Young, online-only customers pose a marketing quandary to banks. No matter how hip the branding is, what ultimately keeps them customers are competitive savings interest rates and a painless user experience.
The research firm Resonate calls them “Walmart and Amazon millennials,” and in a new report, the firm suggests that banks partition their marketing efforts as a result: Play up interest rates and innovation to attract the online-only customer, while reaching traditional bank customers by promoting knowledgeable employees and convenient branch locations.
“Walmart and Amazon millennials don’t have these historical relationships with these bank brands,” said Andy Hunn, Resonate's chief operating officer. “They’ve grown up in the world of financial insecurity and banks imploding, wave after wave of banking privacy scandals.”
Digital-first banks, however, dispute the study's conclusion that low fees and savings accounts with high interest rates are what millennial customers value most. Customer service is pivotal even online, they argue.
“The lack of fees is foundational for it all,” said Chris Britt, co-founder and CEO of Chime. “We don’t win just on the fact that we don’t charge fees, but that’s a starting point.”
Britt noted Chime’s customer base reflects a shift to online, with more than 90% of customers coming from traditional bank sources. “The days of just having a bank because that’s where my mom told me to open a bank account or the one in my town” are over, he said. “That’s not the way consumer banking will work in the future.”
As it develops its mobile-only banking service, Wells Fargo has
“Every customer is looking for the most intuitive experience, and when they do have a problem they want the fastest and most seamless way to get it resolved,” said Peggy Mangot, head of Wells Fargo’s Greenhouse team.
The Greenhouse app is currently being beta-tested by selected team members and customers. In the fall, Wells Fargo will roll out Greenhouse to several states with the goal of eventually making it available to customers nationwide.
Greenhouse analyzes customer behavior and offers predictive insights to help customers manage their money. In developing the mobile-only banking service, Wells has learned that while these customers may be more tech savvy, that doesn’t always translate into financial savvy.
“The points we’ll be emphasizing are the core value propositions of the experience,” Mangot said. “A mobile bank in the palm of your hand gives you the control and tools to have more control over your day-to-day money management.”
Discover Financial Services’ $101 billion-asset online-only bank has also found that a significant portion of its customers come from traditional banks and expect a high level of customer service when needed.
Discover has consistently marketed its banking to current and prospective customers on competitive rates, no monthly fees, and 24/7 U.S.-based customer service.
“As with most consumer products, there are price and interest rate-sensitive customers who come to us as we raise interest rates,” said Arijit Roy, vice president of deposits at Discover.
While Chime has not tried to pay high interest rates to draw in customers, it believes that it has a more consumer-friendly platform to help consumers who have no savings. The current interest rate for the Chime Savings Account is 0.01%.
Chime plans to one day look more aggressively at interest rates, but Britt says his core customers are separate in their needs from the customers of traditional banks with high interest rates. “Many large banks are going after the 1% or the soon-to-be 1%,” he said.
Chime’s main goal of competing on automated savings includes features that allow the customer to round up on transactions, save when spending and save when getting paid.
As a company that markets itself as more of a tech enterprise than a bank, Chime makes its user experience as a selling point. “A beautifully simple banking experience is always compelling,” Britt said.
