Industry analysts and national banks often assume that the main reasons consumers move to a direct bank are low rates and fees.
According to a new survey by BAI, however, almost 20% of the 600 surveyed cited convenience as the most important reason. One reason why the sentiment has changed may be that younger consumers see convenience as being reflective of an easy seamless online experience rather than, for example, access to multiple branches.
Millennials, Gen. X and Boomer aged consumers stated that an easy-to-use app for check deposit and bill pay was important for almost half of those surveyed while generation Z wanted speed… quick transfers (57%) and faster payments.
The managing director of BAI stated, “Direct banks aren’t going away any time soon, and traditional financial services organizations should continue to view them as a real competitor. The way consumers define ‘convenience’ is rapidly changing from branch location to digital capabilities. Our research indicates that organizations that aren’t actively finding new ways to meet this need are at risk of being left behind.”
A key question that the survey did not answer was how important is a bank’s brand to the consumer? Traditional banks cannot assume that the younger customer base will consider a trusted brand when choosing to go with a direct bank. It is important to match not only fees, but also the digital convenience new banks offer.
The good news for midsize to larger banks is that they can use scale to offset costs that come in implementing industry leading “convenience” features for consumers while still offering the benefits of high touch.