“People think about banking when they’re doing other things:” 4 charts on consumers’ banking habits
- Consumers increasingly continue to rely on digital banking tools, and are demanding more personalized products from their financial institutions.
- Incumbents still have a bit of an upper hand in terms of being human-first establishments, but that story can change, as Gen Zers start entering the picture.
In November, Publicis Sapient released the third edition of its ‘Digital Life Index’, a survey focused on documenting how digital experiences influence consumers’ decisions.
Recurring themes echo through the findings: As consumers’ preference for digital and personalized banking options continues to rise, banks may struggle to keep up with the competition. Especially since a lot of incumbents’ competitors are putting more effort into understanding consumers than they are.
“Whether it be fintech or other entities, [these companies] are putting in the research and the time to understand what clients need, and then designing products around these needs,” said David Donovan, evp of financial services, Americas at Publicis Sapient. “So [products are becoming] more personalized. And I think that's a significant change.”
Time may be running out for traditional banks hoping to stay relevant in the next few decades. According to Donovan, 60% of banks say they haven’t yet made any significant progress with their digital transformation strategies. That’s not a good place to be when more non-financial companies are setting up shop in the financial ecosystem.
In four charts, here is how consumers are banking – and how they want to bank:
Digital is going from second nature to first nature for consumers looking to complete banking actions
When it comes to banking actions, people’s preferences continue to lean towards digital, with sending payments and transferring money being the most popular banking actions to do online.
Interestingly, though, when it comes to financial advice, including getting advice on investments and speaking to a financial advisor, the majority of consumers still seem to prefer going to a bank and speaking to someone in person. This could hint at a continued trust in people versus machines.
Digital-only banks are picking up in popularity
62% of US consumers have a digital-only bank account. Globally speaking, young millennials (ages 25 to 34) are the generation most likely to have a digital-only bank account, with 57% reporting having signed up with one. And at 52%, Gen Z (ages 18 to 24) is not far behind.
Even older generations haven’t exactly been shunning challenger banks. Almost a quarter of Boomers over the age of 65 have digital-only bank accounts.
‘Know thy customer’ is becoming the hottest new banking commandment
Banks can no longer consider themselves ‘staple’ establishments, like pharmacies and grocery stores.
As the use of digital continues to climb, so does the demand for personalization. When it comes to top services consumers would like from their financial companies, cash-back partnerships with favorite retailers prevailed as number 1, while personalized offers based on spending made it to the top 3.
“People think about banking when they're doing other things, like, for example, when they're going out to dinner, or when they're going on vacation or shopping,” said Donovan. “And so for me, the stickiest financial institution would be one that almost becomes this personal CFO that sits in your pocket and allows you to live life the way you want to live it. And whoever is able to do that is going to be very successful.”
Even with increased banking options though, consumers are staying put…for now
But despite the increase in banking options available, almost 70% of consumers in North America aren’t switching banks. This could hint at the idea that while they may like to sometimes branch out and try the pumpkin spice lattes of banking options, at heart consumers remain loyal to their default morning cup of joe.
Still, that metaphor may not apply as much to younger consumers, who haven’t yet chosen their favorite figurative caffeine kick, and are still open to suggestions. Things like cashback, paycheck protection, and seamlessness are all things Gen Zers are taking into account as they choose banking options, said Donovan.
“I think young people will switch. I think they’ll go for not just the best digital experience, but [also the option with the best] incentives behind it.”