Financial institutions have customer bases that span multiple generations. While baby boomers are financially well-established and open to adopting new technologies, it might be tempting for banks and credit unions to focus on making digital banking inroads with older generations.
However, as Gregory Magana, Digital Banking Analyst at Javelin Strategy & Research, highlighted in his latest report, The Boomers Are OK— and Shouldn’t Be Your Digital Banking Priority, boomers shouldn’t be the central focus if most institutions’ digital strategies. That said, there are specific strategies that banks with an older customer base can employ to optimize their services for baby boomers.
A Lifetime of Financial Needs
One of the main reasons why financial institutions should not base their digital strategy around baby boomers is that they are not as much of a churn risk as younger generations. In Javelin’s survey of boomer preferences, most baby boomers said they are either extremely unlikely or very unlikely to switch banks in the coming year.
“They are much rosier about their financial situation than younger generations,” Magana said. “When boomers were asked how they feel about their primary financial institution on a 10-point scale, most of them responded with a nine or a 10,” Magana said. “They are the happiest and stickiest customers a financial institution could have, so why would a bank mix anything up?”
Third-party rivals like Venmo, Credit Karma, and PayPal are a concern with younger generations because they have moved beyond peer-to-peer payments and credit score monitoring to offer competitive banking accounts. This concern is less pressing with boomers, as most baby boomers said they haven’t used any third-party services in the past 12 months.
Another concern with younger customers is the potential fragmentation of their primary banking relationship when new financial needs arises. They may move into a new house, require an auto loan, or open a credit card with another institution.
“When it comes to baby boomers, that fragmentation is already baked in,” Magana said. “They have had a lifetime of financial needs. They probably already have an auto loan, and they have multiple credit cards. They are not as likely to seek out products at another institution and potentially switch banks if they like the experience there more.”
Legacy Affinity
Another reason boomers shouldn’t be a digital banking priority is they still have a strong affinity for legacy channels, which they prefer over mobile and online banking platforms.
“When boomers were asked about the factors that motivate them to stay at their primary financial institution, the most important aspect for them is if a bank has convenient branches,” Magana said. “Mobile banking is much lower down on their list of priorities, coming in after convenient ATMs, low fees, and good customer service. All their needs are grounded in real-world channels.”
Boomers have seen significant technology innovations throughout their lives and aren’t averse to using digital channels. However, when it comes to more complex banking tasks, they tend to prefer traditional, legacy channels.
For instance, if a baby boomer is opening or closing an account, they are more likely to visit a bank branch. For actions like reporting a suspicious transaction, challenging an overdraft fee, or reporting a lost debit card, boomers prefer contacting a call center.
Basic Behaviors
Boomers have adopted online banking, but most only perform four online banking behaviors on a monthly basis: checking balances, reviewing transactions, paying bills, and transferring funds within the bank.
When it comes to mobile banking, there are only two activities they typically perform: monitoring balances and reviewing transactions. For more complex banking behaviors like checking credit scores, activating and deactivating debit cards, sending money using Zelle, or financial planning, they are more likely to visit a branch, contact a call center, or avoid performing the activity alltogether.
“Boomers aren’t the fount of digital engagement that many younger generations are,” Magana said. “When baby boomers were asked which channel they use to perform certain high-complexity banking activities, they mostly said they don’t perform those activities at all.”
Improving the Boomer Experience
Though financial institutions shouldn’t base their digital and mobile banking strategies around baby boomers, there are still ways banks can optimize their platforms for this generation.
Financial institutions should focus on streamlining the online banking experience to make it more intuitive and functional while offering education resources geared towards encouraging boomers to move beyond basic online banking. Additionally, banks and credit unions should work to increase boomers’ confidence in digital customer service, reducing their reliance on call center support.
“The initial concept for this report was to explore digital banking strategies for baby boomers,” Magana said. “Upon research, the data indicated that financial institutions should mostly focus their digital banking efforts elsewhere. However, many of the tactical solutions that streamline the boomer experience could also improve the overall experience for younger generations in the long run.”