- June 30, 2021
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For several years now, there has been a growing debate about the alternative digital payment methods into which traditional financial institutions have already entered. They are called upon to cope with a host of new, more flexible forms of competition. Direct, “fresh” and, at the same time, less bureaucratic and awkward. How likely are these banks to survive by ignoring digital darlings such as Amazon or Alibaba, which have been digital companies since day one and have the know-how and the technological ability to apply digital understanding to payment methods?
Marketers in the financial sector seem to overestimate the obvious -of course- differences that exist between the different generations, causing the financial institutions a strong dissatisfaction, related to their reaction. The “traditional” players in the banking market seem to believe that they have plenty of time to meet the digital preferences of end-users, assuming that the older ones are not in a hurry and will remain loyal, clinging to their original banking choices. It goes without saying that this is a highly erroneous approach, doomed to fail. In a survey, Novantas categorized those users who, in recent months chose a different provider of banking products and services, compared to the one they initially had. The processing of these data showed that about 2/3 of those who chose to change their banking provider belonged to the Millennials (47%) or Gen Z (15%) age group. At the same time, it is interesting to find that one in five (20%) was placed in the category of Baby Boomers, while the same size was for Gen X.
When we talk about Baby Boomers we refer to the people who were born between 1946 and 1964 and are currently between 57-75 years old. When we talk about Gen X we refer to the people who were born between 1965 and 1979/80 and are currently between 41-56 years old.
The new online banking trends should serve as a “warning” for smaller banking institutions, where older consumers are more prevalent. And while Millennials and Gen Z are more likely to move to a technology provider, just over half of those in the Gen X category, even almost 1/3 of Baby Boomers say they would follow the same path.
Now, the positive feelings towards the new trend among consumers who live, work and shop online cannot be underestimated by the banking market.
Taking into consideration how our elders understand the financial system, it is obvious that the two older generations, Gen X and Baby Boomers, still place the branches at the top of the pyramid in terms of ease of service. As the same survey by Novantas points out, regional banks typically have a higher-than-average number of consumers born before 1980.
Despite the preference of older customers for physical stores, consumers as a whole interact less with traditional banks. However, continuing to serve these customers translates into maintaining investments in branch networks and other physical aspects of banking, which is proving to be particularly costly. On the other hand, these same banks need to provide a plethora of digital banking tools for the younger generations. Nowadays it is easier for people to change their banking service provider by digitally creating their next current account.
Even though the vast majority of banking institutions have reduced the branches of their existing networks, in the near future things are expected to intensify in this direction.
Baby Boomers share many characteristics and experiences with the Millennials that make this team as important as their predecessors. Both generations entered adulthood amid wars abroad, economic recession and social unrest. The Boomers have watched their retirement funds wither while the Millennials worry if they will ever earn enough to pay off their huge student loans. To varying degrees, both groups are afraid to spend money on even basic necessities and tend to rely on Gen X for many of their needs. Also, both sections value convenience, but Baby Boomers are also very interested in safety.
So how can banks favor this group of users who are new to digitization? By giving priority to an enhanced, personalized and above all confidential digital banking experience through mobile devices. With these concepts in place, banks need to monitor the slow transition of customers from their loyal branches to digital banks. This is also an opportunity for banks to work in parallel with their current experiences in stores such as ticketing systems and self-service machines.
As Baby Boomers become more confident with technology and enjoy the new levels of convenience, they seek the same clarity and direction in banking services. Any confusion or extra steps in this could lead to frustration and eventually make them lose hope in the service. Solutions provided through digital or physical banking should take into account the physical disabilities of this age group. Creating digital experiences with the right visual hierarchy to guide the user, icons that are clear enough for the visually impaired and creating contrast could be some of the many to get one started.
It would be a myth to believe that the Gen X is the generation that is the most economically stable. This generation carries the highest amount of credit card debt and mortgage and education related debt. This is because this generation acts as a bridge between Baby Boomer’s parents and their Millennial, Gen Y and Gen Z children.
Gen X is a generation that was born before the internet and the mass existence of digital tools, but it was the one that was eased into them while they were becoming introduced. The main characteristics of Gen X are that they are loyal and good researchers, so when they take a decision it is based on a lot of research and once they trust an institution, they remain loyal to it. Assurance is their basic behavior and they value the security provided to their assets as they are the hard earners and anything that may jeopardize this security is unacceptable to them.
Gen X can be described as a flexible generation when it comes to changes in the way banks operate. This is mainly due to the fact that they had the exposure of the traditional banking system and handled the finances when their parents retired. Second, they had exposure to the mobile banking experience. All these combined make this team the most up-to-date group. What they really expect from a bank would be to train them and advise them on where to invest their money, how to handle their finances easily and suggestions for planning their transactions.
Gen X is most in need of a holistic banking experience, as it operates online, but still relies on personal banking and ATM withdrawals. This means that banks must adopt an end-to-end innovation to adapt to customer needs. They need to embrace new trends and transform their business models to fit that. Thus, when we bring the emerging trend of digitization, it must be implemented back-and-forth, which means modernizing key processes, as well as front-office platforms and customer-facing systems. The transformation should be through mobile banking, software interfaces, payments, commercial finance, corporate credit, big data, customer relations and interbank banking.
Digital education is becoming increasingly useful, especially in digital services, as it culminates the needs of customers in the digital space. Simple elements, discreet lines, clear icons and user-friendly applications will ensure a better user experience. What is important is for people of previous generations to be able to adopt and acquire the new banking methods, not only because of the rapid progression of technology, but also because understanding how the new financial methods work would make their lives much easier.