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Retail Banking and Credit Unions - US - February 2018

"While the amount of total deposits held at US banks and credit unions continues to grow, the number of companies controlling the industry has steadily shrunk. Nonetheless, consumer satisfaction and demand for a physical presence remains high. While consumers—especially younger generations—are eager to utilize the latest technological advancements, trust and inertia continue to be the primary drivers of loyalty."
- Chris Shadle, Financial Services Analyst

This Report looks at the following areas:

  • Young consumers are not checking their deposit accounts regularly
  • Inertia and trust drive loyalty
  • Black consumers use debit, not credit

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • Overview
          • The issues
            • Young consumers are not checking their deposit accounts regularly
              • Figure 1: Deposit account usage, by generation, November 2017
            • Inertia and trust drive loyalty
              • Figure 2: Reasons to stay at financial institution, November 2017
            • Black consumers use debit, not credit
              • Figure 3: Banking behaviors, use of bank debit and credit cards, by race/ethnicity, November 2017
            • The opportunities
              • Mobile app usage is growing, while mobile payments lag behind
                • Figure 4: Banking behaviors, use of mobile and online banking, by generation, November 2017
              • Consumers still desire a human touch
                • Figure 5: Attitudes towards banks and banking, prefer to talk to bank employee, by generation, November 2017
              • Consumers want flexible banking hours and more branches
                • Figure 6: Attitudes towards banks and banking, November 2017
              • What it means
              • The Market – What You Need to Know

                • Number of banks and credit unions continue to drop, deposits increase
                  • Number of bank branches still in decline
                    • Consumer sentiment hit record highs in late 2017
                      • Personal savings rate drops to near pre-Recession low
                      • Market Size

                        • Commercial bank deposits march upward
                          • Figure 7: deposits in domestically chartered commercial banks (seasonally adjusted), Jan 2008-Jan 2018
                        • Branch locations finally plateau, as number of banks continues to fall
                          • Figure 8: Number of FDIC-Insured commercial institutions and branches, 2006-16
                          • Figure 9: Number of FDIC-Insured commercial branches and institutions, 2006-16
                        • Number of credit unions and memberships continues to diverge
                          • Figure 10: Number of us credit unions, credit union members, and savings deposits, June 2007-June 2017
                      • Market Factors

                        • Most consumers think their financial situation is “healthy” or “OK”…
                          • Figure 11: Opinion of current financial situation, October 2017
                        • …though consumers continue to accrue debt
                          • Figure 12: Total consumer debt, by debt type, Q2 2017
                        • Consumer sentiment index hits record high
                          • Figure 13: Consumer Sentiment Index, January 2003-December 2017
                        • Consumer price index and personal disposable income continue to rise
                          • Figure 14: Consumer Price Index, change from previous period, November 2010-November 2017
                          • Figure 15: Disposable personal income, change from previous period, November 2010-November 2017
                        • Majority of consumers are making more than they spend
                          • Figure 16: Average annual income and average expenditures, by age, August 2017
                        • Consumers plan to save, but saving rate nears pre-recession low
                          • Figure 17: Anticipated changes in consumer spending, November 2017
                          • Figure 18: Ally bank, email, November 2017
                          • Figure 19: Personal saving rate, January 2007-November 2017
                      • Key Players – What You Need to Know

                        • Only a third of consumers think start-up banks could offer more innovation
                          • Nearly 20% of young consumers have not used bank or credit union account in the past three months
                            • Wells Fargo plans to close 800 branches by 2020
                            • What’s Working?

                              • Only a third of consumers think start-ups could offer more innovation
                                • Figure 20: Attitudes towards banking, start-up innovation, by age, November 2017
                              • Fifth Third Bank offers way to pay down student debt
                                • RBC uses AI to help consumers manage finances and watch spending
                                • What’s Struggling?

                                  • Nearly 20% of young consumers have not used bank or credit union account in the past three months
                                    • Figure 21: Savings or checking account usage in past three months, by age, November 2017
                                  • Consumers not motivated to stay with bank for “sophisticated technology”
                                    • Figure 22: Reasons to stay with current financial institution, November 2017
                                  • Bank of America to end free checking for low-balance accounts
                                  • What’s New and Next?

                                    • Open banking comes to the UK
                                      • Umpqua offers BFF – “Best Financial Friend”
                                        • Wells Fargo plans to close 800 branches in the next 2 years
                                          • Trump administration may change the Community Reinvestment Act
                                            • Amazon and PayPal allow underbanked consumers to use cash online
                                              • Figure 23: PayPal, email, January 2018
                                            • Pop-up branches the next trend in retail banking?
                                            • The Consumer – What You Need to Know

                                              • Most consumers utilize a deposit account on a regular basis
                                                • Mobile banking apps gain traction as mobile payments lag behind
                                                  • The human element within financial institutions remains vital
                                                    • Inertia and trust the most important factors in consumer loyalty
                                                    • Account Ownership

                                                      • Over 90% of consumers utilize a deposit account
                                                        • Figure 24: Deposit account usage, by generation, November 2017
                                                      • Nearly half of consumers hold accounts with more than one institution
                                                        • Figure 25: Number of deposit accounts, by household income, November 2017
                                                    • Banking Behaviors

                                                      • Most consumers use a credit and debit card from their bank or credit union
                                                        • Figure 26: Banking behaviors, use of bank debit and credit cards, by age, November 2017
                                                      • Blacks and Hispanics more likely to use bank-issued debit cards
                                                        • Figure 27: Banking behaviors, use of bank debit and credit cards, by race/ethnicity, November 2017
                                                      • Mobile banking apps have found traction, but payments lag
                                                        • Figure 28: Banking behaviors, use of mobile and online banking, by generation, November 2017
                                                      • The human element remains vital within financial institutions
                                                        • Figure 29: Banking behaviors, financial services used, November 2017
                                                      • Consumers prefer to talk to a person
                                                        • Figure 30: Attitudes towards banks and banking, preference for talking to bank employee, by generation, November 2017
                                                      • The branch remains important, though not heavily trafficked
                                                        • Figure 31: Banking behaviors, financial services used, by race/ethnicity, November 2017
                                                      • Hispanic, Black, and Millennial consumers use ATMs more frequently
                                                        • Figure 32: Banking behaviors, use of bank-affiliated atm, by race/ethnicity, November 2017
                                                    • Attitudes toward the Financial Services Industry

                                                      • Customer satisfaction with banks and credit unions remains high
                                                        • Figure 33: Attitudes toward finance and financial services, by gender, march 2017
                                                      • Majority of consumers prefer to have their accounts with one institution
                                                        • Figure 34: Attitudes towards banks and banking, preference for single insitutuion, by race/ethnicity, November 2017
                                                      • Millennials and Hispanics want help reaching their financial goals
                                                        • Figure 35: Attitudes towards banks and banking, help reaching financial goals, by age and race/ethnicity, November 2017
                                                      • The bottom line still matters in financial services
                                                        • Figure 36: Bank switching behavior, November 2017
                                                        • Figure 37: Discover, Direct Mail Piece, January 2018
                                                    • Understanding Bank Loyalty

                                                      • Inertia and trust drive consumer loyalty
                                                        • Figure 38: Reasons to stay at financial institution, November 2017
                                                      • Non-Millennials place greater value on trust
                                                        • Figure 39: Reasons to stay at financial institution, by generation, November 2017
                                                    • Building a Better Branch Experience

                                                      • Consumers want flexible hours and more branches
                                                        • Figure 40: TURF analysis, future of the branch, November 2017
                                                      • BMO Harris invites customers to Smart Branch opening
                                                        • Figure 41: BMO Harris bank, direct mail piece, June 2017
                                                    • Appendix – Data Sources and Abbreviations

                                                      • Data sources
                                                        • Consumer survey data
                                                          • Direct marketing creative
                                                            • Abbreviations and terms
                                                              • Abbreviations

                                                              Retail Banking and Credit Unions - US - February 2018

                                                              £3,435.47 (Excl.Tax)