The FINANCIAL -- Bank customers in North America overwhelmingly trust their banks far more than all other institutions to securely manage their personal data, according to a new report on the banking industry by Accenture.
The report, titled “Banking Shaped by the Customer,” is based on a survey of more than 4,000 retail bank customers in the United States and Canada and is the most recent report in Accenture’s multi-year research on the banking industry.
When asked what type of company they trust most with securely managing their data, the vast majority of respondents – 86 percent – chose banks and financial institutions. This is more than 10 times the number of respondents who chose payment companies (7 percent), mobile phone providers (2 percent) or consumer technology companies (2 percent). Only 1 percent of consumers said they trust social media providers the most to manage their data.
“Despite the many threats that banks face, they still possess competitive advantages that are critical in today’s digital world,” said Dave Edmondson, senior managing director of Accenture’s North America Banking practice. “At the same time, our report highlights several trends that are causing significant challenges for banks and should serve as a call to action for them to focus more on improving customer perceptions and gaps in their digital offerings.”
For instance, the survey found that most consumers (79 percent) define their banking relationship as transactional or commoditized, rather than advice-driven and offering high-margin products and services. These consumers said that their relationship with their bank is defined by simple transactions like paying bills and receiving checking-account statements.
The survey also found that consumers shop around and choose sources other than their primary bank for high-margin products. For example, the majority of consumers said they went to other sources to purchase auto loans (70 percent), brokerage accounts (61 percent), registered retirement accounts (53 percent), financial advice (52 percent) and home mortgage loans (52 percent).
“Consumers’ perception of their banking relationship as transactional and not advice-driven is growing at a rapid pace,” Edmondson said. “Banks run the risk that consumers increasingly view them as a utility — a service for basic financial transactions – and not as the first choice for seeking financial advice. Banks need to become more relevant to customers’ everyday lives, including recommending suitable products and services, whether these options come from the bank or third parties.”
Consumers said they would be interested in several value-added services provided by banks, including: discounts for purchases (54 percent); proactive bill-pay services (53 percent); product recommendations (52 percent); end-to-end assistance with car buying, such as help with negotiating a loan and providing vehicle recommendations (49 percent); and buying a home (46 percent).
Millennials switch banks twice as often as other consumers
When looking at millennials, consumers aged 18-34 years old, the survey found that banks can’t rest on their laurels and must do more to retain them as customers.
Though millennials overwhelmingly said they are satisfied with their online banking experience at their primary bank (cited by 92 percent of millennial respondents), they also change banks more often than customers in other age groups. Nearly one in five millennials (18 percent) said they switched from their primary bank in the past 12 months, compared with 10 percent of customers aged 35-54 and only 3 percent of people 55 and older. Though local/community banks were the biggest “winners” of this trend, 17 percent of millennials who switched chose online-only banks. Surprisingly, slightly older consumers were even more likely to have switched to an online-only bank within the past 12 months, with 31 percent of consumers aged 35-39 years old saying they did so.
Millennials also have distinct preferences for how banking services should be delivered. Two-thirds (67 percent) of them said that the traditional and digital banking experience they receive at their current bank is only somewhat or not at all seamless, and nearly half (47 percent) said they would like their bank to provide tools and services to help them create and monitor their budget. Nearly half (48 percent) also said they would like their banks to offer video chat on their website or mobile/tablet application, compared to only 30 percent over 55.
“In 2015, as millennials overtake baby boomers as the largest living generation in the United States, they are becoming one of the most influential – and challenging – customer groups for the banking industry,” said Robert Mulhall, managing director and North America lead for Accenture Distribution and Marketing Services, Banking. “Not only are millennials more likely to switch banks, but many continue to migrate to online-only banks, which poses a significant risk for banks in the future.”
Local bank branch less important to consumers
Accenture’s survey also found that consumer relationships with local bank branches are changing. An overwhelming majority (81 percent) of consumers said they would not switch banks if their local branch closed – a significant increase from the 52 percent of respondents in Accenture’s 2013 retail banking study who said they would be unlikely to switch banks if their branch closed. At the same time, 34 percent of consumers said that online is the most important channel for banks to invest in over the next five years, followed by mobile (cited by 20 percent of respondents).
“This is a big change in the evolution of retail banking,” Mulhall said. “For the first time in our research, consumers ranked online banking services as the number one reason for staying with their bank, ahead of branch locations and low fees. It’s no longer a question of proximity to the local branch that is driving consumer choice, it’s a matter of which banks are offering the strongest online capabilities and mobile applications.”