It’s often said that customer loyalty is dead amongst the millennial generation. And with the rise in fintechs and online banks, along with the increasing ease of switching financial providers, it’s no surprise to hear that traditional banks are under pressure to keep the business of their customers – especially under 35s.
That’s because the millennial customer is hugely important to banks; this generation is beginning to support themselves, apply for mortgages and take out financial loans for larger purchases, such as cars or even their own businesses.
In Feefo’s latest research, we explore the attitudes of the 16-34 age group when it comes to the UK banking industry. We surveyed 1,002 millennials across the UK, to find out what influences their choice of bank, which factors contribute to their loyalty, or why they become tempted to change providers. Most importantly, we learn what traditional banks and other financial companies should be doing if they want to keep ahead of the competition, and ensure their customers remain loyal.
Considering who to bank with is an important decision: you are putting your trust and financial assets in the hands of a business. When asked what the most influential factor was when choosing a bank, a huge 85% stated that access to authentic positive reviews was a key factor in their decision. Reviews were even more popular than recommendations from friends and family (82%). Ethical banking practices and showcasing awards are also essential ways to attract customers. Customers are more likely to head directly to the bank’s website, rather than go in-store to help with their decision, and only 11% will use social media as part of their decision journey.
Our research revealed that despite 88% of respondents regarding themselves as loyal, over half (61%) admitted that they are intending to switch providers more frequently in future. The top reason for switching was finding better rates elsewhere (25%), followed by more personalised offers (18%) and another bank offering a better overall experience (17%).
Just because the majority of customers consider themselves loyal does not mean that banks can sit back and expect them to stay that way. As identified, even though a customer might currently be satisfied with their banking provider, they could be swayed; especially if circumstances change and they become dissatisfied with their current bank.
54% of respondents view competitiveness in rates and charges as the best way for their bank to keep their custom and more than a third (37%) say they are more likely to stick with their bank if it enhances its services with cutting-edge technology.
Our research also revealed a general feeling that financial organisations fail to listen closely enough to their customers and make little effort to understand them. 40% said that they have little or no engagement with their bank and that they themselves only actively correspond when something goes wrong. More than half (51%) of people who have never switched providers think that their bank listens to them.
This is insightful, as it shows huge potential and an urgent need for banks to assess exactly how they interact with their customers.
Open Banking, an initiative led by the Competition and Markets Authority (CMA) ordering the biggest UK banks to share their customer data with new entrants and online service providers, is being introduced to encourage better service and innovation in the banking industry. Challenger banks and fintech start-ups are in a stronger position to sway customer loyalty away from traditional banks by offering aggregated services, especially with customers that are tech-savvy – such as millennials.
More than half (51%) of those who responded to the survey have already chosen products or services from a non-traditional provider, and the majority describe themselves as being loyal to their current provider. The attraction of non-traditional providers varies, but technology holds the greatest appeal (19%).
To stay on top, traditional banks need to ensure that they can provide their customers with relevant and useful services in one place, along with a greater customer experience through the use of cutting-edge technology. They need to provide an ecosystem, that will simplify their customers lives.
The perfect example of this is Apple, who even though they aren’t the cheapest in their marketplace, offer a seamless experience across all their products that customers are willing to pay a premium for, thanks to the convenience. When a customer has purchased two or three products from a company, their relationship with the brand is naturally stronger, so they are less likely to lapse or detract.
Here are four steps that banks and other financial providers should be taking to keep up with millennial’s demands, make their services more desirable, and encourage loyalty in a highly competitive market.
1. Collect and display genuine customer reviews – Identified as the most influential factor for customers when choosing their banking provider, collecting and showing feedback helps to build confidence with potential customers. By using an invite-only review platform, you also give consumers peace of mind that you follow open and ethical practices.
2. Evaluate your offering – It’s important to be aware of the rates and rewards that your competitors are offering, or why other banks may be attracting your customers. You can do this through carrying out market research, but also by collecting feedback from customers who have decided to stop using your services. Analyse this feedback to identify trends so you can make the necessary changes to give customers fewer reasons to switch.
3. Listen to your customers – Don’t just contact your customers when you are trying to upsell products or services, or wait for them to contact you when there is a problem. It’s important to show that you care about all your customers – why not create an exciting and engaging marketing campaign or use a live chat function on your website so that customers have access to customer service 24/7? Another great way to engage with your customers is to reply to all the feedback you receive, both good and bad, to show that you are listening to what they have to say.
4. Use cutting-edge technology – Banking shouldn’t be boring, and there is no excuse for traditional banks not to utilise mobile, apps and even AI technology to provide a better and exciting service for their customers. If you can make customers’ lives a little bit easier, they will repay you with their loyalty.
Feefo’s finance report is available to download now and will provide you with all the stats and insights you need to know about your millennial customers when it comes to banking.
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