Many U.S. banks, especially regional banks, are currently facing the same conundrum: how to position themselves to acquire at least their fair share of new customers while continuing to appeal to — and not alienate — the current customer base. Urgency is as heightened as ever for banks to tackle this challenge.
Novantas’ U.S. Shopper Survey trends bank acquisition performance and analyzes changes in consumer preferences over time. The 2018 report reveals a perfect storm of factors that traditional brick-and-mortar banks must navigate in order to stay competitive over the next decade.
Younger generation of prospects: The majority of Recent Purchasers were born after 1980. (“Recent Purchasers” are identified in the survey as those who have started a new primary checking relationship in the past three years.) They are now mainstream customers for banks, exhibiting influence that banks must appeal to and serve. Institutions that haven’t kept up with the preferences of this demographic are at the greatest risk of falling behind for good.
Digital-only competitive threats: Traditional banks mustn’t only consider the threat of direct banks, but also that of potential neo-bank and non-bank entrants that could scrape away significant market share — if and when they begin offering banking solutions. Start-ups like Varo and Chime are receiving significant venture-capitalist investment and making fast progress. Technology companies like Amazon are already dabbling in lending and payments solutions. These entities have large, loyal existing customer bases, not to mention massive amounts of resources to fuel new investments.
Unmet demand: It’s no secret or surprise that banks have lagged customer demand for most of the past decade, especially related to remote versus branch-based transactions. The reality is that branches are far less important to consumers than they used to be, at least for sales and service. Banks must allow consumers to open and manage their accounts remotely and, in parallel, repurpose branches to deliver value in new and meaningful ways.
Expensive trade-offs: As interest rates continue to rise, traditional banks risk losing customers and/or deposits based on price alone, especially if their current value proposition is undifferentiated and/or unsubstantiated. Not all banks can or should compete on price. But all banks must examine closely the trade-offs between price and incentives, products, features and marketing to determine how to compete most efficiently and effectively.
This report addresses these factors in three sections and aims to provide banks with the data and perspective that are needed for today’s planning and decision-making to drive investment agendas in 2019, into 2020, and beyond.
VP, Head of Customer