Retail Banking and Credit Unions - US - February 2018

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