Steve Arnison, Director, LexisNexis® Risk Solutions
Digital disruption has touched many sectors as new innovations transform the way that people carry out day-to-day tasks. In addition to daily tasks changing, the digital economy has also increased choice and transferred the balance of power from businesses and organizations to the consumer.It is no surprise then, that as the largest and one of the most technologically adept generations in the world, Millennials are poised to force digital change and the balance of power in the UK banking sector.
This year, we have seen a flurry of “challenger” banks enter the market. These new players are attempting to ‘shake up’ the traditional financial model and transform the way that people engage with their bank. Many of these new challengers have turned their backs on bricks-and-mortar branches on the high street, and instead have dedicated their focus and investment on digital alternatives such as online banking or mobile apps. Monzo, for example, is developing a current account and payments app after obtaining its banking license in August, and Atom Bank, which launched in October,already offers an app-only service.
These emerging challengers have recognised that digital technology is fuelling the biggest change in consumer banking for decades – and they are capitalising on it. It is the Millennial generation in particular that is driving the shift towards digital. This demographicis opting for online or mobile to book flights, arrange holidays, buy groceries and shop for clothes more quickly and easily than ever before, which suggests that the natural progression for banking is digital as well. According to a new report by Oracle Financial Services and Wharton FinTech, more than 25% of Millennials today are relying entirely on mobile banking, and nearly 70% engage with their banks most frequently on their smartphones or computers.
As a result, with so many digital-only challengers entering the market, traditional players are adopting new and innovative services such as the biometric technology,which HSBCrolled out to 15 million customersthis year. Clearly, many banks seem to believe that this digital focus is essential.Recent findings tell a different story, however, asmanyMillennials still value the in-branch banking experience as well.
A recent survey from LexisNexis® Risk Solutions, ‘UK Millennial Study: Privacy vs. Customer Experience in Financial Services3’, suggests that there is still a need for a physical presence from banks. Despite Millennials being digitally connected via smartphones and laptops, nearly two-thirds (64%) worry about the risk of online privacy, and over half (52%) are concerned about having their identity stolen through online, or mobile/app-based activities. Nearly half (48%) expressed their concerns about entering and viewing banking information on a mobile device.
The research also found that (61%) of Millennials in the UK would prefer to open a new bank account in-person, and just under half (47%) would rather open a credit card account in branch. When asked to provide a reason for this, over half (53%) stated that they found it intrusive to provide the level of financial information required to open a new account online, and 49% confirmed that they found it easier to open a new account in person, which further suggests that the online process is not as efficient as Millennial banking customers would like.
These younger consumers may want the convenience of a digital offering, but they still value the human interaction and face-to-face customer service that they get in branch. It would seem that having a representative of the bank to speak to, direct questions to, and who can offer guidance and an immediate decision, is still important to these customers.
Further highlighting the importance that Millennials place on opening a new account in person, respondents to the LexisNexis Risk Solutions survey overwhelmingly stated that they would be willing to wait more than 30 minutes to open a new account in branch (63%), whilst less than half (48%) said that they would wait for the same length of time to open an account online.
These findings show that even the tech-savvy Millennials who are thought of as ‘digital natives’ look for face-to-face advice when making important financial decisions.Financial services institutions therefore need to balance the level of friction that customers will tolerate with the need to safeguard these individuals against fraud, whilst also innovating to meet the demands of an increasingly digitally-savvy customer base.
Banks need to adopt technology to streamline how they engage with their customers. For example,banks could introduce solutions that make it easier for customers to prove their identity when opening a new account online, or perhaps create a system that alerts them to the moment a particular customer enters a branch. This way, the bank can gain important insights into their customers’ accounts and spending habits, which means that branch staff will be able to deliver a highly personalised service without the customer even having to open their wallet.
Our findings suggest that it is not only a digital service that customers demand; they also expect a consistent and convenient experience across all channels. The onus therefore is on banks to take proactive measures to streamline their onboarding and customer interaction processes. If they can master an omni-channel approach across online, mobile and bricks-and-mortar, banks will reap rewards that include higher customer retention and loyalty levels.