Top Three Trends from Raddon’s Annual Payments and Channels Study
Recent years have seen an explosion in new digital payment methods and delivery channels. But are these new mechanisms replacing or merely supporting existing consumer behavior and preferences?
In Raddon’s recent study, Payments Insights: Rise of the Digital Pioneers, we find that consumers are increasingly engaged in payments technology, and more importantly, technology is driving some consumers to look away from traditional banking players.
That’s just one of the findings from this year’s study. Every year, Raddon performs a “state of the industry” insights study on the payments and delivery habits, expectations, and behaviors of the American consumer public. Here are three trends we’ve noticed that may impact your plans for 2018:
1. Consumers have wildly varying attitudes toward technology and banking services.
We asked consumers about how they viewed banks and credit unions in relationship to technology companies and how they transacted in various ways. What we found was that consumers fit into three broad attitudinal categories:
Conventionals represent traditional face-to-face, in-the-branches customers, and no surprise, older generations and community bank customers tend to skew toward this group. Digitals are very technology-focused, but they still embrace traditional providers, like regional banks and credit unions. Pioneers, on the other hand, are most likely to believe that all banks are the same and that tech companies can do things better.
Millennials and those who claim a Major Bank as a primary financial institution are most likely to be Pioneers, with 42% of Millennials falling into that segment. As these are the consumers most likely to “jump ship” to non-traditional providers or technology companies, this high percentage represents a significant risk to traditional banks and credit unions.
Tracking delivery channel usage and payment history can help institutions understand where a customer might fall in this spectrum. Marketing new technology offerings appropriately may help to keep the Pioneers and Digitals and even attract new ones.
2. Growth in mobile banking will come from older consumers.
So far, mobile banking has been the domain of the young, with Millennials 50% more likely than average to use the service, while Traditionalists are 57% less likely. But with Millennial usage of mobile banking basically ubiquitous at this point, any growth to come in that channel will need to come from older generations. Will they adopt?
History says yes. After all, in 2011, people over 65 (broadly Traditionalists) were 47% less likely to use online banking, while those under 35 (Millennials) were 35% more likely. Today, overall usage has increased from 62% to 88%, and those over 65 are only 12% less likely to use the product. There is still a gap, but it is much smaller than before. We anticipate the same trend to occur with mobile banking over the next five years.
Institutions should consider ease of use, text size, and support as more users adopt mobile banking who might not have the intuitive connection with the smartphone that Millennials have.
3. Branch traffic is changing, and branches should adapt to match.
While 77% of consumers still use a branch at least once a month, that percentage has fallen from 84% in 2007. More importantly, however, the number of transactions per month has dropped from 4.26 to 3.79. In percentage terms, the number of transactions done in branches have fallen 18% in ten years. That’s extremely significant from a staffing perspective.
We asked consumers what they would do if their local PFI branch were to close and then asked what they actually did do if that situation had occurred, as it has for 23% of consumers.
What we found was that in the hypothetical, 27% said they would do nothing because it would have no impact, but only 15% actually did nothing when faced with that situation. It turns out, people will take action, but by far the most common activity is to drive to a new branch of the same institution. Fascinatingly, 29% reported that they moved some aspect of their banking relationship to a new institution due to branch closure, while only 24% thought they would, should the situation arise.
This is just a snippet of what’s in this report. Check it out to see more about mobile banking, checking account preferences, mobile and P2P payments, social networks, and much more.
Summary: Younger consumers in particular are starting to lose faith in the banking industry to provide the technology they need to conduct their financial business. In the meantime, older consumers will begin embracing those technologies the industry does provide, putting additional pressure on branches to be revenue centers rather than cost centers.