Consumers emerging from the pandemic are navigating turbulent economic waters, with soaring inflation, rising interest rates and disappearing pandemic relief making management of their financial health — and shrinking their debt — a top priority. This realignment has driven a subtle but significant shift in their relationships with their financial institutions (FIs). Customers no longer view banks solely as service providers but increasingly as financial wellness partners that can deliver in-person, tailored solutions to their complex problems.
Consumers are still demanding that FIs deliver faster, less expensive and more transparent digital payment solutions to grease the frictionless payment paths they expect in their routine transactions, such as paying bills and transferring funds. In a surprise twist, however, customers — most notably those under the age of 35 — are increasingly turning to live, in-branch, in-person guidance from trusted financial advisers to help them chart their short- and long-term financial futures. Trust is a critical factor, particularly among customers who bank locally, with 72% of customers in a 2019 PYMNTS survey citing “trust” as their top reason for choosing their FI partners.
This month, PYMNTS Intelligence examines how consumers are looking to blend both digital and in-person FI services to manage their financial wellness. It also explores how banks can leverage these hybrid service models to deliver customers a menu of personalized services as conveniently and quickly as possible.
Consumers Crave Digital Services With a Human Touch for Financial Wellness
Recent PYMNTS research shows that mobile apps have overtaken in-person, branch banking as consumers’ top means of engaging with their banks. Forty-one percent of surveyed banking customers named mobile apps as their most-used method of interacting with their accounts, versus just 11% primarily using branches in person.
A recent survey of FI customers, however, strongly suggests that rumors of the demise of in-branch banking are premature. Instead, customers are increasingly seeking FIs that can deliver a hybrid service model that prominently features across-the-desk counsel from advisers who can partner with them, helping to craft a personalized roadmap to increase their wealth or repair their financial houses.
Thirty-one percent of consumers stated they prefer visiting branches when opening a wealth management account, compared to 16% who prefer online banking and 10% who choose mobile banking for this service. Similarly, 35% preferred to visit branches to receive financial advice, compared with 15% who turn to online banking and only 9% who utilize mobile banking. Branches are forecast to remain pivotal to banks’ overall revenue growth and as a vehicle to strengthening customer relationships, especially for complex financial transactions.
Stickiness Is Still at High Risk
Other recent survey results show that the customer migration back to brick-and-mortar bank branches is decidedly context-dependent, however. Unless banks adopt a hybrid customer approach that has a deep and diverse menu of low-cost digital payment tools that deliver customized solutions, their customers are fully prepared to switch to other banks that do.
Although 86% of United States consumers are satisfied with their banks, a significant number are increasingly open to working with new providers, including FinTech companies and other nonbank providers. More than one quarter — 28% — of other survey respondents listed “switching to a different bank” as part of their plan to improve their financial well-being. While a recent NCR survey revealed that 78% of Americans would rather partner with an FI than a FinTech provider to build a personal financial management plan, FIs and other traditional institutions still face stiff competitive headwinds from FinTechs. About one-third of all consumers, including 47% of millennials, use at least one FinTech company, large technology company, merchant or other nonbank provider for financial services activities.
The post-pandemic reality is that the mobile phone is the new bank, and unless FIs forge strategic technology partnerships to quickly and easily implement new digital payment tools that offer consumers the speed, flexibility and convenience they want, their customers will not hesitate to walk away and find providers that will. Access to products and services that fulfill unmet needs would motivate a majority of consumers to switch FIs, with 70% of respondents stating they would be “likely” or “very likely” to make the switch.
To survive and thrive, FIs and credit unions must unquestionably embrace and broaden their digital payment offerings to meet the growing customer appetite for frictionless payment systems that spans every demographic. They need to remember, though, that there is also a healthy customer appetite — particularly among younger customers — for FIs that can blend those digital tools with one-on-one, personalized advice and counsel to put them on a path to financial wellness and security.
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