Reducing friction in banking interactions – digital or in-person – that drives customers to challengers
In our modern post-COVID era, accessing money through digital tools is table stakes for all financial institutions – challenger and community banks, alike. In fact, Forbes outlines data showing a steep rise since 2020 in Americans whose primary bank is a digital one. “More than a quarter of Gen Zers (21 to 26 years old) and nearly a third of Millennials (27 to 41) now call a digital bank their primary checking account provider.” Even among Gen X, the rates have grown from 8% to 22% of people for whom a digital bank is their primary FI. “Overall, six in 10 Gen Zers and Millennials primary checking account is with a digital bank with Chime, PayPal, or Cash App.”
However, simply adding digital options in a vacuum is not a successful strategy. “As omnichannel banking becomes the norm, community banks must beware a looming threat: the rock in the shoe – friction that cause end customers to vote with their feet, literally.” according to Laura Merling, Arvest Bank’s chief operations and transformation officer interviewed in a PYMTs.com article. “It’s a metaphor for clunky customer experience, the less-than-optimal interactions, digital and otherwise, that drive loyal customers into the arms of FinTechs and neobanks… nibbling away at traditional financial institutions’ (FIs) revenue streams.”
That nibbling has a real cost for financial institutions. Recent data from Signicat in The Financial Brand finds that traditional banks are inadvertently putting up roadblocks for their customers. “On average, participants in the survey said they had submitted 1.7 financial applications in the last 12 months,” according to the article. A whopping 84% of the applications were for customers seeking checking accounts, savings accounts, credit cards or insurance, highly profitable products for all banks. “Unfortunately, 40% of all online applications that consumers start never get finished,” so banks are losing customers with each additional click.
Since it’s clear that consumers want seamless banking options, FIs must find effective ways to deliver to avoid giving away even more market share to challengers. “Digital has democratized banking, making it much easier to work with multiple institutions for best-of-breed products and services,” according to BAI’s Karl Dahlgren in the recent article on omnichannel banking. While “primacy” still drives greater retention, what distinguishes it even more? Customer experience. “[O]rganizations need to improve the customer experience. Instead of just transacting business, they need to develop relationships – whether they’re Boomers or Gen Zers.”
Stay tuned as Believe in Banking continues to provide news and insights on the industry’s latest developments and best practices. For customized brand-to-branch strategies for your bank or credit union, contact experts at Adrenaline at info@adrenalinex.com.