Avinash Purwar, Senior Vice President - Financial Services Industry, Cisco India & SAARC
A new set of customers are walking into banks today. They are highly technology and social media savvy. These young customers often referred to as 'Gen Y' or Millenials, want advice about how to manage their day-to-day finances and trust their banks to be the primary providers of advice. In addition to the bank, they are likely to use both family and friend networks for financial advice and consult social networking and other online sites for advice, underlining the potential of peer supported online communities.
Gen Y is changing the rules of banking because they want their bank to be available to them anytime, anywhere and on any device. Banks today find themselves in a challenging environment given the increase in the number of these tech-savvy customers. As more customers embrace new technologies like mobility and video, and adopt online behaviors, such as social networking, at an astonishing rate, retail banks realize that generating revenue in traditional ways is becoming difficult. They seek new avenues for growth through products and services that target the younger generation who want online access to banking functions.
Meeting the needs of Gen Y
A retail banking study conducted by the Cisco Internet Business Solutions Group (IBSG) in 2010, suggests that banks have an opportunity to increase revenues up to 10 percent by embracing Gen Y customers. The study's results are wide-reaching and reveal that Gen Y customers trust their banks and seek their help in making important financial decisions; banks that cater to these needs have the potential for significant revenue growth.
Forward-thinking banks need to target Gen Y because of its earning potential which will prove to be a key market opportunity to stay successful. Gen Y holds a large portion of financial wealth and will need a safe place to keep their assets, borrow for homes, and save for their children's education. This group will use the internet and mobile devices as their main banking conduit.
With young consumers embracing new communications technologies such as video, and adopting online behaviors at an astonishing rate, they will have profound impact on retail banking, providing the next opportunity for substantial revenue growth. The potential is significant, and as per the survey, retail-banking revenues could increase by an estimated 5 to 10 percent.
Debt reduction, expense management, and financial education are key priorities for younger consumers.
In order to capture the mind share of these customers, financial institutions need to get a hold of the technology that Gen Y demands or risk losing them to more aggressive service providers.
To be successful with younger customers, a new approach to retail banking is required. The mounting need for financial advice by younger consumers can be met through delivery channels afforded by technology (remote advice, virtual consultations, self-service monitoring of financial status, and peer-supported advisory models) because younger customers want banks to address their needs using the tools they and their peers have adopted, like mobile devices, video, and social networking.
According to the Cisco IBSG survey, mobile phone use among younger consumers is truly ubiquitous; with penetration rates of 97 percent for Gen Y. Cisco IBSG found that nearly 40 percent of Gen Y respondents consider the idea of interacting with remote advisors via video as very appealing. They are willing to switch to banks that embrace these technologies, demonstrating their readiness for innovation in the way banking services- including financial advice-are delivered. Although eighty-eight percent of all customers surveyed were either satisfied or very satisfied with their current bank, 26 percent of Gen Y respondents indicated they would consider moving their primary banking relationship elsewhere.
The above results mean that banks have a tremendous opportunity to provide younger customers with personalized advice and value proposition using technology. They need to recognize the potential of a personal financial management service to improve online "stickiness" and create greater cross-selling of related products. Banks need to realize that video can help in differentiating and scaling bank services to customers.
Several banks are now moving into the online community space, with particular emphasis on serving the Gen Y demographic. An integrated value proposition that includes personalized finance management services, video capabilities, and communities of interest has the potential to generate significant value for retail banks who invest in one or more of these capabilities.
Recognizing the changing needs of customers and innovating accordingly can bring about a transformation in banking, with generational shifts occurring and tech-savvy customers at the forefront of driving change - mobile and video banking is reaching an inflexion point. As customers increase their demands on banks to evolve to a more personalized anytime, anywhere service, responding to the challenges and demands offers banks an opportunity to differentiate their offering and stay ahead of competition. While this task seems daunting, banks that get it 'right' will emerge winners.