Once, banks vied to offer everything a customer needed under one roof. Now, banks just need to figure out how to be the kitchen — the favorite room in the house.
That's particularly true for the overbanked, those with four or more banking relationships. They are mass-affluent, tech-savvy and financially literate. They move money easily and more likely to use aggregators like Mint.com and LearnVest than others.
While they have no problem interacting several banks and fintech players, they present a huge opportunity to the bank that can become the glue of their fractured financial world.
"As a bank, you have to think about this trend you may not necessarily like, but how you may be able to turn it into an opportunity," said Brian Buckingham, vice president of deposits at San Francisco-based Nomis, a data analytics provider. "If a bank can provide the primary financial relationship to a customer, then in turn provide them flexibility and additional services in how they manage money, they may be able to create lifelong customers."
Though banks are typically loath to share data with competitors and thus may not be inclined to offer a multi-account aggregation tool, they may have to change their mindset as these younger, tech-savvy customers are looking for their bank to be more than just a place to hold money, said Peter Wannemacher, an analyst with Forrester Research.
"Even if a bank can't be the sole financial institution for a customer, that doesn't mean they can't be a hub," he said.
This will only become more important, Wannemacher noted, as future generations after millennials grow up in a world where financial services continue to become more commoditized and digitized. The era of a person becoming a bank customer in college and sticking with that one financial relationship for life is likely over.
Banks ought to consider closely the ramifications to their businesses should they decide not to embrace the fact that their customers want more options than just what they have to offer.
"Technology is moving the industry towards a bespoke model," where each person is tailoring his or her own experience, Buckingham said. "Maybe banks will be happy if a customer just has a primary transactional account with them."
Embracing open application programming interfaces is a natural way for banks to allow customers to easily interact with other partners. Indeed, Mondo, a challenger bank in the U.K. is aiming to become essentially an app store through open APIs.
Wannemacher said banks that can offer an account-aggregation PFM tool have the chance to engender greater customer loyalty. Though not a perfect comparison, he likened this scenario to a coffee shop offering free wireless Internet; there's a chance a customer will just buy one coffee and use the Wi-Fi for the entire afternoon. But more likely, they will become loyal customers who frequent the shop often and purchase more of its products.
"Of course they run the risk of a customer just keeping $50 in an account and using that bank as just a dashboard, PFM tool," he said. "But it's more likely that becomes a more engaged customer. This idea becomes especially important looking forward and thinking about a bank's role in the future financial ecosystem. Helping customers manage their financial life should be front and center."
Besides finding ways for their customers to more easily interact with others, banks looking to become the primary bank of the overbanked have to focus on making their products easy and convenient.
The overbanked "have hectic lives and are often on the go, and so they want solutions that meet their demanding schedules," said Larry McClanahan, director of digital delivery for Cincinnati-based Fifth Third Bank.
Reacting to those expectations, Fifth Third has enhanced its mobile app with things like Now Balance, an opt-in service that lets customers view balances on preselected accounts without logging in. It also adopted technology that allows its customers to select an amount to transfer and "drag and drop" between accounts.
"The whole goal with services like this is to get rid of redundant steps, and let customer complete tasks with fewer clicks," McClanahan said.
Though Fifth Third, like most banks, does not offer a Mint-like PFM service, it is something the bank may further explore as customer demand for such a product increases, McClanahan said.
"It is something that we are looking at as we continue to talk to customers about the next features they are interested in seeing," he added. "It's on our road map and something we continue to investigate."
Wells Fargo offers a service called My Spending Report, which combines spending transactions from a customer's Wells Fargo check card, credit card, checking account and bill pay in one convenient place. Transactions are further organized by familiar categories such as food and drink, health, travel, auto and transportation, and ATM withdrawals in an effort to allow the customer get a better idea of how their money is being spent. While the bank strives to help customers manage money, it takes a pragmatic approach and still does recognize that some may still choose to use outside services, said Bret Pitts, head of digital for Wells Fargo.
"We want our customers to succeed financially, and have control and flexibility over their finances and financial data," he said. "Customers have different needs when it comes to financial services, and we're supportive of them using a variety of tools from different providers to help them meet their financial goals."
Beyond PFM tools, banks need to start thinking about other ways to plant themselves in the core of their customers' lives.
Mobile payments are an area where banks can grab that default spot in customers' lives, said Jack Vonder Heide, president of Technology Briefing Centers in Oak Brook, Ill.
Customers will use the default card 98% of the time, Vonder Heide said during a presentation Monday at a conference hosted by the North Carolina Bankers Association.
"Once a customer chooses a default card … they almost never change it," he added.
Wannemacher said that banks have long been known as a place where customers could rent safety deposit boxes to store valuables, but the bank of the future could potentially offer secure cloud storage services as a kind of lockbox of the future, he said.
"Banks right now have a lot of brand equity; customers want them to offer a lot of these services," he said. "But will that still be the case in the future? It's possible that brand equity can erode if banks don't start acting."