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Is the financial sector prepared to embark on a charm offensive to win over customers under 30 and, just as importantly, their families? Experts now believe such a move could not only lead to a more useful industry for hard-pressed youngsters but also help to put strained institutions back on track…
Ian Fraser, whose latest book brilliantly charts the rise and fall of Royal Bank of Scotland, has been one of the first to make this bold proposal. Writing in “Shredded”, Mr Fraser suggests that RBS chief executive Ross McEwan, who has the unenviable task of restoring the bank to profitability, should tap into technology to ensure that cost-cutting does not fatally undermine customer relationships. He wrote: “The only way in which McEwan can improve customer service while cutting costs is if the bank can develop state-of-the-art mobile apps and online transactional platforms, on a par with the sort of things already available from the likes of Amazon, Google and PayPal. That way McEwan might be able to secure the loyalty of sufficient numbers of younger consumers to take the sting out of branch closures and downsizing.”
Indeed, more than six in ten 18-30 year olds said they would like to contact their banks using mobile messaging banking apps. One in six of us has never visited a physical bank, while seven in 10 never call our financial services provider, with slow customer service named the top reason for hanging up on call centre helplines. This is according to recent research from Intelligent Environments, a financial services software provider, which is now urging the financial sector to reconnect with the 18-30s and bring customer service channels into the 21st century. David Webber, managing director of Intelligent Environments, says: “With the majority of Britons now managing their finances online, and bank branches rapidly disappearing from our high street, why should customer service channels remain stuck in the 1960s?”
There are signs that banks and insurers are starting to grasp the significance of technology and its potential to draw in young customers. Online banking has been a much-welcomed innovation and a number of developments tied to mobile banking have genuinely worked in the younger consumer’s favour. Take current account alerts which tell heavy spenders when their balances are running low. This could be helping thousands of people to avoid nasty overdraft charges.
Furthermore, websites and apps can be incredibly effective channels in the growing campaign to boost young people’s knowledge of and engagement with financial affairs. Imagine the potential for the industry to gain the loyalty and trust of young customers through thoughtful involvement with financial education.
But do most institutions understand, or even accept, the power of the young pound? I am not convinced. I can count the number of banking, insurance and investment products devised to tackle some of the biggest challenges facing young people and their families on the fingers of one hand. Seldom do institutions launch large–scale, compelling initiatives to attract and maintain a young customer base, even on issues that the industry obsesses about internally – the protection gap, the need for workers to save into pensions, the nation’s wafer-thin savings buffer.
Recently, I was invited to speak at one of the big four banks on the topic of technology and how it can provide the sector with a direct route to the younger generation. The main argument I put forward was not particularly controversial; payday lenders and other alternative providers could swallow up market share, perhaps with detrimental consequences, unless the big players stepped up to the plate and promoted better options for young people. I was somewhat bemused by the nonchalant reaction I received. Senior figures in the bank’s digital division effectively shrugged their shoulders and abdicated all responsibility for developing youth-friendly services and products, saying it was down to us to design the kind of virtual banking industry we want to use. They also cited commercial pressures as a stumbling block for these reforms, which is more understandable but still frustrating. So why are institutions even contemplating the young agenda?
I think it is because they know, deep down, that they must take their societal obligations seriously in the wake of the financial crisis. A steady stream of data shows that the under 30s have been hit hardest by the recession, with new research from the Institute of Fiscal Studies this month stating the case most powerfully. This suggests that society may be storing up a personal finance crisis of epic proportions unless more is done to help young people today. Financial institutions which reinforce positive financial habits, such as long-term saving, are bound to make households of the future – and their own bottom lines – more secure. Let’s hope this realisation catches on sooner rather than later.