The importance of primacy in banking
In the face of increasing acquisition challenges and rising attrition rates, retail banks must not only focus on acquiring new customers but also on securing primacy by transforming account openings into engaged, long-lasting relationships. As disruption intensifies competition, institutions that succeed in both customer acquisition and primacy gain significant strategic advantages in the market.
A perfect storm confronts legacy banks. Fee revenue and mortgage income are steadily eroding while acquisition costs mount amid fierce competition. Adding to these challenges, consumers are increasingly defecting legacy financial institutions, enticed by simplified offerings from disruptive upstarts. Behind these marketplace realities looms an even bigger threat – the demotion of long-trusted institutions from primary financial status.
Not long ago, customers displayed enduring loyalty, with 40% sticking for life at their first bank. Yet today’s digitally savvy consumers hold 5-7 accounts on average, rapidly switching providers to optimize rates, rewards and experience. This unprecedented fragmentation signals the emergence of “super-consumers” adept at gaming the system for the hottest deals – not sustainable brand devotees.
Last year major banks trumpeted strong account growth. But lower income segments largely drove these gains, indicating higher credit risk and servicing costs that erode margins. Worse still, disruptors siphoned off 37% of new checking relationships as millennials and Gen Z flocked to digital-first challengers like Chime or used a legacy bank as a ‘deposit hotel’ while transacting with Venmo, PayPal or another non-traditional provider. Even cash-flush Boomers now divide loyalty across traditional and alternative apps.
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