Personal finance is so far into its transformation, even the term ‘challenger banks’ sounds dated.
Arguably, no other industry has seen such a big generational shift than personal banking.
We’ve witnessed a surge of mobile-native disrupters entering the market, and today their cards and apps haven taken up permanent residence in many wallets and phones.
For the digitally-savvy Gen Z and millennial audiences, the attraction of ‘banking at your fingertips’ is forcing established high street finance brands to innovate. Coupled with new compliance and regulation policies, this has become a very competitive sector.
With consumer-centricity the driving force behind this change, there’s a growing need for both challenger and established banks to understand who their audiences are and what they want from personal finance services.
Here are the banking trends changing the face of the industry as we know it.
The rising mobile banking trend
The digital banking trend ins’t going away anytime soon, so keeping up with the latest in mobile banking is an important part of building out a loyal customer base. And they’re a fickle bunch:
44% of UK and U.S. millennials want to change banks in the next 12 months, so the days of remaining loyal to a bank for the long term appear to be behind us.
Established banks, like many large companies, respond slower to digital innovation. And with all banks looking to future-proof their operations in this turbulent market, mobile has been a key focus.
Not only is smartphone ownership now almost universal (with regional variations), mobiles remain the most important device for getting online.
As such, opportunities in the banking sector have shifted.
This has paved the way for smaller, nimbler players like digital-only challenger banks and financial services promising an exclusively mobile experience that cater for every need.
The convenience and time-saving advantages of banking via mobile – allowing users to make transactions, pay bills, transfer money and monitor their financial affairs at the touch of a screen – have proven extremely valuable.
In Q4 2019, 73% of consumers said they used an internet banking service in the past month.
And when we look at the most commonly used devices to view finances on, mobile is the clear favorite.
By offering an insight-driven experience along the online journey, digital banks are giving customers what they want, presented in the quality of experience they expect.
Expanding the online banking demographic
A look at the age breakdown here illustrates the universal appeal of online banking, and particularly the increasing influence of mobile.
According to the Global Mobile Payment Market report, the market is projected to grow at an annual rate of 33% between 2019 and 2026. It’s estimated the market will be worth $457 billion by the end of that period.
The continuing legacy of PCs/laptops among older users is clear to see, with banking via these more “traditional” devices seeing a higher uptake among older age groups.
And if we turn our attention over to mobile banking, then we see the opposite trend in effect, with 25-34 year-olds having a 16-point lead over the oldest age group (55-64s).
While these converging trends may seem somewhat predictable, what they do tell us is that this new way of handling our financial affairs via mobile has expanded the appeal of online banking among the largest cohort of the global online population: Millennials.
And they have high expectations.
Meeting new consumer demands
As the above chart shows, banking trends like this are highly consumer driven; they want the features of their banking brands to integrate with their lifestyles.
With online bankers active over a wider span of media than ever before, omnichannel strategies should be brought in to initiate conversations and provide a seamless customer experience – which is by no means reserved for retail shopping.
Achieving a consistent, cross-channel experience is something consumers increasingly expect.
In 2020, 43% of mobile banking users, for example, want a brand to provide customer-centric services and products that help to simplify daily life, while 35% want brands to offer customized or personalized products.
As global banking becomes more mobile based, the need to meet consumer expectations is heightened by the convenience that smartphones bring to every other aspect of our lives.
The role of social media and online banking
It should come as no surprise that social is a crucial channel for brands to target young, digitally-engaged audiences.
Internet users are now spending an average of 2 hours and 24 minutes per day on social networks and messaging apps.
Having said that, it appears social is reaching its saturation point because time spent on platforms has either slightly decreased or stayed the same in 22 out of the 46 markets we survey.
Regardless, social has a dominant role to play in engaging consumers – but the challenge comes when identifying the most important channels and how to engage their customers effectively.
Social platforms gaining from mobile payments
What mobile payments have a great deal to offer to social media services in terms of potential revenue, and with over 1 in 4 online adults having used their mobile to pay for an item or service in the past month, the addressable market is considerable.
The vast reach of these social media platforms, as well as their ubiquitous presence in the daily lives of online adults, makes them the ideal medium to push these services into the mainstream.
As such, social networks are another part of the explanation as to why APAC outscores other regions by such a considerable distance, and it’s rooted in the way mobile payment providers in this region have chosen to approach the consumer.
Services targeting Western markets like Google Pay, Samsung Pay or Apple Pay are native to mobile handsets or operating systems (although Huawei and Xiaomi have introduced their own native services too). This tactic may boost sales to some extent, but this inevitably limits their addressable market, especially in fast-growth economies in which cheaper handsets prevail.
By using robust consumer data you can identify your audiences’ social media habits, motivations and attitudes, and form a strategy to fit.
The open banking advantage
New technologies, such as open banking, allow third-party providers to access customer data via APIs.
This banking trend helps to provide new digital solutions to customers, including cash management. With open banking, the financial services and retail banking industries can connect with other digital platforms, improving the overall banking experience.
If banks don’t seize the open banking initiative in adhering to consumers’ lifestyles, other contenders may beat them to the finish line with new technologies.
In the UK retail banking sector, there’s been a lot of attention on challenger banks like Monzo, Revolut and Starling, but Google, Amazon, and even Facebook will not just sit and watch this trend pass by.
They will have the advantage of a bigger foothold in consumers’ day-to-day, and rich datasets to build out their financial offerings and gain market share.
These digital transformations to the banking system change the rule book. Now customer-centric banking services – from both traditional banks and new entrants – compete against each other for market share, allowing new, dynamic players to enter.
Doing it well: Revolut
UK-based challenger, Revolut, has accumulated nearly 6 million customers in just four years and continues to rapidly gain in popularity.
Claiming to go “beyond banking”, Revolute’s app lets users open a bank account in minutes, and offers features like free transactions in around 130 currencies, personal budgeting tools, currency exchanges at real rates, and free debit cards with global delivery.
Revolut combines a slick interface and user-friendly features with great offers and a true sense of customer-centricity.
They’ve also mastered their social offering. A glance at their Twitter feed shows they’re not ‘cut from the traditional banking cloth’, offering advice and information in a fresh, funny and engaging way.
As one user review says: “Revolut gives you everything you’d expect from a bank and so much more, all without actually being one.”
Doing it well: First Direct
First Direct is a brand that has gained loyalty by providing a top quality brand experience, and according to Money Saving Expert, is the bank most likely to be recommended by customers in 2020.
Despite its success, the brand has moved its brand message away from having ‘great customer service,’ to position itself as a ‘modern bank.’
Even this movement is highly consumer-driven. Zoe Burns-Shore, First Direct’s Head of Brand and Marketing, told Marketing Week, “We’ve asked our customers if they’d prefer First Direct to be digital only and there’s actually resistance because around mortgages and complex banking issues people like to be reassured that there’s a human on the other end of the phone waiting to help them.”
It’s a great example of a retail bank continuously checking in with their core consumer base, and, as a result, generating positive feeling among their target audience.
4 banking trends to take away
- Mobile has irreversibly changed the face of banking, and as uptake increases, it’s on track to becoming exclusively mobile-first.
- Millennials want digital banking features that integrate with their lifestyles.
- A multi-channel approach isn’t just nice to have, it’s needed to create the perfect purchase journey for consumers.
- Social is perhaps the most valuable channel for reaching mobile bankers.