It’s no secret that customers are switching banks in higher numbers than ever before. Technology is powering a paradigm shift that makes changing financial institutions less difficult, and savvy financial institutions (like lean, digital, challenger banks) are capitalizing by offering lucrative incentives.
That’s the surface level anyways, as the data from a Resonate study shows. But it also suggests customers are responding to other influences besides a decent promotion. In fact, there are a multitude of reasons banking customers are more inclined to switch banks, and they’re evolving all the time.
It’s no longer enough to offer a hot offer, or a solid product. If you want to retain and maintain customer relationships, you need to be aware of all the factors in play that are impacting your customers and their decision of who to bank with.
Here’s what you need to know:
Why Did Customers Used to Stay With Their Banks?
To know where you’re going, it’s important to know where you’ve been. It wasn’t too long ago that banks simply didn’t have to worry about churn in any meaningful way. Yes, customers would sometimes switch from their local branch, but this was generally on account of major life upheavals like moving away or going to school.
It was difficult to change banks before Open Banking and online accounts. So difficult in fact, that as Bill Streeter said in the Financial Brand, “People had to be driven away by horrible service or unbearably high fees.” If a bank wanted to keep a customer, they didn’t have to be exceptional, they could get away with “good enough.”
Bank switching is easier than ever before at a time when the up-and-coming generations have higher consumer expectations than ever before. This is a perfect storm for financial industry change.
What Hidden Factors are Driving Customers to Switch Banks?
One distinct advantages traditional financial institutions have over challenger banks and tech companies looking for a piece of the pie is the vast amounts of data they have on their customers. This is their most important weapon in the war for customer retention.
In addition to the above mentioned factors of ease of change and lucrative offers, customers (and more particularly, specific segments) are demanding even more from the banks. The number one factor, according to the Resonate study, was (perhaps unsurprisingly) fees. Customers would basically take whatever fee they were offered before, but now with the freedom to shop for the best prices, they are more inclined to do so.
No individual group is more inclined to switch to a bank with better fees than women. According to the study, women are 2.5x more likely than the general population to feel their bank fees are too high, and take action to correct that. Given that women are an enormous share of the market, it behooves banks to greatly consider their fees in an effort to remain competitive and entice their customers to remain loyal.
If there’s one thing that defines the Millennial generation, it’s their propensity to care. Whether it’s for a specific cause or just a general societal awareness, Millennial customers are demanding the companies that serve them care too. And that includes banks.
New generations of customers want their banks to be energy conscious, minimize waste, and care about social justice issues. Banks of yore wouldn’t waste valuable marketing dollars extolling these virtues, even if it was something they were already doing. But now, it behooves modern financial institutions to show that customers can bank with a clear conscience at their bank.
Shifting consumer expectations require a shift in the way banking is offered. You can have the slickest promotions and the best digital products, but if you’re still charging old-school fees, and not using data to anticipate customer desires, your clients can and will leave for greener pastures.
Want to pursue the innovative solutions you need to remain at the top of the banking game? Get in touch with Zafin today and find out how we can empower your success.