Millennial and mass-affluence groups most likely to shift from bank

11 July 2016 6 min. read

American banking customers are seeking value from their banks, or else they will shift to another provider – a recent survey finds. Additionally, while consumers are open to robotic advice, the research finds that digital propositions are one element of the wider customer experience, with customers continuing to value face to face services at the local branch.

The financial services sector, like many other sectors, is finding itself in a period of uncertainty as digital technologies create new products, new expectations from consumers and new competitors. The potential for disruption remains a very real threat for many incumbent banks, however, opportunities exist too – with more streamlined services to customers, reduced overheads and new revenue streams.

In a new report, titled ‘Banking on Value: Rewards, Robo-Advice and Relevance’, Accenture tracked the consumer sentiment and behaviour of 4,000 consumers in the United States and Canada. The survey found there to be four major trends affecting the consumer banking sector.

Loyalty to primary bank

Staying loyal
One of the major forces, outside of inertia, preventing people from shifting to another services provider is the value of the current proposition. People are keen to save money, where possible, and are more and more often expecting banks to support them in that endeavour. 45% of respondents to the survey said that their primary reason for staying loyal would be if their current providers offer discounts on purchases of interest—from banking products to cars, home goods, travel and more. Additionally, being supporting in the car buying process was cited by 43% as a reason for loyalty. Personalisation of services was cited as a reason to stay loyal by 40%, followed by having a proactive means to pay and manage bills available and providing actionable financial advice on a proactive, real-time basis, cited by 39% apiece.

Switching from bank

National switch
The number of consumers that defected from their financial services provider from their main bank stood at 11% in 2015, with Millennials (defined between the ages of 18 and 34) at 19%, and the mass-affluence (consumers with an annual income over $100,000) at 18%, the groups the most likely to shift. This is an increase on the previous years, and reflect, according to the analysis, the increased ease of shifting provider, the continued perception that banking is transactional (79%) rather than advice based, and the growing landscape of providers as new entrants enter the field.

One of the major players to lose out on customers are large regional or national banks, which saw 38% of their customers leave while only seeing a 23% return, for a net loss of -15%. The biggest gains were are online-virtual banks, up a net 11%, payment providers saw a net 3% gain, followed by local community banks, up 1% net, and credit unions, up 1%.

Robots in banking

Going robo
Another significant changing trend is that respondents appear to be much more open to receiving advice from ‘robotic advisors’ (robo-advice). 46% of respondents said they were open to bank using robo-advice in the future. One of the major drivers for such advisors for consumer was cited to be speed and convenience (50%) and lower cost (29%). Specifically for investment advice, respondents were relatively positive, three out of four respondents are willing to receive robo-advice about asset allocation and opening a bank account (74%), while seventy percent were open to receiving retirement planning advice from robots.

“It’s well-known that robo-advice is gaining significant traction in the wealth management industry; however, our research shows this trend is also picking up in retail banking,” said David Edmondson, Senior Managing Director of Accenture’s North America Banking practice. “Consumers will continue to dictate how, when and where they want to interact, and banks have an opportunity to use intelligent automation and robotics to simplify and improve the customer experience. Successful banks will strike the right balance between human and machine interaction to elevate their role in customers’ lives beyond simple transactions and become a go-to resource.”

Role of branches in banking

Branching in
The human element remains an important feature for banks, however, with almost 50% saying that they trust their bank more when talking to someone in person. The results also show that the bank branch is still frequented, with 15% visiting a branch at least once per week, while 40% say they will continue to visit a branch because they enjoy the experience. Customers also feel that they receive more value from their bank when they speak to someone in person.

The branch is also not likely to fall into obscurity, even with recent mass closures. The vast majority (87%) of consumers, including 86% of Millennials, report that they will use the branch in the future. The number of respondents seeing online as the primary channel for development is down four points to 30%, whole those interested in seeing investment in branches increased four points since last year.

“Today’s consumers expect their service providers to understand and anticipate their needs and offer a seamless experience across digital and physical channels – and they expect this as much from their bank as they do from retail stores and Internet giants,” Edmondson concluded. “Even as consumers indicate interest in robo-advice and online banking, they continue to demand human interaction at the branch to handle more complex banking needs. Banks need to find ways to blend the digital and branch experiences to provide more value-added services to their clients, and move past their role as a transactional service provider.”

Another recent study on retail banking, conducted by A.T. Kearney, found that banks are improving their margins and operations, yet still need to work hard if they want to come anywhere close to RoE expectations of 15% or more.