Redefining Banking Convenience
In this research brief, Novantas presents current highlights from our ongoing Shopper Surveys of U.S. consumers. These surveys of recent and prospective primary checking account purchasers from the end of 2015 explore the profiles, attitudes, behaviors and trends of consumers who are shopping for and/or opening primary checking accounts. Combined with additional Novantas analysis, the surveys provide insight into how banks can increase consumer awareness, consideration and purchase of their checking accounts.
The number of new primary checking accounts opened each year — measured as a “churn rate” or as a percentage of total primary accounts — has dropped by half in the past decade. Where previously 15% or more of primary checking relationships were new each year, the rate now hovers around 7%. This decline reflects the combination of very low deposit interest rates, along with the recession and slow recovery. While household acquisition is now tougher, the flip side is that the primary checking relationships last longer, and hence the benefits of acquiring a household relationship are greater. And with gradual acceleration of the economy and rising interest rates, churn rates will be rising as will the opportunity to win new relationships.
To help banks navigate a challenging household acquisition climate, this research brief focuses on four elements of survey research and analysis, each of which helps explain who is shopping, what matters to these consumers, and how banks can best win their business.
- Bank Shopper Segmentation. Consumer behavior and attitudes about the branch and other channels are evolving rapidly, and are changing the nature of the customer acquisition for banks. Our segmentation analysis by channel attitude and behavior reveals the growth of the “thin branch ready” and other digitally-driven segments, which do not align neatly with age, income and other demographics. By choice or default, banks will attract more of some channel segments and lose others. The banks that best understand these segments, and know how to attract and retain them, will be clearly advantaged.
- The Millennial Opportunity. Not surprisingly, especially given reduced churn, new checking accounts skew to younger consumers — i.e., Millennials matter. National banks are now winning an outsized share of primary checking purchasers, especially among Millennials. Yet the Millennials at national banks also turn out to be more open to switching banks, which creates an opportunity for other banks that can understand and target the best parts of the segment, and then prioritize the necessary digital, marketing and other investments.
- Redefining Convenience. Given similarity of bank product feature/functionality and pricing, convenience remains among the top differentiators in choosing a bank. But how consumers determine which bank is most convenient for them, or more precisely how they perceive that convenience, is now more involved than simply which bank has the nearest branch. “Perceived convenience” is a richer, market-specific story — encompassing branches, digital banking, ATMs, marketing and brand. And these factors affect local deposit share, making the traditional branch share / deposit share “S-curve” a more complicated relationship.
- Building Distinctiveness. As proximity (“the branch nearest me”) wanes in relevance for bank selection, differentiation becomes more difficult. Our survey work finds that bank “distinctiveness” — the ability to stand out in the mind of the consumer along one or more brand attributes — is driving primary checking purchase, even when accounting for share of voice, branch share and other factors. The national banks are more advantaged than others in creating distinctiveness. In lifting their marketing game, the priority for regional banks is not just share of voice, but building their distinctiveness.
The story that emerges is a complex one — with differences specific to segments, markets and banks — and points to the need for banks to develop a market-by-market, multi-lever approach to customer acquisition. While branch counts and locations remain a primary lever, they are losing primacy and now must also be integrated with other physical channels, digital banking, marketing message and volume, and brand. These combinations for each bank by market provide an image of convenience and distinctiveness that influence checking account purchase choice.