How to Keep Consumers from Breaking Up with Banks
Today’s U.S. consumers aren’t looking for forever when it comes to their banking relationships. They’re looking for good service, convenience, good rates, and low fees. And, they aren’t afraid to switch if financial institutions and fintechs aren’t delivering.
MX’s latest survey of more than 1,000 U.S. adults found that 55% of respondents have closed a financial account in the past. And, nearly 1 in 4 consumers (23%) are opening new financial accounts at least once per year or more often.
At this rate of new account openings, it’s no surprise that the clear majority of consumers also believe an individual can have more than one primary financial relationship. Seventy-seven percent of U.S. consumers believe this — and more than 80% of Gen X and Baby Boomers believe it. So what does this mean for financial institutions and fintechs?
Defining Today’s Primary Financial Relationship
The average consumer has at least 5 to 7 financial accounts with different providers, making it nearly impossible for bank, credit union, and fintech leaders to measure primacy. As a result, leaders at top financial institutions and fintechs are changing how they define a primary financial relationship within their organizations. It’s no longer about direct deposits, payment activity, or the number of products and services a consumer has with a particular institution. Today, it’s about engagement, eyeballs, and experiences.
Surprisingly, 83% of consumers still say they have a financial provider they consider the primary one. Consumer perspectives are also evolving when asked how they define a primary financial relationship. Only 38% of consumers define a primary financial relationship as where their direct deposit for their paycheck goes — this is a sizable decrease compared to 2020 research shared by the Financial Brand that showed more than half of consumers defined primary financial relationships by direct deposits.
The other most used definitions? Twenty percent of U.S. consumers define a primary financial relationship as where they conduct most of their day-to-day transactions. Another 10% say it is where they have connected other financial accounts to see their finances in one place. Among Gen Z, 11% define it as where they log into most frequently online or through a mobile app.
Very few respondents defined a primary financial relationship as where they deposit most of their money (5%) or the account they’ve had the longest (8%). But, that doesn’t mean keeping customers for the long term is a thing of the past. When asked how long they’ve had their oldest financial account, 22% of all respondents say they have had an account for more than 15 years.
Diving a little deeper, it’s no surprise that age means longer relationships. Nearly 50% of Baby Boomers have had an account for more than 15 years. In addition, women are more likely to keep accounts longer — 26% of women have had their oldest account for more than 15 years, compared to 18% of men. Respondents who classify their ethnicity as White are also more likely to have longer relationships than non-White respondents. 25% of White respondents have had their oldest account for more than 15 years, compared to 19% of non-White respondents.
For younger generations, the average time period for their longest-held accounts falls between 1-6 years. Forty-two percent of Gen Z respondents say their oldest account is 1-3 years old, while 24% of Millennials report the same.
When asked the main reason why they keep their oldest financial account, the top reasons echo why consumers also leave financial providers. But, it also reinforces that humans are creatures of habit — 29% of U.S. consumers said the main reason is because it’s the one they’ve had the longest. Other top reasons include:
- Good customer service (18%)
- Good reputation (12%)
- No/low monthly fees (10%)
- Convenient branches and ATMs (9%)
- Good online or mobile experience (8%)
Interestingly, 6% of all respondents said the primary reason for keeping their oldest account is because it’s too much hassle to switch. Instead of switching, many consumers may simply be opening new accounts and letting others lie dormant. When asked how often they have opened a new financial account on average, nearly 1 in 4 consumers (23%) are opening new accounts at least once per year or more often — with 4% opening a new account every 3 months. Among Gen Z, this jumps to 36% opening new accounts at least once per year. To win customers in the future, financial providers should prioritize optimizing the account opening process to make it convenient and easy for consumers to switch.
Choosing the Right Financial Provider
Let’s take a look at what consumers look for when choosing a new financial provider. Mobile banking applications top the list when consumers are asked what’s most important in choosing a financial provider. And, for Gen Z and Millennials, it’s even more important. The top 5 most important elements when choosing a financial provider across all respondents include:
That said, while mobile apps are important for acquiring new customers, they may be less important to keeping customers. Of the more than half of consumers who have closed a financial account, less than 5% say they did so because they were unhappy with the mobile experience.
Having a good digital and mobile banking experience has become table stakes. Financial institutions and fintechs won’t even be invited into a consumer’s life if they don’t deliver on the digital and mobile experiences consumers have come to expect.
Instead, what makes consumers leave is rooted in service, convenience, and rates. When asked about the primary reason they’ve closed an account, U.S. consumers say:
And, underlying everything is trust and security. When asked which factors are important when it comes to their experience with financial providers today, consumers continue to rank security as No. 1 most often (30%), followed closely by trust (25%).
Rising to Consumer Expectations
Gaining and retaining consumer trust for the long term isn’t easy. In our previous research, 33% of consumers agreed they felt financial providers don’t do enough to support their financial needs. But what do they need and what is enough? Our research shows consumer expectations center on proactivity and personalization.
Half of consumers agree they believe financial providers have a responsibility to teach them to be financially strong. And, 59% of respondents want their financial provider to proactively help them better manage their finances. This has been a consistent refrain for more than 18 months as we’ve asked this question in the past.
The good news is that when asked if they believe financial providers are proactively helping them better manage their finances, 62% said yes. But is that enough? On the flip side, 19% say no and another 15% aren’t sure if their financial providers are proactively helping them.
For a majority of consumers, money is the biggest stressor in their lives. In fact, 53% of consumers say money is a source of stress for them. Additionally, 52% agree thinking about money makes them anxious — an increase from 47% just six months ago.
Add on the fact that the average consumer already has 5 to 7 accounts with different financial providers. And, if they are opening new accounts at the rates cited above, tracking and managing finances across disparate accounts quickly becomes unwieldy.
When asked what best describes how they currently track and manage finances, the majority of consumers (40%) said they only check their finances through their financial accounts. Only 21% use a budgeting tool or app while 20% use a spreadsheet or other manual process. And, 15% of consumers say they don’t track their finances — an increase from less than 10% six months ago.
Let’s say that again: 15% of consumers don’t track their finances.
Financial institutions and fintechs have tremendous opportunities to help consumers become financially stronger. Here’s two examples:
Simplify digital money management with account aggregation.
Less than half of consumers (44%) say they have used digital tools to bring different financial accounts into one view. Why? Top reasons include:
- I don’t care about seeing all my accounts in one place (25%)
- I don’t have multiple accounts to combine (21%)
- I don’t know how to do this (17%)
- I’m concerned about sharing my financial information (17%)
For Gen Z, the number of those who say they don’t know how to do this rises to 22%. As Open Finance makes it easier for consumers to share their financial data, financial institutions have an opportunity to educate consumers on the benefits of account aggregation and how to create a 360-view of their finances in a single place.
Help consumers get smarter on financial topics.
Teaching consumers to be financially strong doesn’t mean just sending them alerts when their account balance is low. In fact, increasing their financial literacy could also help increase engagement and the bottom line, according to research from Rebel.
“When it comes to money, it’s not awareness of products and services that keeps customers coming back. It’s their own perceived ability to manage that product or service that initially causes them to engage — and keeps them engaged over time.” — The X Factor
Where to start? Consumers say the financial topics they’d most like to receive additional education or support are:
Further, when asked what question is most important to be able to answer when it comes to managing finances, consumers say:
- Am I spending more than I should? (22%)
- How can I cut expenses? (20%)
- How much can I put towards debt or savings? (19%)
- Am I saving enough for retirement (15%)
- How am I tracking against my budget? (13%)
Interestingly, the top question to answer in July 2023 was about how much they could put towards debt or savings. Now, consumers are focused on how much they are spending and how to spend less. We see this echoed in top goals for 2024 among consumers:
More than half of U.S. consumers (54%) expect their financial provider to know them. Financial institutions and fintechs have a wealth of data about their consumers. Most consumers (54%) want financial providers to leverage that data to personalize their experience. And, 48% say they would give their financial provider access to more of their data if they knew it would result in a better experience. Among Gen Z (54%) and Millennials (58%), this is even higher.
But, consumers won’t share their data for nothing. Sharing this data has to result in value for them. They’re willing to exchange data for more personalized, more relevant, and more timely experiences.
So what do consumers think personalization means? When asked which statement most closely aligns with what they think a personalized money experience should look like, consumers said:
While each of these is a form of personalization, it’s clear consumers see choice as core to how they perceive what a personalized money experience means. Financial providers should ensure that any personalization comes with a choice for consumers to ensure they can tailor their ultimate experience to their needs.
And, financial providers have room to grow when it comes to leveraging data to create more personalized experiences. Forty-four percent of respondents either said no or they weren’t sure when asked if they believe financial providers are leveraging the data they have about them to personalize their experience. This is a telling statistic as it becomes easier for consumers to open new accounts or switch financial providers if they aren’t satisfied. Consumers are more likely to leave — or simply stop using that account — if the provider isn’t leveraging what they know about their consumers to create better experiences.
The research also shows consumers are still wary of maintaining security and privacy. Sixty-four percent of respondents said they’d rather keep all of their financial data separated by account to ensure security and privacy. This is compared to 36% who would prefer to securely share their financial data from all their accounts so they can receive personalized guidance and insights in one place. However, among Gen Z and Millennials, the scale is tipping. Half of Gen Z and 41% of Millennials would rather share their financial data to receive personalized guidance and insights versus keeping data separated by account.
What’s Next for 2024
Today’s money experience needs to be more than just easy. While offering a mobile banking app may bring a new customer through the door, they’ll quickly leave if there is nothing to keep them there. And, as consumers continue to worry about a potential recession, they are looking for proactive, personalized insights to help them.
To win and keep customers in 2024, the money experience needs to connect customers to their data in a way that enhances their financial lives. It needs to be personalized. It needs to be intelligent. And, it needs to be actionable.
This survey of 1,043 American adults was conducted by MX in Q4 2023 using an online survey platform. Results included an even split in responses across each generation, as well as gender (male and female) and White and non-White (Asian, Black, Hispanic, or Other) respondents.