A Digital Inflection Point for Banking
In this research report, Novantas presents the latest findings from the ongoing Shopper Surveys of U.S. consumers. These surveys of recent and prospective primary checking account purchasers from the end of 2016 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.
Historically, banks have relied upon their physical networks to drive customer acquisition and deposit growth. Consumers needed only to look to their nearest intersection to find their next bank; physical proximity drove consideration and ultimately influenced purchase decisions. It’s no longer news to banks that times have changed. Consumer adoption of technology and shifting preferences toward digital channels have been the impetus for bank innovation for several years.
Yet, our U.S. Shopper Study indicates that the pace of bank innovation needs to ramp up considerably over the next 12-18 months. This research brief highlights three critical shifts that suggest consumers have reached a digital inflection point, including: a dramatic “untethering” from bank branches, an important shakeup in the drivers of bank Consideration and Purchase, and the increasing demand for digital account opening capabilities.
The Great “Untethering” from Branches
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 strong year-on-year movement away from branch-dependent segments toward more digitally-driven segments that are both less attached to, and less dependent upon branches. Purchase results confirm this “untethering,” showing a continued decline in the correlation between branch share and purchase rate.
In a world where branch share is no longer the fundamental driver of deposit share, banks will increasingly win and lose based on their ability to connect with, and unleash, consumer demand. The players that best understand the drivers of demand will be clearly advantaged.
The Changing Dynamics of Bank Consideration & Selection
Replacing branch share as the strongest indicator of purchase is a factor called “Perceived Convenience.” Having branches, of course, does factor into a consumer’s perception of a bank’s Perceived Convenience. Historically having close physical proximity to a branch was, indeed, the primary driver of a bank’s Perceived Convenience factor. However, in 2017, for the first time, having a branch nearby was no longer the top driver. Instead, a bank’s ability to enable its customers to access their funds “wherever/whenever” (online/mobile capabilities and no foreign ATM fees) became more important drivers of Perceived Convenience. Banks scoring in the bottom-20% on Perceived Convenience suffer from near-zero rates of Consideration, so establishing online/mobile credentials is essential. Going forward, banks that meet consumer desire for flexibility and mobility will significantly outperform those focusing on branch dominance.
The Importance of Digital Account Opening
In a world that is increasingly shifting towards digital engagement, consumers are likely to have less and less patience for account opening processes that require an in-person visit to the branch to complete. Our Shopper Survey found 80% of consumers do at least some shopping for their bank in digital channels and over a third would prefer to open a new account digitally. However, less than 10% are able to. Banks that fail to optimize their account opening processes to ensure that new customers can be pulled through digitally, from start-to-finish, are likely to see their acquisition rates decline over the next two-to-three years as FinTechs and more digitally savvy competitors sweep up the growing share of digital account openers.