Until relatively recently, the process of client acquisition for banks has been quite easy.
The typical client lifecycle would follow the same pattern: clients would come in with their parents, open a basic checking or savings account, then usually, they would stay with the same bank (and often the same branch) for the rest of their lives. Banks could rely on their legacy clients to come to them for all their banking and investment needs, from deposits and payments to loans, investments, and even insurance. This was an extremely favorable set up for most banks, as it kept client acquisition costs low, minimized the need for extravagant marketing spending, and most importantly, boosted profit margins tremendously. Clearly, the value of being top of mind was not lost on banks.
This relatively carefree client acquisition process has come under siege with the advent of mobile and internet banking, the arrival of financial technology (fintech) apps, and most recently, the global COVID-19 pandemic. All of these factors have played a part in remaking the face of the financial services industry, and banks have been challenged to adapt to these factors. Spoiled for choice and growing up in a world designed to cater to them, today’s banking clients have an outlook that’s completely different from their parents’ generation. As such, banks will have to adopt innovations like digital banking software platforms and upgrades to their core systems, to hold this valuable market segment’s attention. To this end, here are some characteristics of digital natives that banks need to be aware of.
Immediacy Defines This Generation
To really understand the current generation of banking clients, banks must gain an appreciation for the meaning of the word “now”. The Millennials and GenZers who make up today’s digital banking natives have grown up in a world immersed in the internet. Consequently, this means that for their entire lives, they’ve had access to almost any kind of information that they need, and with the rise of mobile tech, all that information is accessible to them no matter where they are.
To remain relevant, banks will need to recognize that their youngest customers will expect this same immediacy in the banks they choose to do business with. The first step to this is for banks to upgrade their core systems and be ready to transition to a cloud-enabled banking platform with advanced analytics capabilities. This upgrade sets the stage for all the other operational changes that will be necessary for banks to win the millennial and GenZ markets.
They Have Choices
In the client acquisition scenario mentioned earlier, banks of the past benefitted partly from the relative lack of choice that their potential clients were faced with. Bigger cities and towns would typically have branches of the largest national bank brands, but for smaller, more rural towns, there would typically be a single local bank, and that was it for options of banking services. If clients wanted to take their business to a particular bank, they might have to drive long distances to do so, making banking inconvenient for them especially if they had to transact regularly.
Contrast this with today’s always-connected generation. Most of today’s millennials and GenZers are perfectly accustomed to shopping online, for pretty much anything they want, whether that’s sustainable banking options, food, home improvement items, pet supplies, or personal care products. Moreover, the ecommerce platforms that millennial shoppers frequent typically offer many different options of the same item, allowing shoppers to find the best deal for their money. This pursuit of value has translated into every other aspect of millennials’ lives, and if they don’t get the deal that they’re looking for from their first choice for banking products, there are always many other banking or financial technology (fintech) apps for them to choose from.
Cross-Channel Engagement Is Necessary
Banking clients of the past had to content themselves with in-person transactions over the counter at the branch, face-to-face meetings with bank managers, or, more recently, withdrawing and depositing via automated teller machines. All of these transaction methods required clients to personally go to a branch location, but if the global coronavirus pandemic has taught us anything, it’s that we cannot be too dependent on physical locations and in-person transactions.
Today’s digital natives are looking for client engagement and transactions across multiple platforms and multiple channels. They have come to expect to be able to talk to customer service personnel over ther preferred communications channel, whether that’s phone, SMS, or email. At the same time, they want self-service access to information on loans and interest rates via chatbots and bank apps. Banks that are unable to provide this level of service will likely be dropped, in favor of banks with the necessary tech stack to provide all of this.
Ironically enough, today’s digital natives actually bear many similarities in their banking habits to those who came before them. They still search for the best value for their money, and are expecting positive experiences when engaging with bank staff. The only difference is how these engagements occur, and if banks are slow to adapt, they will quickly lose this valuable market segment.