BAI’s Banking 2023 Outlook on Consumers offers actionable insights on generational marketing sentiments. Drawing on the comprehensive report, Karl Dahlgren, BAI Managing Director – Enterprise Strategy, shares his perspectives on how generational marketing trends may impact financial services organizations and how to address generational preferences.
BAI: Fraud and identity theft protection are overriding concerns for all generations. Should a bank or credit union emphasize its commitment to protecting customers?
Karl Dahlgren, BAI: Absolutely. Our 2023 Banking Outlook Survey found that the top way consumers feel financial services organizations can help them manage money more effectively is by providing better fraud and identity theft protection. Better fraud and identity theft prevention was ranked number one by boomers+, Gen X and millennials. Gen Z ranked it number two.
In addition, concerns about fraud and security are consumers’ top frustrations with digital banking. It’s the number-one frustration for Gen X, millennials and Gen Z, and it’s the number-two frustration for boomers+. Interestingly, when consumers across generations were asked if they were more cautious about sharing their personal information to protect themselves against fraud and identity theft, only about half said yes.
Nearly two-thirds said their primary financial services organization was doing enough to protect them from fraud and identity theft. This is a higher percentage than those who said they had stopped sharing personal information to protect themselves. This demonstrates that consumers are expecting and relying on their FIs to set up protections against fraud and identity theft.
Nearly half of Gen Z (47%) anticipate changing primary financial services organizations in the next two years, while the percentages are much lower for older generations. Should bank marketers focus the lion’s share of their budgets on the younger generational segments?
Financial services organizations need to expand and nurture their relationships with the younger generations. Our survey found more than 50% of Gen Z and millennials are likely to increase the number of deposits at their primary institutions.
A higher number of Gen Z and millennials also said they would increase the percentage of loans at their primary institutions over Gen X and boomers+. More than 50% of Gen Z and millennials said their primary financial institution clearly gives them better value the more business they give them. Only 42% of Gen X and 36% of boomers+ felt this way.
If that’s the case, BAI research points to appealing to younger generational segments by providing faster payments and quicker transfers. Are there other marketing messages that would resonate with younger audiences?
The younger generations are also interested in learning what their peers are doing and gaining better financial literacy. For Gen Z consumers, improving product and service recommendations was cited as the top way that banks and credit unions could improve their customer experience. For millennials, it was more tools to customize their experience. Both generations said enhancing the mobile experience was the second-most important consideration.
Younger audiences express a preference for a superior mobile or digital customer experience. Yet nearly half of Gen Z (45%) and millennials (45%) want access to a branch—and they want 24/7 customer service. How do banks reconcile customers’ preference for both the digital and the human experience?
Gen Z and millennials have the highest number of monthly interactions with their primary financial institution relative to other generations. BAI research shows that Gen Z and millennials have the highest branch and drive-up usage, but they also use online and mobile banking more than Gen X and boomers+. There’s no question that the younger generations embrace digital channels. But they are really using all channels to a much higher degree.
Looking at customer interaction preferences, we can’t simply categorize someone as exclusively an online customer or exclusively a branch customer. We need to look at what channels they prefer for different types of activities. Routine activities like checking balances, transferring funds, making loan payments, making deposits and learning about simple products are geared toward mobile. More complex activities like applying for a loan, opening a deposit or investment account, closing an account or getting advice on a complex product are geared toward branch or phone with human assistance.
The bottom line is that customers want to use all channels including online, mobile, branch, live agent calls, video calls, text chats, ATMs and voice/AI. And they expect the same great experience on each channel without friction or channel-switching.
Direct banks seem to have continuing appeal to Gen Z, but they fell sharply (from 34% to 22%) among millennials. Where do millennials seem to be headed?
The answer may be larger banks. More so than the older generations, Gen Z and millennials cited large banks as their primary financial institution in 2023. Millennials have increased their use of large banks year-over-year. And they have the highest use of both digital and physical channels, making a large bank a good choice for those seeking both a physical and a digital customer experience, or what’s known as “phygital.” Also, millennials are entering a life stage where they are opening more products and services, so they are looking for financial advice. It can be tough to get reliable financial advice online, so customers seek experts in the branch to help them with big financial decisions. Often, that’s at a large bank.
What are the best marketing strategies for banks and credit unions as we head into 2024? Should strategies be different for large banks versus community banks and credit unions?
Financial services organizations should expand their marketing efforts with younger generations for future growth and target them with financial education, better mobile and app experiences and financial advice. However, don’t neglect the Gen X and boomer+ generations because they hold much of the current wealth and deposit balances. And they’re looking to better understand new technologies while also getting protection from fraud and identity theft.
Direct banks and large banks have more monthly marketing interactions with their customers. And their customers are more likely to notice their advertisements; they’re more likely to receive a product or service recommendation from their bank; and they’re more likely to visit the social media sites of large or direct banks. To counter that, community banks and credit unions should recommend products and services to their customers as often as direct or large banks. Community banks and credit unions need to step up their social media presence to compete and gain attention from younger generations.
Edmund Lawler is a contributing editor and writer for BAI.
Explore key topics you should be considering as you build your marketing plans for 2024 and beyond in the BAI Executive Report, “Marketing strategies for the digital age.”
