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Consumers Are Crowdsourcing Their Financial Services, While Banks Risk Losing Primary Status

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Galileo Financial Technologies, a SoFi Technologies company, released the Galileo Consumer Banking Report with Datos Insights. The report reveals that while 85% of consumers have positive experiences with their primary financial institution (FI), many are diversifying their financial services across various providers.

This trend is particularly pronounced among Gen Z and younger millennials, who use an average of six financial tools, with more than half from outside their primary FI. The study emphasizes the growing demand for digital-first, personalized, and autonomous services, highlighting that traditional FIs may lose valuable customers to digital competitors if they do not innovate.

Additionally, the report notes that 60% of consumers prefer DIY financial services, and 42% of younger millennials have used virtual assistants for financial tasks. Gig workers are identified as a unique demographic with specific needs that FIs are currently not fully addressing.

Positive
  • 85% of consumers report positive experiences with their primary FI.
  • Younger generations, particularly Gen Z and millennials, are using a diverse range of financial tools.
  • High consumer preference for personalized and autonomous digital services.
  • 60% of consumers prefer DIY financial services, indicating a strong market for digital solutions.
  • 42% of younger millennials have used virtual assistants for financial tasks, showing tech adoption.
Negative
  • Traditional FIs risk losing primary status and associated customer retention.
  • More than a third of consumers (37%) feel their primary FI does not offer tailored financial solutions.
  • 32% of consumers believe their primary FI does not understand their needs or provide personalized service.
  • Gig workers' unique needs, such as credit building and budgeting tools, are not being met by primary FIs.

The data from the Galileo Consumer Banking Report suggests that traditional banks are at risk of losing their primary status as consumers diversify their financial service providers. This fragmentation within consumer banking preferences poses both challenges and opportunities for traditional financial institutions.

For banks and credit unions, failing to meet the digital demands of their customers could mean losing them to more tech-savvy competitors. Banks should leverage their existing customer data to offer more personalized services, ensuring they remain relevant in an increasingly digital landscape.

For investors, this trend could impact the valuation and future earnings of traditional banks. As digital-native financial services become more prevalent, the competitive landscape will shift, potentially decreasing the market share of traditional banks.

It's important for investors to monitor how these institutions adapt to the changing preferences of their customers, particularly through digital transformation initiatives.

The report highlights the growing preference for digital financial tools among consumers, particularly younger generations. The fact that 60% of people prefer to manage their finances without human interaction and that younger millennials are using virtual assistants at a high rate underscores the importance of digital-first solutions.

Traditional financial institutions must innovate to meet these changing expectations. Adopting AI-driven technologies, enhancing mobile app functionalities and offering seamless user experiences are vital. Notably, the inability of many banks to offer personalized services based on customer data is a glaring gap that needs addressing.

From a tech investor's perspective, companies that provide these digital solutions, such as fintech firms, are well-positioned for growth. The shift towards digital and autonomous financial services is an opportunity for fintech companies to capture more significant market share.

The report offers important insights into the generational shift in banking behaviors. Gen Z and younger millennials use multiple financial tools and services, often outside their primary financial institution. This behavior indicates a more sophisticated approach to financial management, one that traditional banks need to understand and cater to.

The trend of younger generations relying on diverse providers for their financial needs reflects a broader market opportunity for specialized financial products. For market researchers, this segmentation is pivotal in identifying niche markets and tailoring products that meet the specific needs of different consumer groups, such as gig workers who require unique financial solutions.

Investors should consider the implications of these trends on market dynamics. Companies that capitalize on these niche markets with targeted, personalized financial products are likely to see increased customer loyalty and market share.

Galileo Consumer Banking Report by Datos Insights uncovers the latest consumer banking behaviors and preferences

SALT LAKE CITY--(BUSINESS WIRE)-- 85% of consumers say they have positive experiences with their primary financial institution (FI), yet they’re using as many tools or services with other financial providers as they are with their primary FI, according to a new study released today by Galileo Financial Technologies, a leading financial technology company owned by SoFi Technologies, Inc. (NASDAQ: SOFI), in collaboration with Datos Insights.

New Consumer Banking Research: People Like Big Banks, But Gaps Exist - The Galileo Consumer Banking Report from Datos Insights reveals people generally like their primary financial institution, but digital innovation gaps exist. And it’s causing people to “bank” elsewhere. The research highlights why people are looking outside their primary provider to meet their digital banking needs. This research also breaks down what motivates each generation. (Graphic: Business Wire)

New Consumer Banking Research: People Like Big Banks, But Gaps Exist - The Galileo Consumer Banking Report from Datos Insights reveals people generally like their primary financial institution, but digital innovation gaps exist. And it’s causing people to “bank” elsewhere. The research highlights why people are looking outside their primary provider to meet their digital banking needs. This research also breaks down what motivates each generation. (Graphic: Business Wire)

The Galileo Consumer Banking Report by Datos Insights reveals that, while traditional banks still claim most of the market, they are at significant risk of losing their role as primary FI, and the customer retention and lifetime value that goes with it.

“To remain competitive, financial institutions can provide services that are digital-first, intelligent and eventually autonomous. Financial institutions that fail to deliver will lose their most valuable customers to their digital competitors,” said Derek White, CEO at Galileo. “Banks and credit unions of all sizes can embrace technology and unlock the data they already have to deliver timely, more relevant financial services at the customer’s point of need.”

Key takeaways from the report include:

  • The concept of using one provider for all financial needs is eroding. Even among satisfied customers, “primary” status doesn’t mean what it used to. Across all age groups, customers are curating their own suite of financial services through multiple providers. Gen Z and younger millennials are leading this diversified strategy: On average, they use more than six financial tools or services. And they are using more than half of these tools outside of their primary FI.
  • Personalization is paramount, but many FIs aren’t cutting it. More than a third (37%) of consumers surveyed don’t agree their primary FI makes offers that are tailored to their financial situation, and 32% don’t agree that same provider understands their needs or offers personalized service, underscoring the need for banks and credit unions to unlock and use customer intelligence to personalize offers and experiences.
  • Customers don’t want to talk to their financial institutions. Instead, they want DIY financial services. 60% of people said they prefer to do everything without human interaction, and 42% of younger millennials have used a virtual assistant to conduct financial activities – more than any other generation.
  • Retail banks are missing a prime cross sell opportunity with gig workers. On the surface, gig workers may look like an average consumer, but their needs are decidedly different. Not only do gig workers use a wider variety of financial tools or services, they over-index for specific services that their primary FI may not be offering to them today, such as credit building, budgeting and expense tracking tools. These customers want their financial service providers to recognize and respond to their unique needs in real-time.

“Consumers are making more sophisticated, informed financial choices as the youngest digital natives build their own financial habits,” said David Albertazzi, the director of Datos Insights’ retail banking and payments practice. “And there are bigger shifts coming, as baby boomers begin the biggest transfer of wealth ever to younger generations who have significantly different financial preferences and behaviors. Banks and credit unions will serve themselves well by maximizing their own accountholder insights to offer more personalized financial services that push customers deeper into their financial ecosystems.”

For more information on the research data or to get a copy of the research report, visit galileo-ft.com/lp/the-galileo-consumer-banking-report-by-datos-insights.

About the Galileo Consumer Banking Report

This report is based on a study Datos Insights conducted in Q1 2024 of 2,500 consumers in the U.S. Those qualified to participate in the study have a relationship with a financial institution and participate in a research panel. The pool of consumers who answered questions to determine their qualification for the study was in proportion to the population of their country for age, gender, income, geographic region and race.

About the Digital and Core Banking Offerings at Galileo

Through API-centric and microservice-based back-end technology, the Cyberbank Core digital banking backbone enables FIs to augment or replace their old core banking systems and dynamically create and deliver tailored financial products and services based on individual customer needs and behaviors. Through its Cyberbank digital services, Galileo empowers financial institutions to deliver seamless and innovative customer-centric banking experiences.

About Datos Insights

Datos Insights delivers the most comprehensive and industry-specific data and advice to the companies trusted to protect and grow the world’s assets, and to the technology and service providers who support them. Staffed by experienced industry executives, researchers, and consultants, we support the world’s most progressive banks, insurers, investment firms, and technology companies through a mix of insights and advisory subscriptions, data services, custom projects and consulting, conferences, and executive councils.

About Galileo Financial Technologies

Galileo Financial Technologies, LLC and certain of its affiliates collectively comprise a financial technology company owned and operated independently by SoFi Technologies, Inc. (NASDAQ: SOFI) that enables fintechs, financial institutions, and emerging and established brands to build differentiated financial solutions that deliver exceptional, customer-centric experiences. Through modern, open APIs, Galileo’s flexible, secure, scalable and fully integrated platform drives innovation across payments and financial services. Trusted by digital banking heavyweights, early-stage innovators and enterprise clients alike, Galileo supports issuing physical and virtual payment cards, mobile push provisioning, tailored and differentiated financial products and more, across industries and geographies.

©2024 Galileo Financial Technologies, LLC. All rights reserved.

Galileo Financial Technologies, LLC is a technology company, not a bank. Galileo partners with many issuing banks to provide banking services in North and South America.

Katie Boyless

The Fletcher Group

404.791.8245

katie@fletchergroupllc.com

Source: Galileo Financial Technologies, LLC

FAQ

What did the Galileo Consumer Banking Report reveal about consumer behavior?

The report reveals that while 85% of consumers are satisfied with their primary FI, many use multiple financial services from different providers.

How are Gen Z and millennials diversifying their financial services?

Gen Z and younger millennials use an average of six financial tools, with over half from providers other than their primary FI.

What percentage of consumers prefer DIY financial services?

60% of consumers prefer to conduct financial activities without human interaction.

How many younger millennials have used virtual assistants for financial tasks?

42% of younger millennials have used virtual assistants for financial tasks.

What challenges do gig workers face with their primary financial institutions?

Gig workers need services like credit building and budgeting tools, which are often not provided by their primary FIs.

How can traditional financial institutions stay competitive according to the report?

Traditional FIs need to adopt digital-first, intelligent, and autonomous services to meet evolving consumer expectations.

What percentage of consumers feel their primary FI offers personalized services?

37% of consumers feel their primary FI does not offer tailored financial solutions.

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