What do young customers expect from financial services? 18 August 2021

Competition is fierce for the money of the next generation. 
Customer preferences are changing rapidly, and banks need to keep up. Older customers – and their money habits – may still be a reliable source of revenue, but all bankers realize the impetus to adapt to changing preferences in order to remain viable. Young people don’t visit banks in person. They bank and pay from their phone. They shop online. They are happy to store their money in a variety of places across their digital ecosystem. Maybe they day trade. Or dabble in cryptocurrencies. These habits – all centered around digital tools – are here to stay.  
Furthermore, the proliferation of neobanks, fintechs, and digital wallets means the field of competitors has widened dramatically. Customers are no longer limited to choosing between banks when it comes to handling their financial needs. Peer-to-peer payments? There’s an app for that. Investing? Cross-border transfers? Starting your own business? Short-term credit? Phone insurance? Fintechs abound that handle all of those needs. And these fintechs are technology companies first, financial companies second. They don’t have to tack on some new technology to a legacy infrastructure system as part of a years-long transformation project. The user experiences are top notch. And user experiences are a key differentiator in our digital economy. 

Banks - whose core competency has never been digital - are not just competing against one another to create the best banking app. They must produce digital experiences at a comparable level to tech companies. This is because users don’t differentiate between banking apps and social media apps. Customers aren’t willing to grant a bank forgiveness when it comes to UX just because they are far afield from their main competency. If I switch over from Instagram to make a payment, Instagram is my immediate point of reference when it comes to UX, not a competing bank app. Banks must produce an experience on par with that of the best tech companies of our era. That is no small task.
So, with intense digital competition and young customers flush with options, what can banks do to ensure they are meeting and exceeding the needs of the next generation? There are some must-haves. A younger customer seeks low or no fees, ease of use, and on-demand services. A current account and an accompanying debit card are the bare minimum when it comes to financial services. Customers do not expect to pay for the bare minimum. With the amount of options at their disposal, if they are going to pay for a bank account, it needs to be delivering value for money. A yearly fee should not be merely getting you in the door at a bank. 
Ease of use is self-explanatory. A customer’s money belongs to them. It must be easily accessed and used whenever needed, and with speed. If they have questions regarding their account or a certain service, they should be able to ask someone and receive an answer immediately, from the comfort of their home. Many banks now provide chat-based customer service 6-7 days a week in multiple languages. A young person doesn’t want to sit on the phone for hours waiting for a customer service representative. Nor does anyone of any age, for that matter. 

Then there is the increasingly important matter of brand alignment. Millennials and the following generations want to use and be associated with brands that align with their values. With climate change wreaking havoc on a daily basis, a bank that is actively funding further harmful activities risks turning people off. The growing consciousness of consumers means banks must establish and maintain a brand that is aligned with customer values. 
One advantage for banks is the painful process of leaving. Banks are not something a person swaps as easily as their preferred movie theater. You can simply go to another movie theater in the city if you have an unpleasant experience. Transferring all of your money, changing deposit information with your employer, and updating all of your card information at merchants are just some of the switching costs that are incurred when changing banks. It is not an appealing proposition for most customers. 
This is why neobanks throw gobs of money at customer acquisition. They can become the institutions that people are reluctant to leave when they grow old. If a neobank is able to acquire customers before they turn 25, they can cultivate the customer loyalty and the lifelong relationships that are so valuable to any financial institution. 

A new development in the industry means banks and fintechs are appealing to even younger customers. Banks such as Pekao, P.F.C., and Tinkoff are developing offerings for kids. They are starting the customer relationships before the next generation is even legally allowed to open a bank account. Of course, banking for kids requires responsible stewardship. But given that kids are digital natives, they will obviously take well to finance apps. And these offerings enable banks to partner with parents in teaching the fundamentals of money management. 
Regardless of when a young person signs up with a bank, they expect a completely intuitive, friction-free digital experience. That is what banks must deliver. Whether it is the onboarding process, making payments, transferring money internationally, or accessing cash, it all needs to be smooth and enjoyable. Banks must serve a facilitating role, and not be a hindrance in the lives of their customers. If they don’t grasp this reality, young people will store their money with a fintech that does.         

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