In 2024, the financial services landscape in the US witnessed significant consumer activity, with nearly half switching primary providers. The report highlights a growing sensitivity to fees, with 44% of consumers citing high fees as the main reason for switching. Checking accounts saw the highest switching rate at 23%, followed by credit cards and debit cards. The report also emphasizes the role of digital experiences and customer service in influencing consumer choices, especially among younger demographics. As economic conditions stabilize, personal life changes are now the primary triggers for considering new financial relationships, emphasizing the need for banks to align their offerings with consumers’ evolving needs.
This report looks at the following areas:
- Trends in consumer switching behavior in financial services
- Impact of fees on customer loyalty and switching
- Role of customer service in financial provider selection
- Influence of digital experiences on switching decisions
- Differences in switching behavior by demographic segments
- Market dynamics and predictions for the financial services sector
Nearly half of consumers switching primary providers in the past year. Looking ahead, financial institutions must align offerings with consumers' evolving needs.
Patrick Rahlfs, Principal Analyst – Financial Services
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EXECUTIVE SUMMARY
- What you need to know
- Market predictions
- What consumers want & why
- Opportunities
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MARKET DYNAMICS
- Market context
- Market drivers
- Loan debts continue to reach new heights, but stabilized in 2024; plans for additional cuts in 2025 could provide some relief
- Graph 1: total loan debt, by type, Q4 2015-Q2 2024
- Rising delinquencies signal continued struggles; nearly 11% of credit card balances in Q2 were in serious delinquency, the highest since 2012
- Graph 2: percent of balance 90+ days delinquent on loans, by type, Q4 2004-Q2 2024
- Annual inflation slightly rose in October
- Graph 3: headline CPI and core CPI, 2021-24
- Consumer sentiment rebounds after a number of months on the slide
- Graph 4: consumer sentiment index, 2022-24
- Households' growth in finances has primarily been driven by salary gains
- Graph 5: income growth over the past 12 months, by change in financial situation, 2024
- Over 40% of consumers have seen their financial situations change for the better in the past year
- Graph 6: change in financial situation over the past 12 months, 2024
- Households' outlooks on their personal finances remains bullish
- Graph 7: income growth in the past 12 months, by financial outlook, 2024
- Graph 8: opinions on financial future, 2024
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CONSUMER INSIGHTS
- Consumer fast facts
- Switching in the past year
- Checking accounts were most commonly switched last year
- Graph 9: accounts with primary provider switch in past 12 months, 2024
- Investment products had a low percentage of switching
- Graph 10: financial account ownership and switching in last year, 2024
- The switching environment is active
- Graph 11: accounts with primary provider switch in past 12 months, by year, 2022-24
- Young consumers switch cards before savings accounts
- Graph 12: accounts with primary provider switch in past 12 months, by age, 2024
- Black consumers are top switchers of deposit accounts
- Graph 13: accounts with primary provider switch in past 12 months, by race, 2024
- Debit and credit activity exists at opposite ends of the financial health spectrum
- Graph 14: accounts with primary provider switch in past 12 months, by financial situation, 2024
- Institutions switched to
- Banks outpace credit unions and fintechs in newly switched customers
- Graph 15: financial institutions switched to in past 12 months, 2024
- Online banks are having success in deposits, while commercial banks win in cards
- Graph 16: financial institutions switched to in past 12 months, by account type, 2024
- Online banks and fintechs offer solutions to struggling consumers
- Graph 17: financial institution switched to in past 12 months, by financial situation, 2024
- Credit unions have success converting Asian consumers
- Products considering switch
- Considered switches mirror recent switches
- Graph 18: products considering provider switch, 2024
- Common account types are growing in switch consideration
- Graph 19: products considering provider switch, by year, 2022-24
- Recent switchers were likely to stay active in further switches
- Graph 20: products considering provider switch, by switch in past year, 2024
- Black consumers are open to new deposit accounts
- Graph 21: products considering provider switch, by race, 2024
- Motivations for recent switches
- Fees are the top motivator to leave an old provider
- Graph 22: reasons to leave primary provider in past year, 2024
- Younger customers are most sensitive to customer service
- Graph 23: reasons to leave primary provider in past year, by age, 2024
- Fees are most pressing to consumers with tight finances
- Graph 24: reasons to leave primary provider in past year, by financial situation, 2024
- Parents are less likely to tolerate a bad digital experience
- Graph 25: bad digital experience as a reason to switch providers, by parental status, 2024
- New provider features
- While lower fees were the most-sought feature, consumers sought well-rounded providers
- Graph 26: desired features of new provider, 2024
- Brand values were Gen Z's most cited feature
- Graph 27: desired features of new provider, by generation, 2024
- Female Gen Z consumers often follow personal recommendations
- Graph 28: desired features of new provider, by gender and generation, 2024
- Asian consumers were highly motivated by rewards and bonuses
- Graph 29: desired features from new accounts, by race, 2024
- Online savings accounts capitalized on environment
- Graph 30: desired features from new accounts, by recently switched account, 2024
- Low fees and customer service is the essential combination for insurance
- Graph 31: desired features from new accounts, by recently switched insurance account, 2024
- Timing of Switch
- Personal life changes often dictate account switches
- Graph 32: timing to consider new financial services relationship, 2024
- As the economy normalizes, personal changes become more impactful
- Graph 33: timing to consider new financial services relationship, by year, 2022-24
- Younger Millennials are a prime target for marketing
- Graph 34: timing to consider new financial services relationship, by generation, 2024
- Job status often dictates needs for lower-income consumers
- Graph 35: timing to consider new financial services relationship, by household income, 2024
- Economic conditions are most actionable for $100K-$250K asset group
- Graph 36: consideration of new financial services relationships when economic conditions change, by household accumulated assets, 2024
- Attitudes toward loyalty and switching
- Switchers feel loyal to their institutions, but need incentives to stay
- Graph 37: attitudes toward switching and loyalty, by recent switches, 2024
- Gen Z is growing more comfortable sharing data
- Graph 38: Gen Z attitudes toward personal data sharing, by year, 2022-24
- 25-34 year old consumers must be rewarded for loyalty
- Graph 39: attitudes toward loyalty, by age, 2024
- Asian consumers are open to secondary financial relationships
- Graph 40: attitudes towards loyalty in financial services, by race, 2024
- Inflation has caused the most product exploration among lower-income groups
- Graph 41: attitudes toward inflation's impact on product exploration, by household income, 2024
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INNOVATION AND MARKETING STRATEGIES
- Marketing and advertising
- Huntington Bank combines incentive with brand values
- FNBO leads with a no-fee promise
- Charles Schwab highlights financial implications of life milestones
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APPENDIX
- Consumer research questions
- Consumer research methodology
- Generations
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