Many younger customers feel let down by their bank's digital offering, specifically the lack of a social media element. And most banks do not seem to know how to placate this growing market segment.
The 'Generation Y'ers are unhappy, so what are you going to do about it? The problem is that Generation Y – those aged between 18 and 34 – expect their bank to be on top of all the latest tech developments. In particular, they want to access their account via social media, a service that banks have been slow to provide and which presents them with a number of challenges. But failure to really grasp social media is going leave banks vulnerable to losing a generation of customers to non-banks and alternative providers.
The evidence that banks are not hitting the target with Generation Y comes in the latest World Retail Banking Report released by consultantcy Capgemini and financial services body Efma. A survey contained in the report recorded a decrease in the percentage of customers with a positive banking experience. This has been attributed to unhappy younger customers – which make up between a quarter and a third of the total population in many markets – who want to do mobile banking, flit seamlessly from one to channel to another and access their bank via social media.
According to the Capgemini report, 89% of bank customers have a social media account and many would like to do their banking this way but less than 1% say they can.
Banks are in a bind. The regulations governing social media are unclear but there are obviously privacy and security issues. Even if they do decide to embrace social media, the investments will be large and the payback is uncertain – getting the web experience right will not result in profits if the basic products are incorrectly designed and priced.
But some banks are making headway such as Turkey’s Deniz Bank, which has a Facebook branch allowing customers to access their accounts, make payments to their friends as well as apply for loans and credit cards.
To succeed at social media, banks have to not only understand a new customer psychology and get the web experience right. They have to improve their data analytics to capture and respond to social media activity, they need back-up staff to respond to issues raised on social media and they have to ensure safety and security. In the end, it may be a bigger challenge than complying with Basel III.
