Demographics in Banking - Thematic Intelligence

Demographics in Banking - Thematic Intelligence

Summary

Demographic mega-trends around birth rates, migration, and aging are intersecting with rising geopolitical tensions, deglobalization, inflation, and a host of other social factors to reshape the operating environment for financial services. The next decade will see a massive transfer of power and wealth from the departing boomers to young cohorts. GlobalData predicts that up to $8.6 trillion of assets held by the wealthiest will be transferred to younger generations by 2029. Together, these shifts will have profound implications for the development of financial services across the value chain, as well as the overall business model of providers. In particular, millennials and Generation Z exhibit different concerns regarding sustainable investment, inclusive society, technology-first interactions, and a far less pronounced preference for incumbent providers of financial services. Banks managing theses shift proactively will derive enormous benefits. Banks that fail to prepare will face growing strategic misalignments, increased customer churn, and declining revenue.

Technologies such as cloud, artificial intelligence, and robotic process automation help banks cater to demographic differences, which can be complex and conflicting. But other technology trends (such as the metaverse and decentralized finance) can represent entirely new types of channels and operating models, which can outpace or disrupt current capabilities. Meanwhile, socioeconomic and macroeconomic trends such as rising interest rates, the gig economy, ESG, and gender empowerment create very distinct customer sub-segments. Ultimately, bank executives must decide where consumer preferences are different enough to warrant calibration and where they are not. GlobalData analysis suggests there are areas around simple, seamless digital experiences where there is one best way. However, there are also areas where certain features, touchpoints, or issue-based positions will significantly increase or decrease acquisition and retention rates among specific sub-segments of users. By cherry-picking those that are quickest and cheapest to deliver operationally, banks can ensure they capitalize on demographic shifts to drive market share and increase profitability.

Scope

• The single biggest demographic shift for incumbent banks will likely be the inversion in provider preferences. In the US, for example, customers aged between 18-24 are nearly half as likely to prefer traditional providers (31%) versus the general population (56%) for the primary current account relationship.
• When looking at preferred research methods for financial products, 34% of respondents in the US aged 18-24 are likely to rely on family and friends versus 26% for the general population. This speaks to declining trust in traditional providers (and traditional sources of media), and growing reliance on family and friends as information sources.
• In the US, daily use of mobile banking - which we define as use of the bank’s proprietary mobile channel (web and/or app) - is nearly twice as high among 18-24-year-olds than the general population (37% versus 21%). However, daily branch use among 18-24-year-olds is more than twice as high as the general population (17% vs 7%). This underlines how dangerous it is to assume how consumers will behave based solely on underlying demographics.

Reasons to Buy

• Understand how big demographic shifts around birth rates, migration, and aging are intersecting with technological, socioeconomic, macroeconomic, and regulatory changes to shape the future of financial services.
• Learn which disruptive technologies can mediate the impact of demographic trends most and why.
• Interrogate how socioeconomic and macroeconomic trends create distinct consumer sub-segments with specific drivers for acquisition and retention.
• Learn how key regulatory trends around open data, data privacy, financial inclusion, fertility policy, and immigration policy play out differently across specific socioeconomic groups, genders, wealth brackets, and geographies.
• Review the latest consumer survey data on how the interplay of demographic shifts impact consumers’ key drivers of product selection, preferred touchpoints for different tasks, and overall dimensions of net satisfaction.