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By Crystal Gopman, CMO
Are your new customer acquisition goals higher than ever in 2024?
Yes? Then, you’re on trend. Late last year, the BAI surveyed 102 financial services organizations to gain insights for the coming year. The findings of the study, the BAI 2024 Banking Outlook, placed customer acquisition in the top two priorities—just behind deposit growth—for bankers. Coming in third? You can probably guess. Enhanced digital banking experiences. And we’re here for it.
Top 3 business challenges for bankers in 2024
- Deposit growth
- New customer acquisition
- Better digital experiences
Of course, these three concerns are overlapping. One of the best ways for banks to grow their deposits is through enlisting new customers. And banking customers—from all generations—are seeking better digital experiences. But it’s the subject of customer acquisition that really got me thinking.
Do banks know what their customers need?
For their annual study, the BAI also surveyed 1,000 consumers of all generations—from Baby Boomers to Gen Z—to assess their financial behaviors and concerns heading into 2024. One finding stood out to me: consumers from “all generations were a bit disgruntled.” Further, when asked, first in March of 2023 and then again in September of 2023, if their primary financial services organization “understands their desired digital customer experience,” every generation reported declining levels of satisfaction.
When consumers were asked “if they felt their primary financial services organization understood their financial needs,” the response was universal. Every generation from Gen Z and Millennials to Gen X and Boomers reported lower scores. This level of dissatisfaction suggests to me that, given the right set of circumstances, a wide of range of customers would consider switching banks.
Every generation is in play
Last month, I wrote a piece about demystifying bank switching behavior where I discussed a February 2024 study of 500 consumers that Pinwheel conducted with our partners at Savanta research. We came to some interesting conclusions. One figure that got my attention: 70% of all consumers would be more likely to switch banks if they could digitally transfer their direct deposit in seconds. And more significant, 81% of consumers who earn over $150k—the world’s most valuable customers we are all vying for—report they’d be more likely to switch if they were offered this capability during account acquisition.
In tandem with the BAI study, we can now further break down our findings by generation. For all four generations, BAI research shows that a superior digital customer experience can move the needle for consumers when it comes to bank switching. And while this is especially the case for Gen Z, with 61% of them reporting they’d switch to a bank that offered a better app and other digital capabilities, their older cohorts aren’t that far behind. Fifty-four percent of Millennials said they’d make the switch, as did 34% of Gen X, and even 12% of Boomers said they’d do the same.
What about those rich incentives from major banks attempting to lure customers to make the switch? They yielded paltry results at best. A full 40% of those new accounts at big banks remain unfunded with dormant accounts adding a financial burden of $120-400 per annum. It seems that better digital technology and superior services are bigger motivators for consumers to move their money to a new bank. But banks are not investing in alignment with this reality.
Which generation is the unlock?
Of course, new customer growth tends to come from people who are new to banking. People who are fresh out of college or starting their first job. These consumers typically have less money and fewer assets than older consumers. BAI author, John Rountree, concedes that, “members of the Generation Z and Millennial generations are well worth acquiring for their longer-term lifetime value, but their deposits will likely have minimal impact in the near-term.” While Gen Z represents the future of banking, I wonder if we’re overlooking more near-term opportunities for growth.
Currently, Gen Z comprises only about 5% of spending in the United States. Now that portion will rise as they enter their peak earning years. However, at this moment, the generation holds far fewer assets than older generations. We all know that Baby Boomers own the lion’s share of America’s $156 trillion in privately held assets. But Gen X owns 30%, the second largest share, which amounts to more than the assets of the Silent Generation and Millennials combined.
Gen X today, Gen Z tomorrow
For banks looking to enlist new customers in the near term, it just makes sense to market to Gen X, Boomers, and even older Millennials. And maybe that’s the audience Rountree refers to when he remarks that “banks and credit unions will focus more intently on retaining and growing existing deposits ahead of prioritizing the acquisition of new customers.”
Gen Z is the group often regaled for their tech savviness. But Gen X has embraced tech too—it’s not like Space Invaders was their last venture into the digital realm. Enhanced digital customer experiences are just as important for Xers in gaining banking primacy as it is for Gen Z. In their early 40s and 50s, Gen Xers are reaching an age where the purchase of additional products can really help banks grow their deposits. They need things like mortgages, home improvement loans, possibly home equity loans for their children’s college, brokerage services, and trust and estate planning.
For Gen X, it’s still game day. They’ve amassed significant wealth, according to a Pew Research survey they’re working and earning longer than ever, and behavior trends show they no longer hesitate to change banks if their needs aren’t being met. So, why not make it easy for them?
Let’s talk about how the industry’s top performing direct deposit switch solution can transform your account opening journey. Win primacy day one with Pinwheel Prime. Explore our direct deposit switch solutions here.
