A four part approach to understanding multi-generational retail account holder churn and how to avoid it Subtitle: “I’m not trying to cause a big sensation, I’m just talkin’[...]

Before we dive into this blog post, can we take a moment to appreciate the classic song by The Who, My Generation. I was listening to that song recently, and as the banking nerd I am, I thought about what drives retail users across all demographics to stay with or leave their financial institution (FI). For example, I intuitively understood that Generation Z (Gen Z) would be more likely to switch because of a poor mobile banking experience. I also intuitively understood Generation X (Gen X) may have a tough time converting because of the sheer amount of important linked accounts (e.g. mortgage payment, retirement accounts, etc) they have tied to their primary checking and savings accounts. Finally, it's also pretty apparent that what may be holding baby boomers back from making the switch could be their technical expertise. So with that in mind, why do younger generations churn?

Younger Generations | You Spin Me Right Round Baby Right Round

To quote the timeless song by Dead or Alive, You spin me right 'round, baby right 'round, like a record, baby right 'round, 'round, 'round. Look, we all know that millennials and Gen Z are quicker to switch financial institutions when their needs aren't met than their preceding two generations. Some of the reasons behind this are macro in nature (I mean, what do you expect from a generation that grew up on songs like Bye Bye Bye?), but do you know what the biggest reason for younger generations to so quickly ghost your institution? Poor digital banking experiences. Period. From subpar mobile applications (apps) to slow digitalbankingsolutions, younger generations expect seamless, easy-to-use technology. When their FI doesn't deliver, they are more than willing to find one that does.In fact, studies show that more than 60% of Gen Z and millennials would consider switching banks for better digital capabilities. These generations are digital natives-they demand intuitive digital features and services that match their fast-paced, connected lifestyles.

Gen X and Baby Boomers | Slower to Switch FIs, But Not Immune to Churn

On the other hand, Gen X and baby boomers are less likely to leave their FIs, largely due to several factors like established trust, technical challenges, and the sheer complexity of moving accounts tied to mortgages, loans, and investments. However, a key reason they will switch is poor digital services, after all 71% of baby boomers interact with their online banking mobile application on a weekly basis. Even though this group grew up with in-branch banking, they are increasingly turning to digital banking solutions, and when those services don't work well, they become dissatisfied. A poor user experience can drive them away, especially if it affects the security and reliability of their accounts. Afterall, we live with the unfortunate truth that account takeovers prove lucrative for fraudsters, the FBI estimated that elder scams jumped 11% year on year in 2023. This means your mobile app and online banking must have built in seamless security, an intuitive user interface (UI), and should always be accessible for your account holders to access. The more unintuitive the user interface, the more potential fraudsters have to take advantage of it.

Yet, switching banks is not easy for these generations! Baby boomers and Gen Xers often have multiple interconnected financial products-like mortgages, retirement accounts, and bill payments-making the process of switching more complicated. Furthermore, technical acumen can be a barrier for some, making a transition to a new digital banking experience feel daunting. Despite these hurdles, if the digital experience continues to deteriorate, even these loyal generations will consider alternative financial providers.

How You Can Reduce Churn | Lessons for Banks and Credit Unions

For banks and credit unions seeking to reduce churn, the focus should be on improving the digital banking experience for all generations. Here's what you need to know:

• Invest in Seamless Digital Banking Solutions: Ensure your mobile app and online banking platforms are fast, easy to use, and secure.Slow apps, poor functionality, or the inability to complete basic tasks digitally can drive customers or members to competitors.
• Keep Security at the Forefront:Trust is key, especially for older generations. Highlight your security features, such as multi-factor authentication and real-time fraud monitoring, to keep them at ease.
• Relevant Communications:Do you like spam emails? What about mobile app notifications at all the wrong times? Exactly. Neither do your customers or members. Select a digital banking provider that has the ability to deliver personalized messages and offers to your account holders. Afterall, as I've written before, companies that excel at personalized communications generate 40% more revenue than those that don't​.

How to Entice Churn from the Competition | Use Digital Experiences as the Primary Motivator

If you're looking to attract account holders from competitors (and who isn't), here are some action oriented steps you could begin to do today.

1. Target Frustrated Users with Better Digital Banking Solutions: Highlight your institution's superior mobile app, digital banking tools, and quick support options. Show potential account holders how easy it is to make mobile deposits, transfer money, or pay bills via your app. Afterall, according to FI Navigator, nearly 45% of financial institutions are on a legacy platform with churn rates from those vendors as high as 48% in terms of user sizes (in other words, we could deduce that people who bank on legacy providers are leaving their FI to move to an FI with a new platform).
2. Simplify the Switch: Offer personalized transition services to make the switch feel less daunting. Use easy-to-follow guides and provide in-person or virtual workshops to help baby boomers and Gen Xers feel comfortable with the transition.
3. Incentivize Change: For millennials and Gen Z, who are more likely to switch for better rewards or features, promote your bank or credit union's unique offerings, like no-fee accounts, cashback rewards, and enhanced security.

Take Me Home

Country roads, take me home to the place I belong. There is no out-maneuvering the data. All generations will leave a financial institution due to poor digital experiences, but the motivations and barriers vary. As mentioned above, younger generations will switch quickly if their needs aren't met, while baby boomers and Gen X, though more loyal, can also be driven away by clunky technology. By understanding these trends, we hope to help FIs reduce churn and attract new account holders by delivering a seamless, supportive digital banking experience.

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