How to Serve Banking Customers into the Future

Competition for share of consumers’ wallets has never been hotter since the end of the Great Recession, with more mobile/online-only banks, like Ally and Chime, popping up to compete with traditional financial institutions. These disrupters to the industry are responding to changing consumer needs, and traditional banks and credit unions will need to adapt to remain relevant and grow their businesses.

Consumers’ Changing Needs from Financial Institutions

Consumers value some bank services differently now than they did five years ago, according to the latest results from Rockbridge’s National Technology Readiness Survey.  While the importance of most bank services, including having convenient local branches available has remained stable, two interesting changes have occurred in the services U.S. consumers require from their banks and credit unions. First, mobile banking apps are now critical to four in ten consumers (40%), compared to just one in five consumers (22%) in 2014. Second, free local ATMs are becoming less important as people move away from cash. While still critical to just over half (53%) of consumers in 2019, more consumers feel ATMs are not that important (17%) compared to 2014 (12%).

Despite consumers having more dependence on digital tools and less reliance on cash, physical bank branches remain an important part of retail financial institutions’ strategy and many banks and credit unions are looking for ways to optimize their physical locations. From Capital One Cafés to Chase’s Everyday Express branches, financial institutions want to serve more than just their customers’ financial interests and do it in different types of locations to help their organizations stay relevant and grow.

New Products and Services:  It’s Not Just Financial Anymore

Financial institutions could consider broadening their product line from traditional financial services products to provide other consumer services, according to the NTRS.  When asked about a range of non-financial products and services, U.S. consumers are most likely to consider using a bank as an originator of legal documents (i.e. a will) (21%), or as an insurance provider (17%), which may be viewed as natural extensions of these institutions’ core products. In contrast, around half of consumers are not at all likely to use a bank as a mobile phone service provider (45%) or as a TV/cable provider (50%). These services may seem too far removed from financial institutions’ primary mandate. However, given that most people are at least somewhat likely to use these services if offered by a bank or credit union, they may represent a long-term opportunity for financial institutions.

New Banking Locations: Moving Beyond the Traditional Branch

Despite the excitement around new bank branch formats such as Capital One Café, nearly half of U.S. consumers (47%) only feel comfortable doing their banking at a traditional bank branch (37%) or online (9%). That said, there are many consumers who are open to other types of locations that may be more convenient for them given their lifestyles.  At least a quarter of consumers would be comfortable doing their banking at a grocery store (33%), big box retailer like Target or Walmart (25%), or post office or shipping company like UPS or FedEx (25%). Banks are least likely to attract customers to gyms (4%), full-service restaurants (6%), coffee shops (11%), or bookstores (11%).

While financial institutions understand and meet consumer needs online and offline, thinking outside the box about how to better serve them in the future requires understanding their comfort levels for new products and types of locations to do their banking. There is a limit to what consumers will accept as services from their financial institutions and where they would do business with these institutions, at least in the near term.

About the Study: The National Technology Readiness Survey is conducted by Rockbridge Associates, Inc. and A. Parasuraman, and has tracked technology and e-commerce trends since 1999.  The survey is co-sponsored by the Center for Excellence in Service at the Robert H. Smith School of Business. The most recent wave is based on an online survey wave of 1,083 U.S. adults sampled at random from a consumer research panel in May 2019. A total of 507 were asked about their financial services usage and attitudes. Results are weighted to match census characteristics.

Written by: Hilary Ross-Rojas, Research Director