Tectonic Shifts In Banking Channel Preferences

The American Bankers Association (ABA) released the results of its 2011 survey of US consumers’ preferences of banking channels. The survey of more than 2,000 U.S. adults found that:

62% of adults prefer to use the online channel to do their banking — up from 36 percent in last year’s survey. And for the first time, the majority (57%) of customers 55 and older say they opt to do their banking online, a significant increase from 20% in 2010. The popularity of all other banking methods has declined since last year’s survey, with preference for branches dropping from 25% to 20% and preference for ATMs dropping from 15%to 8%. The least preferred method of banking was the mobile channel, which dropped from 3% in 2011 to 1% this year.

My take: I have three reactions to these findings:

1.  The shift is too dramatic. I’ve been doing consumer research in the financial services industry for most of the past 12 years — looking at the adoption of online banking, online bill pay, account aggregation, eStatements, PFM, etc. — and I have never seen, year over the year, the kind of change reported by the ABA. 

From 2010 to 2011, the percentage of 55+ year-old consumers that prefer to bank online nearly tripled from 20% to 57%. Why? What the hell happened between last year and this year that suddenly made Boomers wake up to the benefits of online banking?

Even the shift among all adults — from26% to 62% — is huge, but it’s hard to tell how much of that shift is being influenced by the 55+ segment (it shouldn’t be too much if the sample is representative). Did Gen Yers wake up one morning and discover online banking? And are you trying to tell me that a significant percentage of them shifted their preference from the branch and ATM? No way.  

2. We need to ask more specific questions. Whatever the reason for the tectonic shifts in preferences, the results of the study convince me that we researchers need to get a little more specific when asking about channel preferences. Specifically, we need to ask about channel preferences for specific types of interactions and transactions. Eight percent of consumers might say that they prefer to bank by ATM, but the reality is that they can’t do everything they need to (potentially) do with a bank through the ATM. 

3. The mobile number is out of whack. If asked, before I saw the results, to guess what percentage preferred the mobile channel, my guess would have been a lot higher than 1%. I would have guessed that it would have doubled from 3% to 6%. That number might seem to low to you, but keep in mind that only about 15% of US adults are using mobile banking. So 6% of 15% would mean that 4 out of 10 mobile bankers prefer the mobile channel to all others.  But the percentage didn’t double — in fact, it dropped. Very counter-intuitive.

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10 thoughts on “Tectonic Shifts In Banking Channel Preferences

  1. Ron,

    You are, of course, spot on. I’ve long argued that we are limited by the poor granularity of data we have on channel utilization and preferences. This problem is exasperated by the culture of the industry that reinforces that channels ‘compete’ for revenue, eyeballs and transactions, when in fact what we really need to understand is how behavior is changing. What the ABA research tells us is that behavior is definitely changing, we should be asking about why that is happening and what are the new triggers.

    To illustrate, if you ask an average banker where they sell a mortgage product, they’ll tell you sales are dominated by branch – they’ll explain that limited amount of contact centre and web based sales occur, but it is simply not significant enough from a revenue perspective. However, when we look at data on where people go to look for a mortgage, we will find behaviorally search dominates how people find and qualify potential mortgage providers. So in reality, the mortgage is actually SOLD online, but the customer fulfills in the branch because of compliance procedures. That’s the sort of granularity we need to start looking for now.

    The relationship between a bank and a customer is more complex than – I will choose this or that channel as my preference. It is understanding what a customer is trying to do and how they are working through those journeys – I think this fits somewhat into what you called stoROIes.

    What should we take away from the ABA research as a whole? If you are relying on your branch network for revenue, or you are measuring revenue as if branch and web compete, you are screwed. You need a better understanding behaviorally of your customers day-to-day banking activities, and how your products fit into their lives. Then you can really start working out how to service those needs. Just throwing more money at web because it is the channel of preference will be no good if you don’t understand why you are doing that.

    Brett King
    BANK 2.0

  2. “Past performance is not an indication of future returns.” Disclosure that is applicable to financial investments as well as trends in consumer preferences. Instead of questioning this year’s findings that 62% of adults and 56% of boomers prefer online banking as their primary source, we would be better placed to question previous years’ results which seem very much seem “out of whack”.

    The reality is that most consumers can accomplish the vast majority of their banking needs through the use of remote tools. Very few need a branch/ATM for anything other than to withdraw cash. And we know the trends relative to payments… credit / debit has overtaken the use of cash, and this trend, too, will accelerate. Many Banks have or are deploying RDC solutions enabling consumers to deposits checks remotely. The trends are obvious. Whether the number is 62% or 52% or 72%, the trends clearly show that consumers want convenience… which translates to remote banking for most consumers and for most banking activities.

    For Banks – and especially Community Banks – the branch is a ‘sunk cost’ that has the potential to “sink the ship”. Community Bankers must recognize the change in attitudes and preferences to realign their cost structures and investments.

  3. Brett: Not to nitpick, but, for me, the ABA research doesn’t show that behavior is changing. Instead, it hints at changing attitudes. But I couldn’t agree more with your points about the “point of sale” vs. “point of influence” distinction. I also agree that throwing money at the Web w/o knowing why isn’t helpful, but the way this research often gets used is by justifying why money should be TAKEN AWAY from one channel. If consumers don’t “prefer” the branch or ATM, then we should be investing less in those channels, no? The answer might be yes, but the rationale — “consumers’ preference” — is the wrong one to rely on.

    Serge: Yeah, you’re right. Last year’s numbers don’t make sense either.

  4. I ‘prefer’ to sit in a comfy chair, sipping a free glass of chilled champagne, whilst the bank teller hand counts my cash. In reality, I stand in the rain at the ATM. What I prefer and what I actually do are two different things and what consumers say to market researchers and do in real life can be very different.

    I think that this survey will send the wrong message to a lot of people because its flawed in three ways:

    Does the fact that the survey was conducted online for the first time have some bearing on the result? If I am one of the 30% of Americans who don’t use the Internet and therefore was not in the survey, where’s my opinion?

    Secondly, without understanding what was defined as ‘banking’ (broad or narrow scope?) there’s a danger of comparing apples and oranges. Generally speaking, mobile banking doesn’t have the same capabilities as Internet banking or a branch yet, so for all my banking it wouldn’t be my preferred channel. On the other hand, its hard to get cash from your PC.

    Finally, in 2010 and earlier there were some ‘unknowns’ – 9% of 18 – 34, 8% of 55+ that could have hidden anything. No ‘unknowns’ in 2011 – amazing. Surely, what we have is a completely new survey, not one that can be used to compare results against previous surveys?

  5. This is the second crappy study pumped out by the ABA. A couple weeks ago, they published this press release: “MOST BANK CUSTOMERS PAY NOTHING FOR BANK SERVICES — ABA survey shows 71% of bank customers avoid all fees.”

    They surveyed people asking them what they paid for banking services. I’d venture to say that nearly 100% of the population has no clue how much they pay or don’t pay for basic banking services. But the ABA took self-reported answers and spun them into fact. The headline should read “Most Bank Customers *Think* They Pay Nothing for Bank Services.”

  6. While the just released Nielsen Social Media 3Q 2011 Study around social media demographics and usage does point to a significant shift in attitudes and behavior across all demographic segments (especially the use of mobile for social networking by the 55+ age category), there is never a distinction in these studies between ‘daily’ transactions and other engagements such as opening accounts, making large deposits, taking out loans, etc. In fact, the recent study from Greenwich Associates even shows that there is the desire for more 1:1 interaction from the small business segment that uses the local branch while daily transactions over the internet continue to climb. In other words, for many people, the branch will continue to be important even when they may ‘prefer’ another channel. There probably isn’t the need for as many branches, but ask these same households if they would prefer to have their account with a bank with branches or strictly an online bank. Some won’t care. Others may use online channels, but want the availability of bricks and mortar as found by the series of Celent studies earlier this year. As Stuart noted, it is too bad the surveys are developed by committees who are hell bent on changing key questions each year.

  7. Jim, I agree with your point about branch banking. It will continue to be important to some consumers for some types of banking interactions. As new channels are added by banks and adopted by consumers the underlying point is that consumers have more choices. As a banking customer, convenience is the result of being able to choose the exact right channel for each of my banking transactions. ATMs are great when I occasionally want to get cash. Online banking is great when I want to pay my credit card bill. branch banking is great when I want to talk to a CSR about getting a home equity loan. I don’t have a single preference for how I interact with banks because I interact with banks for a huge variety of reasons. That variety is best addressed by having more choices, not less.

  8. A much wiser man than I once said ‘An unsophisticated forecaster uses statistics as a drunken man uses lamp-posts – for support rather than for illumination’ Andrew Lang. I assume he meant this specifically about online surveys even though it was said sometime around 1900.

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