses couldn’t drag them away. Another is cross-selling, in and of itself a valuable customer service, assuming it’s done in the customer’s and not only the institution’s best interest. Yet another is to surprise and delight—offering the occasional freebie, sharing relevant news, or even the random thanks for being a great customer.
Those approaches are still needful and valid. But a strategy that may be weakening is share of wallet. The idea is that the more accounts and services a customer has with one institution, the more loyal that customer will be. Or, to put it more cynically, the bigger pain in the ass it is for a customer to switch banks.
That’s not relationship-building. It’s restraint-imposing. And, thanks to the phenomenon known as digital banking, it’s fast vanishing. Much of what not long ago required a trip first to the prospective former bank and then to the prospective new one, with each trip involving having to face personnel and complete endless forms, has been reduced to a few touches or clicks.
But besides vastly reducing pain to the hindquarters, digital bank also opens customers to thinking outside the bank box.
Some of you may remember when savings and loans existed. In their final throes, they had won the privilege of offering checking accounts. Credit unions already had that privilege. Technical differences distinguishing the three organization types were lost on the average customer, who tended to lump them all under, simply, “banks.” As long as a financial institution offered needful services, no one much cared what it was called on paper.
Today it is technology that opens new doors to convenience. So perhaps it shouldn’t surprise us that people aren’t uncomfortable doing their banking with technology companies in addition to—or in place of—traditional financial institutions. Especially a technology company like, say, Amazon, which, like banks, largely sells products available anywhere, but, as banks aspire to do, has built its customer base on the kind of convenience and service that’s by and large impervious to wild horses.