Almost 30 years ago, Bill Gates made the bold statement, ‘We need banks, not banking.’ If recent data is to be believed, banks continue to deliver record results. However, as we all know, they face competition from all sides, especially at their weakest points when players offer better deals. This competition is forcing banks to rethink their approaches to better meet the expectations of customers, especially younger ones.
Indeed, despite the transformation, changes in retail banking are occurring mainly in response to regulatory changes rather than a desire to create the bank of the future. Competitors are successfully positioning themselves to offer solutions that provide better service and greater efficiency. By specialising in certain products or segments, they create offerings that attract customers more than traditional banks. This is especially noticeable among the younger demographic, who expect a more personalised and modern approach to banking services.
How do banks attract young customers?
Customer loyalty is driven by the added benefits provided by banks, according to customers. However, as digital adoption is relatively high among young people, banking relationships for the 18-30 age group will erode even faster than for other customer segments if the bank fails to fulfil this need. For example, 74% of young people open a current account with their parents' bank, but 53% of them open an account with a second bank before the age of 30 because of attractive rates and service quality. More than 25% of young people cannot answer what added value their banks offer because they do not know the terms and conditions of their products and fees.
Banks that do not adapt their services and marketing risk losing this audience. For example, 72% of young people only use their cards in the normal way, while 40 per cent have premium cards but do not use their additional features. Young people expect a personalised experience, with 71% wanting personalised advice on managing finances and 65% wanting more information on banking news. The simplicity and flexibility of the customer experience, especially through banking apps, plays a key role in retaining this audience.
Let's take a look at a list of some of the factors that influence customer loyalty:
- Personalised advice and financial planning;
- Simplicity and convenience of banking apps;
- Understanding the real value of products and services;
- Flexibility and adaptability to changing customer needs;
- Value-added products such as cashback, for example.
How are banks responding to the demands of the new generation?
Whilst the perception of value varies from individual to individual, certain changes will enable banks to better identify and meet the needs of young people, and therefore make their offering a key asset in enabling young people to achieve their financial goals. It is important to consider that personalisation and transparency are becoming key factors when choosing financial services. Banks that can anticipate the needs of this audience and offer convenient, easy-to-understand solutions will be able to gain trust and retain customers for years to come.
To become truly useful to young people, banks must focus on several key aspects, including being practical, integrating into customers' lives and anticipating their needs. Let's look at some of these in more detail:
- Practical approach and information provision: Young people have a hard time accepting bank offers and struggle to understand what products and services are available to them. This is mainly because the products and services offered are often described without any connection to real-life situations that young customers may face. Therefore, instead of describing the variety of the range and its technical aspects, it is much more appropriate to describe it in terms of real-life cases. In this way, it will be much easier for young people to identify with the offer and realise the added value of the products offered by their bank. In short, the aim is to talk to customers not about the products on offer, but about their needs (questions, desires, concerns, etc.) to make them more tangible and understandable;
- Integration into everyday life: Beyond traditional banking, banks can make a difference by integrating themselves into their customers' everyday lives. To meet the needs of their customers and provide them with maximum support in managing their finances and assets, banks can combine their traditional products with related products that add value. For example, we can imagine ‘No Worries’ packages (key replacement in case of loss, access to a network of locksmiths in case of emergency) combined with home loan offers or consumer loans for home appliances. By offering related products directly related to situations that young working people face on a regular basis, banks can add value beyond the traditional, purely banking offering. In this way, the bank becomes a trusted partner in the process of becoming an adult and can maintain this special relationship with its customers;
- Better understanding and anticipating needs: Acting on the needs expressed by young adults is the first step. However, if banks want to attract and retain this population from their first job to their first home and beyond, they must develop analytical capabilities that will enable them to better understand their customers' needs and wants. Predict upcoming life events and associated needs in order to make recommendations for personalised banking products. Develop a deep understanding of the customer's context and lifestyle to create relevant touch points. Successful banks will be those that can take advantage of greater access to customer data to offer a truly differentiated and advanced experience.
Conclusion: What do young people expect from banks?
If banks are to be relevant to the younger generation, they need to change their approach, seeing banking as a service that can offer a tailored and personalised experience for each customer. Simply increasing the number of financial products will not help attract and retain young customers who want to choose and control services and pay a fair price for using them. Unless banks create the conditions for clear and accessible presentation of their products, young people's distrust and doubts towards traditional banks will only increase. Instead, banks should integrate their offerings into young people's daily lives, making them more tangible and useful in order to build trust and become a trusted partner for this audience.
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