Affluent and Wealthy consumers prefer customer service via remote channels rather than face to face. This is as true for GenY as it is across all generations. That is, interactions across virtual channels, and specifically social media, has become ubiquitous. This, according to an infographic entitled: Your wealthiest customers want service on Social Media researched by McKinsey & Co..
There is lots of talk in the Community Bank and Credit Union circles that GenY are an essential customer base. This is so, insist Bank and Credit Union executives, despite the fact that most GenY expect free services and the vast majority are unlikely to want revenue generating products offered by Banks and Credit Unions. GenY is critical, goes the argument, because of the financial windfall they stand to inherit once the older generation passes. Never mind that an average banking relationship is about 7 years (about as long as a typical marriage) and that the expected windfall (if there is one) is unlikely to occur within this time period. We’ve written on the fool’s gold including Knowing Your Customer Is Essential for Loyalty and Profitability Gen Y Hard Hit By Recession But Youthfully Optimistic Can Gen Y propel Community Banks and Credit Unions? New data from a recent Wall Street Journal article suggests that the windfall is not likely to happen at all! WSJ reports that nearly 50% of the population has less than $10,000 in total savings with nearly 36% of Boomers reporting the same. Another 14% of Boomers have less than $50,000 in savings. In sum, 50% [Read More...]
Banks are initiating aggressive customer acquisition programs, and a recent Fed reports helps with the finding that household wealth rose by $3 trillion in the first quarter, to $70.3 trillion. On average, household wealth at the end of the quarter was $613,635, about 11% below the 2007 peak but a sharp rebound from the lows set just a few years ago. That’s the good news… The bad news is that the Net Worth of the older generations has recovered and in some cases exceeded previous peaks, the case is far from the same for the younger generation (those under the age of 40). As can be seen in the chart below, the Net Worth of those under the age of 40 has declined and remained depressed at around $100,000, while the older generations average Net Worth has risen to ~$700,000 for 40-61 year olds and over $900,000 for those over 62 years of age. This information is crucial to Bank and Credit Union executives focused on customer acquisition, customer retention, cross-sell strategies and more generally, value creation for customers and growth / profitability for the Bank. Understanding customer segments is essential. Understanding customer preferences, needs, and wants is a pre-requisite for succeeding [Read More...]
Many Community Banks and Credit Unions provide a great service to the community in the form of free checking accounts. And many in the Community Bank and Credit Union sector are rightfully proud of their contribution and support of the community. Unfortunately, the big win for consumers results in a huge loss for Banks and Credit Unions which jeopardizes the viability of the very institutions providing the service. The reality is that most consumers do no need or want anything more than a checking account (accompanied by a debit card and perhaps direct deposit & bill pay). These limited set of products require substantial scale before a provider can generate economies of scale to produce a profit; and by definition, this excludes Community Banks and Credit Unions. Because of this, most Community Bank and Credit Union customer relationships result in recurring, non-recoverable annual operating losses. Understanding this, Community Banks and Credit Unions must be extraordinarily careful in who they choose to serve, what products and services they choose to provide, which channels they emphasize, how they price products and services, and how they market their services in a very crowded and largely un-differentiated marketplace. The infographic developed by NetCredit (below) shows that roughly [Read More...]
Brett King discusses how customer behavior and technology are changing the future of financial services. The reality will challenge the thinking of traditional Bankers through a discussion of topics including: · Why customer behavior is so rapidly changing, including the four phases of disruptive change; · How community financial institutions and their branches must evolve; · Why checks are rapidly disappearing and cash is next; · Why your mobile phone will replace your wallet in the next 2-3 years; and · How financial institutions must reinvent themselves or become irrelevant
As with everything in life, some things are better than others. To some consumers, Coke tastes better than a generic cola. To some car buyers, a Mercedes is preferred to a Honda. To some print store owners, a customer placing a large order is preferred to a customer placing a small order. To some financial advisors, a client with a large portfolio is preferred to a client with a very small portfolio. We ought not be surprised that the preference likewise should hold for customers and members of Community Banks and Credit Unions. That is, a Bank or Credit Union executive, assuming a rationale individual, should prefer a customer / member that is capable, willing and interested in purchasing numerous banking products & services over a customer / member who is interested in just one or two basic products. To help us understand customer segmentation, FIS Global recently published an article entitled Attracting and Retaining Gen Y and Gen X, in which they discuss some of the demographic traits of the Gen Y population. One of the most interesting findings is provided in the following graphic: Not surprisingly, FIS found that Gen Y has high penetration of credit card debt and [Read More...]
Community Banks and Credit Unions are doubling down on their efforts to grow the proportion of Gen Y in their customer base. We find this strategy puzzling given the mountains of data that suggests Community Banks and Credit Unions should focus on the affluent (read here and here), rather than investing resources on Gen Y which is likely to results in negative ROI (read here and here). Yet another data point comes from Pew Research Center that notes that Gen Y has been hard hit by the recession and the profound changes in the employment realities. Their February 2012 survey entitled Young, Underemployed and Optimistic provides important insights to businesses that believe that their near-term (next 3 – 5 years) growth and profitability are dependent on Gen Y. Optimism Just 31% of Gen Y say that they earn / have enough to have the kind of life that they want, as compared to 50% Gen X and older. Optimism among Gen Y is registered for 57% who say that they will earn / have enough in the future, although that is not the case today. This level of optimist is more than 3x higher for Gen Y, as compared to [Read More...]