Today is National Online Banking Day, originally created by Ally Bank in 2015 to honor its one-millionth customer. But in just three short years, digital-only banks have gained a reputation for disrupting spending and saving trends as we know them, and continually pushing innovation boundaries to keep up with Millennial wants, needs and habits. But are cloud-based banks exactly what young people crave?
Online banking does offer a multitude of benefits. Depending on what company a customer banks with, they’ll likely see lower interest rates, no-fee ATM withdrawals, intuitive and simple digital interfaces, and a commitment to the environment.
These perks are only amplifying as more and more traditional banks vie for Millennials’ business. Earlier this year, Chase launched its digital-only branch, Finn. While it is in no way the country’s first cloud-based bank, it is the first digital brand from big banks. It’s also upping the ante to gain young customers, offering a $100 sign-up bonus, foreign transaction fees only, and 60,000 Unlimited Rewards points to those who have more than $75,000 in their bank account (casual, right?) and have a Chase Sapphire credit card.*
Chase may be first on this front, but they aren’t alone. Citi has plans to launch a digital bank, too, and Wells Fargo’s Greenhouse is slated to finish its beta phase soon. Citizens Bank also announced its cloud-based solution in July, offering a two-percent annual percentage yield and no-fee accounts. All are likely to be followed by the masses in the coming years, according to MarketWatch. It’s recent Payments Landscape in the US: Opportunities and Risks to 2022 study, it anticipates that a “growing number of digital-only banks is likely to increase competition in the banking and debit card market.”
Sounds great, right? We aren’t doubting the benefits of online banking—quite the opposite. But it’s worth asking: is this truly the direction the market is moving for Millennials?
Our own research indicates that the generation’s interest doesn’t match the upheaval of in-person banking. In our 2017 Millennial Money Report, we surveyed more than 400 young people between the ages of 20 and 35 (the definition of Millennial); 67 percent of whom were women and 33 percent male. Their education, background, socioeconomic status and geographic location varied—but together, their interest in cloud-based banking was lackluster.
When asked the last time they visited their bank, 46 percent indicated within the last month. Even more surprising is their purpose of visiting: many of them said it was for mundane tasks like depositing checks or withdrawing money, which can be done via mobile or through an ATM.
We then asked if they would join an online-only bank. Overall, 41 percent of the target demo said yes to banks with no brick-and-mortar analog; meaning that 59 percent of respondents said no. For those who indicated ‘yes’ to joining, their reasons varied: better perks, no ATM fees, convenience—many of the same reasons we’ve indicated above.
But for those who said no, it is clear that old habits die hard. Their rationale lies with the mundane tasks listed, like withdrawing money or depositing checks. In-person presence seems to have relevance, still, even for Millennials.
And to that point, human interaction is clearly of value when it comes to customer satisfaction. In a study from J.D. Power, online banking customers were among some of the least satisfied in the market. Scores were driven largely in three areas, but first and foremost was communication. The most satisfied segment was “branch-dependent digital customers, the group that used the branch two or more times in the past three months and also used online or mobile banking.”
While the survey took into account all generations, it’s also worth noting it looked specifically at the gap in satisfaction between digital-centric and branch dependent customers. This gap was most pronounced among Millennials and Gen Xers, “bucking the conventional wisdom that younger banking customers do not like to use branches.”
To find the happy medium between digital-only and solely branch-banking, organizations like Bank of America and Umpqua Bank are turning to Tinder-like apps to keep Millennials swiping right on their business.
Instead of putting forth cloud-based options only, the banks are using tech to drive young people into branches, bridging the gap between innovation and tradition. Umpqua, a Portland, Oregon-based bank, launched an app that will allow customers to browse profiles and interact with bankers before coming into a physical location. Just like Tinder or Bumble, profiles consist of a photo, a few details about the employee, and information on their expertise.
Similarly, Bank of America is capitalizing on customers comfortable with digital banking but need a helping hand on-site. About a year ago, BoA began testing tablets and video-conferencing capabilities inside thinly staffed branches. The result was a success, informing the company’s decision to move forward with a larger program.
“Three aspects drive a great customers experience [in banking]: ease, effectiveness and emotion — banks usually do well on the first two but poorly on the third,” Forrester analyst Alyson Clarke told Digiday.
A balance of both digital and in-person may just be the secret sauce banks have been looking for. As always, we’ll be keeping a pulse on online banking trends and look forward to seeing the success of these programs going forward. Happy banking!