PALO ALTO, Calif.—A new study shows that customer experience has the single greatest influence on how consumers decide where to bank.
Indeed, the study found Millennials don't care as much about convenience as is often believed, and that with this demographic, too, winning their loyalty is all about the experience.
A study of 2,000 U.S. Millennials and Baby Boomers by the Medallia Institute finds that 63% of Millennials and 54% of Boomers cite personal experience, reviews or recommendations as being the most influential when choosing where to open a checking account. Beyond choosing an FI, 80% of Millennials also cite these factors as the top reason for switching banks.
"As the largest generation in the U.S., Millennials represent massive current and future purchasing power," said Beth Benjamin, senior director of the Medallia Institute. "Capturing and maintaining their attention is paramount to earning their brand loyalty."
Once considered critical, branch location is no longer the key factor for consumers when selecting their retail financial institution, the Medallia Institute said, noting that only 13% of Millennials cited convenience as most critical in their selection process. Convenience is only slightly more important to Boomers, with 20% citing convenience as most influential in their FI choice.
"Experience factors—personal interactions with the brand, online reviews, and recommendations from friends and family—have replaced branch proximity as the most important driver of customer acquisition," said Robert Schiff, vice president and general manager of financial services at Medallia. "Market leaders must become experience leaders if they want to stay on top. Welcome to New Finance."
What makes for a positive customer experience? Both Millennials (93%) and Baby Boomers (91%) say it starts with getting the basics right, including security of personal information, transaction efficiency and effective problem solving. Millennials respond positively to innovation with nearly 65% reporting that their day-to-day behavior is driven by a desire to find new and better way of doing things.
"What it means to deliver great experience is changing. Historically, it was about pain-free processes and pleasant service," added Schiff. "Now Millennials are demanding a level of novelty and experimentation that looks more like what we expect from a fashion house than a bank. There's real work to do if we're going to keep up."
Additional findings:
- Online banking is the most frequented channel: 81% of Millennials and 72% of Boomers have interacted with their bank online in the past 30 days (logged into an online account and/or used a mobile banking application). Millennials are 2.6 times more likely to have used a mobile app.
- The preponderance of online banking does create significant challenge for financial institutions: 55% of Millennials rank technology failures or the inability to carry out a transaction online in their top three most frustrating banking experiences.
- The human factor has a stronger impact on how Boomers rate customer experience than on how Millennials do. Boomers are 2.4 times more likely than Millennials to cite an interaction with a bank employee as driving a positive experience, and 1.7 times more likely to list bank employees as a top source of frustration.