Banks Have To Rebuild And Rebrand -- Or Bail Out

The financial services industry might not be known for change, but change is coming. Over the next five years, the consumer banking industry will need to embrace new ways to engage consumers as it vies with digital banks, upstart fintech companies, Amazon and Google.

It won’t be easy. Lower interest rates, compliance pressure, high costs, younger generations’ transactional relationship with banks, and the time it takes to transform an established bank all feel like insurmountable obstacles. The reality is that change will come faster now thanks to Gen Y's on-demand lifestyles and tech-driven expectations. Millennials are also fickle: One three-year study by Scratch found that one in three millennials are open to switching banks in the next 90 days.

Here are some new ways banks can better align with younger, tech-savvy customers looking for financial guidance:

1. Redefine personal support. The bank branch has become less relevant as paper transactions diminish. Banks need to offer live video chats, social media sessions and personalized office visits instead of trying to upsell you like a fast food cashier while you’re at the teller window. An Accenture study found that 67% of millennials want their bank to provide tools and services to help them create and monitor budgets.

2. Customize customer plans. A new bank customer should immediately enjoy a simple, ongoing process that helps them control finances and build wealth. To do this, banks should seek to understand their customers’ goals and needs. Banks can enhance mobile bank statements with personal goals and savings tips. They can offer families specific savings programs for kids at the beginning of the relationship.

3. Increase education. Most people feel overwhelmed by managing their money. Yet, according to CGI, only 7% of customers turn to their bank for financial advice. They need guidance on how to save better, get out of debt, invest on a consistent basis and borrow smart. The financial pressure on young people has never been greater considering the cost of college, a new home and life in general. Webinars, video consults, social media forums and predictive budgeting apps will help address this pressure.

4. Watch your tone. Don’t look or sound like a traditional bank. I received an email from a local bank boasting a “great savings rate would make my heart skip a beat on Valentine's Day.” Instead of cringe-inducing messages like this, banks should focus on sharing valuable insights with their customer, such as specific, actionable advice that educates them on how to achieve their financial goals. Showing empathy with customers based on their stage in life also helps build long-term relationships.