Banks need to embrace digital to survive

Imagine that 71% of millennials would rather visit the dentist than hear from your company. Not an ideal situation. But a very real one for banks in the US.

Banks are in deep trouble with customers, especially young ones, according to two interesting reports. Millennials have no problem with changing banks, and many of them would just as well switch to companies like Google, Paypal or Spotify if these offered banking services.

This infographic shares some interesting insights:

27% of millennials say they don’t see the need for any bank. And more than a third believe they will not use a bank in five years time.

Another interesting stat is that more than half of those interviewed don’t think there is anything separating their bank from other banks. And one third are willing to change banks. On a side note, that figure was even higher in a recent Swedish survey among 18-24 year olds (link in Swedish).

If we combine this with the fact that more than half of millennials are willing to use non-traditional methods of payment the conclusion is that banks need to get a lot better at creating digital solutions that makes life easier for their customers in a hurry.

And the reason for this is that digital is a key part in banking for millennials. 62% of them use on-line banking via mobile or tablet. And 32% have never seen the inside of a bank.

The importance of digital and tech goes deeper than that, however. 73% of millennials are more receptive to an offer from Apple, Google or Amazon than from a traditional bank. The reason for this, according to the surveys, is that millennials see tech-driven companies like this as leaders. They’re not just companies they would like to work for, but also potential suppliers of financial services.

There is a very revealing quote from a professor in one of the studies:

“If Apple opened a bank, it would have 37 million customers on the first day. Apple doesn’t have customers, it has admirers, and that doesn’t happen in the financial sector”.

(Rodrigo Garcia de la Cruz, Professor at Instituto de Estudios Bursatiles.)

Millennials are not just fans of Apple, they’re fans and users of digital and mobile technology that is constantly improved and refined in terms of user experience.They’re used to being able to shift from one screen to another with Netflix.They’re used to ordering a taxi via Uber’s app or booking someplace to stay with the help of AirBnB. They’ll soon get used to ordering lunch by just tweeting an emoji.

And then they encounter traditional banks and wonder why everything is so difficult all of a sudden.

In certain areas banks are making headway, transferring money is one such area. But most of the developments in banking takes place outside mature markets, where traditional banks don’t exist. If we want to see traditional banks show digital leadership we have to look long and hard.

Millennials, as well as others, see this. That’s why nearly half of them expect major changes to the banking industry to come from someone outside that industry.

If banks are to persuade millennials that they have something to offer in the future they need to step up and improve their digital services a great deal. And they need to hurry because there are already competitors with one foot inside the industry investing in this kind of development.

The alternative is that most of us will be banking with Google in the near future. And vaguely recalling that there used to be an entire industry devoted to financial services.

Here are the two reports:

Millennial Disruption Index

BBVA Innovation center – These are the millennials


What do you think – Will banks do great in the future or do they need to transform the way they do business? Leave a comment below.


Image: Ken Teegardin, Injured piggy bank with crutches, Flickr

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