The report: What Customers Want From Banks: Online Banking Trends and Consumer Priorities
Source: The Motley Fool
Why we picked it: While The Motley Fool is directed at investors, clear-eyed fundamental analysis can clear away a lot of industry-insider distraction, and underline indisputable trends that impact all bankers.
Executive Summary
A recent survey of 2,000 consumers by investment site The Motley Fool reported that almost all consumers now view digital banking services and capabilities as key factors in choosing a bank, on par with security and customer service – and almost twice as many as those who prioritize competitive savings rates. Fully three-quarters of respondents are open to switching banks for better services, with millennials being the most likely to switch – but the hassle of changing automatic payments and direct deposits remains a significant barrier to switching.
Key Takeaways
• Digital banking is now as important as security and customer service in bank selection.
• Competitive savings rates are the most crucial interest-related factor across all generations.
• While 76% of consumers would switch banks for better services, logistical challenges hinder many.
• Younger generations, especially millennials, show less bank loyalty and more willingness to switch.
• Social responsibility factors, while not top priorities, are gaining importance in bank selection.
What we liked about this report: While it aligns with a general industry consensus on the importance of digital, it makes the point in usefully unequivocal terms.
What we didn’t: Because the report is written for an investment audience, it doesn’t provide any actionable advice for bankers per se – but then we knew that going in.
Digital Products and Services Now Drive Selection
In 2024, digital banking has cemented its place as a cornerstone of consumer banking preferences. The survey reveals that 91% of respondents view mobile and online access as a critical factor in choosing a bank, more so than traditional priorities like security and fraud protection, and quality customer service.
This trend underscores the need for banks to invest heavily in their digital infrastructure and user experience to remain competitive. As consumers increasingly manage their finances through smartphones and computers, banks that fail to provide seamless, user-friendly digital experiences risk losing market share to more tech-savvy competitors.
The importance of digital banking is particularly pronounced among younger generations. While all age groups value online access, Gen Z and millennials show a marked preference for digital services over traditional banking features like ATM access and branch locations.
This generational shift suggests that banks must continue to innovate their digital offerings to attract and retain younger customers. Features such as intuitive mobile apps, real-time transaction notifications, and easy-to-use budgeting tools are no longer nice-to-haves but essential components of a competitive banking package.
Dig deeper:
- How ‘Hyper Personalization’ Creates High-Touch Customer Experiences at Scale
- Can Banks Delight Customers Without Creeping Them Out?
What Still Matters
However, the emphasis on digital banking doesn’t mean that traditional banking channels have become obsolete. The survey shows that 88% of respondents still consider convenient branch locations important. This indicates that while digital banking is crucial, a hybrid model that combines robust online services with strategic physical presence may be the optimal approach for many banks. This could involve reimagining branch roles to focus on complex transactions, financial advice, and building community relationships, while routine transactions are primarily handled through digital channels.
As digital banking evolves, security remains a top concern. With 91% of respondents citing security and fraud protection as crucial, banks must ensure that their digital platforms are not only convenient but also secure. This may involve implementing advanced authentication methods, such as biometrics or two-factor authentication, and educating customers about cybersecurity best practices. Banks that can effectively communicate their security measures and build trust in their digital platforms will likely see increased adoption and loyalty from security-conscious consumers.
Interest rates and account features: Despite the emphasis on digital services, traditional banking concerns still play a significant role in consumer decision-making. Competitive interest rates, particularly for savings accounts, remain a top priority for consumers across all generations. In fact, 49% of respondents identified savings account rates as the most important interest-related factor, far outweighing other products like personal loans or mortgages.
Automate Your CX:
14% of respondents cite changing automatic payments and direct deposits as the biggest obstacle to switching banks.
This preference highlights the ongoing importance of core banking products and suggests that even as banks innovate in the digital space, they cannot neglect the fundamental appeal of attractive savings rates.
Low fees on checking and other accounts are also crucial, with 90% of respondents citing this as an important factor. This preference aligns well with the rise of online banks, which often offer lower or zero-fee accounts due to their reduced overhead costs. Banks looking to attract cost-conscious consumers should consider.
Consumer loyalty and bank switching: The survey reveals a significant willingness among consumers to switch banks if they find one that better meets their needs. A striking 76% of respondents indicated they would be likely to switch, up from 52% in 2020. This trend is particularly pronounced among millennials, with 86% expressing a willingness to change banks.
However, the process of switching banks is not without obstacles. The hassle of changing banks and the need to update automatic payments and direct deposits are cited as significant barriers. Banks looking to attract new customers should consider streamlining their account opening and transfer processes, potentially offering services to help new customers easily transition their recurring payments and deposits.
The growing importance of social responsibility: While not top priorities, social responsibility factors are gaining importance in consumers’ banking decisions. Sustainability and environmental friendliness are considered important by 70% of respondents, while diversity in bank leadership matters to 68%. Community involvement is valued by 75% of consumers.
Don't Forget About ESG:
70% of consumers consider a bank's sustainability and environmental friendliness important.
These figures suggest that banks should not overlook their social and environmental initiatives. As these factors become increasingly important to consumers, particularly younger generations, banks that demonstrate strong commitments to sustainability, diversity, and community engagement may find themselves with a competitive edge.
Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.