Millennials — people born between 1981 and 1996 — are the most likely to have switched banks in the last two years or plan to switch in the next year, according to Morning Consult. The good news is that research has also shown that younger customers are more likely to visit a branch than older ones. But they’re also less likely to tolerate slow processes or outdated technology. And they like to share their experiences — both positive and negative — on social media. Millennials are making financial decisions independently and at a much faster speed than previous generations.
The concept of lifelong brand loyalty toward a single bank for all financial needs is limited. Generally, users tend to engage with multiple providers for whoever provides best-in-class services. For example, a consumer could go to one provider for a credit card and another for a mortgage. They are also less likely to stay with one bank forever. Getting their loyalty requires continuous innovation across all dimensions and a huge ecosystem at the back end that provides an integrated, secure, and modern digital banking experience.
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That’s a big ask for traditional banks, which have tended to favor solutions they built themselves. For inspiration, they can look to the emerging crop of more than 10,000 financial technology (fintech) startups. Most deliver born-on-the-web customer experiences without the baggage of legacy systems. They are mobile by default, are highly personalized, and rely on ecosystems of third-party services to embellish their core offerings. Although they compete with traditional banks, fintechs are also becoming important partners. That’s why banks bought up fintech startups to the tune of $83.1 billion in 2021. “There are purpose-driven fintechs that banks can partner with to bring products to communities they couldn’t reach before,” says Kyndryl’s Damiani. “Large banks no longer see fintechs as a threat. Instead, they are beginning to leverage these capabilities to accelerate their innovations and, in many cases, promote fintech development around the world.” The biggest headwinds banks face are often generated internally. Organizational silos can limit collaboration and throttle innovation by slowing process redesign and inhibiting the robust feedback loops that enable rapid experimentation. There’s no easy way to break down silos — but top executives can facilitate the process by stressing the importance of customer experience and offering programs to reskill employees whose jobs may be marginalized by new digital workflows.