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Growing Demand for Mobile Banking Hurts Small Institutions

National banks are winning more consumers who want to bank digitally because people believe big banks have better mobile banking solutions.

By Rob Rubin, Managing Director, Novantas

The perception for many young consumers is that the national banks offer the best mobile banking services. Is it just a coincidence that young consumers on FindABetterBank.com are more likely to select a national bank over a community banks or credit union? Not likely. If national banks’ grip on branch-share dominance wasn’t already tight enough, the strength of their digital channels enables them to expand into new markets without big investments in new branches.

In a recent BankChoice Monitor survey of consumers shopping for new checking accounts on FindABetterBank.com, 36% of shoppers say they must have mobile banking with their next checking account — shoppers under 30 are more than twice as likely to require mobile banking compared with shoppers over age 60 or older. On FindABetterBank, shoppers 50 or older are the most likely shoppers to select small institutions and shoppers under 30 are more likely to select national banks.

consumer_demand_for_mobile_banking

Raddon | Strategic Consulting Solutions

National banks are winning more customers that want to bank digitally. Today, many young consumers’ shopping for checking accounts consider mobile banking to be more important than having branches nearby — and many believe that national banks offer better mobile banking solutions. As demand for mobile banking continues to grow, national banks will be in a better position to compete in markets where they don’t have large branch networks because many shoppers will consider digital channels more than branches.

Small institutions appeal most to a minority of people shopping for checking accounts today. A handful of small banks and credit unions perform well with younger consumers. But most do much better with older shoppers. This is partly because a higher percent of small institutions have checking products geared towards senior and features like access to surcharge-free ATMs resonates with this group. The problem for small institutions is that only 17% of people actively shopping for checking accounts are over 50 years old.

Insights from Rob RubinRob Rubin is Managing Director of Novantas Data Services. His research leverages insights captured from thousands of bank shoppers every day while they are actually thinking about- and in the process of shopping for a new bank.

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Digital Banking Report | 2017 Trends & Predictions

Comments

  1. As customer facing technology solutions continue to grow, the ability of credit unions and banks to develop and/or implement those technology solutions becomes more and more difficult. Costs are too high and expertise is lacking.

    This means that credit unions and most banks must change their business model around how they develop, select and implement customer facing technology solutions. Until that happens the technology gap between the large national and regional banks compared to credit unions and the remaining banks will continue to grow.

    Until that gap is closed the large national and regional banks will continue to grow the millennial generation customers at the expenses of their smaller banks and credit unions.

    Here is an idea that can help credit unions and banks. It is radical and bold, but the prospect of failure is even greater if the trend is not reversed.

  2. I agree with you, Rob.

    To add to why customers prefer national bank is the perception that national banks have the net security capabilities than community banks.

    Customer also wants bank that will secure his financial details.

    If we critically looked at the recent data attack on some US banks, we’ll find out that their net security were able to discover the breach on time. And that’s why much harm hasn’t been done on customers’ accounts.

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