PwC’s Digital Banking Customer Survey discovered significant changes in where and how customers do their banking. The survey polled 6,000 retail customers in the United States to better understand what they prefer when selecting and interacting with financial institutions. Here are some of the key takeaways from the survey.
1. More Customers Prefer Digital Banking
The portion of customers who have no interest in traditional brick-and-mortar branches is growing. In 2020, it was just 26%, but in the most recent survey, this number jumped to 31%. There was also a significant decrease in customers who are digitally engaged but like the option of using a branch. The survey indicates that the majority of people in this category no longer feel the need for a physical branch. They prefer all digital services.
Many customers are frustrated by the lack of digital services at their banks. While banks have made significant investments in digital products over the last year, there are still discrepancies in digital account openings. Between 20 to 25% of surveyed customers preferred to open a new account digitally but weren’t able to do so at their current bank.
The portion of “phygital” customers who like both digital and physical branches is a quarter of customers, up from 17% in 2020. This parallels the decrease in branch-dependent users, which now make up 35% of customers, compared to 42% pre-pandemic.
The bottom line — more customers have become comfortable using web and mobile banking apps. They don’t care as much about physical branches. Keep this in mind as you allocate your bank’s budget. To meet the needs of your customers, you may want to focus on creating safe, fraud-resistant digital journeys rather than investing in brick-and-mortar locations. However, as indicated below, that’s not the only option.
2. Over a Third of Customers Insist on a Branch
Despite the rising interest in digital banking, many customers still prefer branches. Two out of three customers still consider branches to be a valuable channel for interacting with their financial institutions. This is particularly true for tasks such as account management or financial research.
While the usage of digital channels has increased, 35% of customers reported that they would not choose a bank that does not have a nearby branch. If you have a physical presence, are you leveraging it to meet the needs of your current customers? Are you investing in your branch so that you can attract new customers who prefer in-person interactions?
3. Customers Want Different Things From Their Banks
Banking customers choose their primary banks based on what’s important to them, and this varies heavily along generational lines. While 60% of Baby Boomers believe their primary bank is where they keep their primary checking account, only 34% of Gen Z customers believe this. In comparison, only 7% of Baby Boomers believe their primary bank is the one they trust to deliver the greatest advice. Over a quarter of Gen Zer’s expect their banks to provide them with advice.
The shift in banking preferences has led to an increase in direct banking. Direct banks currently account for 20% of all primary bank relationships in the United States, up from 10% in 2019. Large traditional banks have maintained roughly 42% of consumer relationships. Regional banks, community banks, and credit unions are feeling the pinch.
If you operate a community bank, this doesn’t mean that you need to close your branches and jump on the online bandwagon. Rather, it underscores the need to understand the unique value proposition you offer to your customers. Customers who favor community banks prioritize low fees and customer service, whereas customers who prefer digital banks do so because of a diverse product offering and recommendations from friends and family.
4. The Amount of Account Holders Who List a Non-Bank as Their Primary Financial Institution Has Doubled
Nontraditional banking service providers, such as businesses, social media platforms, and automakers, are rapidly gaining favor, particularly among younger customers: 57% of millennials and 64% of Gen Z customers currently hold a financial account with a nontraditional institution.
About 17% of people holding accounts with nontraditional financial institutions now describe this as their primary financial institution, doubling from the previous year. One in four customers say they would utilize a retail company for banking, and they are more likely to purchase banking products from a social media provider or automaker.
To compete in this sphere, you have to consider the advantages customers get from non-banks. Are they more convenient? Safer? Less prone to fraud? What can you do to offer this same level of services to your current and prospective customers?
5. Leading Banks are Using Solutions Rather Than Products
As indicated throughout the survey, younger customers are less captivated by a physical branch presence and more open to alternative banking options. To compete in this changing environment, some financial institutions are looking for unique ways to make their branch presence more profitable, and the emphasis is on niched solutions rather than products.
For example, Zions Bank provides a comprehensive professional practice financing solution for medical professionals looking to start their own practices, expand their medical offices, purchase new equipment, or refinance current loans. The bank focuses on attracting dental, veterinary, optical, and medical practices with easy online applications.
In a similar industry-specific vein, Nerve is a neobank that is tied to a music streaming platform that targets independent musicians. The company positions its solution as one that helps professional musicians discover each other, make payments, and cooperate by providing a private networking tool.
Angling to attract the growing and mostly unbanked cannabis sector, Valley Bank has announced a cannabis-specific solution, with a cashless digital payment infrastructure. This bank plans to provide services to dispensaries, cultivators, testing labs, distributors, CBD/hemp enterprises, and armored car services.
Also geared toward underserved populations, Chime, a fintech company wants to help “everyday Americans who aren’t being served well by traditional banks.” The company offers a secured credit card for consumers wishing to establish credit. While the product category isn’t new, the focus on avoiding fees and interest is.
These companies are an inspiration to financial institutions that are looking for new ways to compete. Keep in mind that you don’t need to follow every trend. You don’t need to appeal to the masses. Sometimes, narrowing in on a niche audience with a very specific need can be even more profitable.
Get Support for Your Banking Journey
At SQN Banking Systems, we understand that it can be challenging to keep up with all the trends in banking, but there’s one thing that never changes — fraud. There are always criminals plotting ways to steal money from you and your customers.
Whether you’re focused on digital banking, enhancing in-branch services, or creating products to appeal to niche groups, you need an anti-fraud strategy. To protect your financial institution, contact us today. We’ll talk with you about your current approach to bank fraud and help you find a path forward.