“Where do you bank?”
While consumers often have a lot of different accounts at different places, this question is generally accepted as the litmus test to determine primary financial institution status from the consumer’s perspective.
But with advancements in financial technology, their financial lives are more complex and intertwined than ever. The answer to this question isn’t as clear cut as it used to be. And the pandemic only accelerated the complexity by pushing people to get comfortable managing their money digitally.
The problem with that question is that it blurs the practical reality. It also hides the competitive threats that may be lurking in the form of neo-banks who are aggressively building relationships with these consumers, always seeking a greater share of their wallets.
Recent research has shown that especially Generation Z and Millennials are capable of having relationships with a high number of financial service providers — lowering the probability that any one provider earns the coveted title of “primary.”
Recent research conducted by Qualtrics on behalf of Kasasa gives a helpful overview of the variety of products and services that Gen Z and Millennials are currently using. Although this may not surprise you when viewed in aggregate, the surprise comes when you examine what these network looks like for an individual consumer.
Consumers were mostly content to keep their money parked in 2020. Many financial institution executives reported reduced account openings and the NCUA reported that 56% of credit unions had lower membership than in 2019.
But they won’t stay content forever. In fact, as pandemic restrictions lift, community financial institutions can expect to see higher-than-normal rates of switching… unless they do something about it. When consumers say they want to switch, what they’re really saying is, “I need a financial institution that meets my needs better.”