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Designing a Digital Experience Around Banking Apps: A Way to Court Younger Consumers

March 16, 2023

Today, it's easier than ever for customers to switch banking services providers. In less than five minutes, a consumer can set up a new account via a mobile application. And the younger they are, the more likely they are to switch. Almost half of Millennials and Gen Z have already switched banks in the past two years, and this is the modern conundrum that the Banking and Financial industries now face. How can they evolve to appeal to younger consumers, solve the paradox of building personalized relationships without being “in-person”, and protect against the disruptive entry of Fintech competitors? A superior digital experience, designed around banking apps, may be the key to retaining those younger consumers.  

The Reasons Why Younger Consumers Are More Likely to Switch Banks 

The reasons why customers switch are varied, and much is influenced by age. A Capco study showed that Boomers are more likely to look for better interest rates, while Gen Zs want better rewards and loyalty programs. Millennials, meanwhile, are the demographic most likely to switch for any reason. But why? Understanding what younger consumers want has been a continuous challenge for the financial and banking industry. Younger consumers can be a nebulous group, increasingly difficult to pin down, with expectations that seem to shift with every technological advance.  

Yet, Millennials are now the largest driver of new loan demand and will continue to be for the next eight years. While Gen Z will make up the largest generation ever in the U.S. by 2034 and may account for a third of all U.S. consumer debt by 2040. They are the future of banking and financial services. However, many providers focus their education and investment tools on 40+ age groups and do not provide an easy, streamlined financial experience that caters to the habits and preferences of younger consumers. The in-person, community branch model no longer holds the same appeal in an increasingly digital world, where most of our decision-making and purchases happen in a 24/7 online environment.  

Serving the Growing Demand for Digital-First 

The reason Fintech startups are causing such disruption in the banking industry is that they supply the kind of digital-first experiences that younger consumers want. Up to 80% of Gen Z already use mobile banking via their smartphones, often because apps run 24/7, aren't restricted to "banking hours", offering convenience and easy navigation. But banks shouldn’t make the mistake of thinking that they can simply offer the same old banking experience, just in an online form. The main reason that FinTech's such as Venmo and Robinhood have been able to carve away long-established customers is that they appeal to younger consumers’ on-the-go lifestyles, with easy to use, 24/7, digital financial services and products, such as P2P mobile payments (75%), mobile trading (22%), and cryptocurrency (11%).  

Investing in the Right Support Channels 

Data from Experian found that Gen Zs, for instance, have a deep desire to better understand money. They just want support delivered through the channels they prefer. Banks that offer text messaging as a main form of communication appeal to over 60% of younger customers, who prefer to receive information about accounts via text versus the phone. Millennials may still want to speak to a live person when it comes to a complex issue, such as investment advice or mortgages. Though younger consumers aren’t opposed to interacting with a chatbot if it saves them time – Capco’s report found that 41% of those who prefer digital banking or use Fintech apps prefer the option to interact with a chatbot or other technologies that can answer questions without requiring a phone call.  

Ensuring Enough Personalization  

Capco’s research discovered that over 72% of banking customers rate personalization as “highly important” in financial services. Millennials value it more than any other group (79%), followed by Gen Z (75%), and over a quarter of younger consumers are willing to pay more for rewards or features of interest. They want personalized advice and solutions tailored to their unique needs. But how do banks build personalized relationships with their customers in an impersonal environment such as digital apps? The best way could be to offer the convenience of self-service, but with opportunities to connect in real-time with a customer service or financial advisor via live chat, SMS, or video. It gives customers control over how they interact with a bank. And by providing highly trained agents with tools that display interaction histories, as well as banking usage patterns, they can offer a more personalized experience.

Addressing Concerns Over Fraud 

Fraud is a consistent motivator for switching banks. In a recent survey, 90% of customers are worried about fraud and would question their loyalty to a bank if their provider had fraud issues. Capco’s study also shows that Gen Zs are particularly sensitive to this issue – 81% are concerned about security. To address this, banks need to have sufficient measures in place to instill confidence while online banking. They also need to communicate what they’re doing to protect sensitive data– 72% of banking customers still perceive security as “not enough”. But there also must be balance. Security cannot disrupt the digital experience. There are ways to authenticate someone’s identity without being obtrusive, such as mobile app face recognition tools, or the use of biometrics. Customers also need to be able to access fraud prevention teams if they have a concern, not just by phone, but in-app, via text or chat. 

Evolving CX to Meet Customer Needs 

The one thing all banking customers agree upon, regardless of age, is that if customer service isn’t what it should be, they are more likely to switch.  

To provide the kind of customer experience that future consumers want may require building an ecosystem of vendors and technology providers that support the shift to a more digital form of money management and digital investments.  

When searching for a CX partner and outsourcer to support the “new” banking experience, there are three things one should look for:  

A CX partner who can meet the customer care needs of a digital banking experience. They must be able to support the right channels (SMS, chat, email) and integrate innovative technologies that streamline services. As well, outsourcers need to supply the necessary training to keep agents up to speed as technology changes. Look for strong in-house training programs, such as the ones we implement at itel, as well as the ability to source candidates at scale with tech support or finance backgrounds. With increasing data availability and improved data quality becoming critical priorities for banks, look for outsourcers with in-house tech teams, such as our Data Science & Innovation team. They can source the right quality data, but also help you leverage the insights gleaned from that data, including new ways to increase efficiency or productivity.

A CX partner who can meet the regulatory and security compliance needs to address fraud/identity theft concerns. You need an outsourcer who can keep up with regulatory changes and the increasing prevalence of cyber threats. itel is strongly focused on data protection, with a dedicated Director of Governance, Risk and Compliance and an Information Security Manager that oversees all risk, compliance, and InfoSec activities. Our IT team has decades of experience in systems and software management, from network administration and telephony to service desk and information security and monitoring. SOC II and PCI DSS certified, we are a company dedicated to the protection of both client and customer data, following the latest information security best practices.  

A CX partner who can offer collections services for defaults on loans or credit cards. With inflation, Americans are increasingly leaning on credit cards to make ends meet. New data from Equifax shows there’s been a 15% increase in consumer debt year-over-year since 2019, with banks issuing 18.6 million new credit cards in the first three months of 2022. As consumers’ ability to pay is stretched, loan or credit card defaults are bound to occur. When looking for a CX vendor, it’s vital that they have experience in receivables management services, like itel. When it comes to first or third-party collections, our agents often reach 150%-200% of revenue targets. The nearshore is also renowned for its excellence in collections services, with highly trained staff that can show the empathy, courtesy and respect needed to build a rapport with customers, so debts can be resolved promptly.  

If banking services providers are looking for ways to tap into the next gen of financial consumers, now is the time to start. Or technology players may beat you to it, offering the kind of digital experiences that will lure away younger customers.  

Want to learn about itel's Customer Experience Management made for Banking and Financial Services? Click here.

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