How Are Consumers’ Banking Behaviors and Attitudes Changing?

Hey everybody. Welcome back to another episode of What’s Going On in Banking. I’m Ron Shevlin, chief research officer at Cornerstone Advisors and author of the FinTech Snark Tank blog on Forbes. Today, it is my great pleasure to have Liz Wilton, executive vice president and head of consumer banking and brand experience at Cenovus, with me. Liz is perennially ranked as one of the most powerful women in banking, and I’ve known her for a long time, so I’m thrilled to finally have her on the podcast. Liz, thanks a lot for joining me today.

 

Thanks. It’s awesome to be here, Ron.

 

All right, Liz. What we do here is look at some of the hot topics in banking, and I’ve got three that I hope to ask you about today. One of those is consumer behavior and attitudes.

 

Over the past few years, we’ve certainly seen how younger consumers are changing their banking habits. They’re not necessarily closing accounts and switching everything. They’re adding new accounts and expanding their use of fintech tools and technologies that interact with the accounts they already have.

 

If you look at what’s happening right now, are there newer consumer behaviors and attitudes that you’re picking up on that might be more specific to late 2023, 2024, or what you see looking ahead?

 

I think you nailed some of the overall trends. With younger consumers, it’s what I’d call silent attrition. Money is moving away because they’re creating new relationships. They’re not completely abandoning the relationship with their current bank, but they certainly aren’t growing it.

 

I’ve said for a couple of years now, and I think the trend has continued, that people are looking for more in terms of advice, even at the mass-market level. We’re used to that at the upper end of the scale, but mass-market consumers increasingly want more than a dashboard with balances and a place to point and click to transfer money. They want help understanding what those numbers mean and what they should do next.

 

I always use the Apple Watch example. It tells us when to breathe, tracks our steps, and tells us how many more we need to take. I think people translate that expectation to their bank: you’re showing me my balances, but what do I need to do next?

 

I don’t see that kind of guidance as bells and whistles anymore. It’s becoming table stakes. Advise me instead of simply telling me.

 

Right now, it’s not surprising that we’re also seeing this in terms of fraud. People want their bank to help protect them and make sure the money is still there the next time they come back. They’re not necessarily looking for the sexy features. They’re looking for capabilities that make them feel secure. Fraud is really influencing what people want to see from their banking experience.

 

So let me drill down on that. How do you respond? Is it a matter of bolting another feature onto the checking account or mobile app and saying, “Hey, we’ve got some protection capabilities for you”? Or is this leading you to design new products and services that can actually help generate revenue for the bank? How are you addressing those new requirements?

 

It’s a little bit of everything. Some of it goes back to basic customer information. Do customers understand the protections already in place? Do they understand how paying attention to various alerts can help them?

 

One thing we’ve done is add insights into our experience through a partnership. Those insights surface account behaviors in a different way than a dashboard. They can say, “Did you notice this?” or “We saw this go up.” If the first Zelle transaction from your account happened today, the system can ask whether you actually made that transaction. It’s more interactive.

 

So that kind of thing is a bolt-on. There’s also general education. When people walk into a branch, we try to make sure they’re familiar with capabilities they may not have turned on. We’re also trying to give our teams more awareness of what a customer does and doesn’t use so that the conversation can be specific instead of broad.

 

If Ron walks in and I can see that he doesn’t deposit checks remotely, I can explain why that might be worth considering today, especially when physical checks are increasingly being manipulated.

 

We’re also looking at deeper product refinements that can be built into the core product. We’re talking with partners that have advanced capabilities around credit monitoring and credit protection. We’re also thinking beyond protecting yourself. Could you potentially help manage that protection for other people in your family, including aging parents who may not live with you and who are particularly vulnerable?

 

Those kinds of capabilities could become differentiators within the core product. So it’s a mix of education, using what we can do today, and thinking about how protection services become a fundamental part of the value proposition going forward.

 

That raises a couple of things for me. We’ve had personal financial management tools, or PFM, for practically 20 years. Back in the early 2000s, the story was that PFM would deepen relationships and create great engagement. The reality is that it never progressed much beyond budgeting and expense categorization.

 

A lot of the so-called insights were things like, “Hey Liz, you spent a lot of money on beer this month,” and most people would look at that and say, “Damn straight I did. I know what I’m spending on beer.” It didn’t change behavior, and it wasn’t telling people something they didn’t already know.

 

How are the insights you’re describing different and better than what we’ve seen for 20 years? More importantly, how are you helping them drive behavioral change? That’s the big challenge in the industry. It’s great to tell somebody what’s happening, but it’s not rocket science to know that if they want their financial health to improve, they probably need to spend less or change certain behaviors. A lot of people simply don’t want to change those behaviors.

 

I completely understand the question. We talk about this a lot in banking. A lot of what we do is commoditized, and some of the fundamentals don’t change, even when you’re helping people think about how to manage their money. It’s a little like helping people improve their diet or become healthier. Some of the core fundamentals remain the same.

 

There is more sophistication in the science behind how some of these insights are derived, and I do think there’s more context. But I think the bigger difference is that our infrastructure can now help us be more persistent at scale.

 

You can generate a good old-fashioned pie chart for somebody, but how does that become active? How does it keep updating and provide the next iteration of advice? How do I learn that certain messages didn’t motivate Liz, but maybe something else will?

 

That’s where I think newer technology comes into play. I can’t keep coming at you with the same message over and over again. We need to learn from our interactions and get smarter about what motivates you and what emotionally moves you. Money is emotional.

 

Now that I’ve been in marketing, I look at communications differently. There are emails I read because I think, “That’s clever. That really struck me,” while 10 other emails didn’t. We’re experimenting with that kind of personalization.

 

For about a year and a half, we’ve had a new email marketing engine in market. For the first six months, we essentially guessed at how we thought people would interact with emails based on tone, whether we used an illustration or real photography, the subject line, and other elements. Does Ron have FOMO, or is Ron more straightforward?

 

After about six months, the system had ingested enough information about how customers responded to different approaches that we could turn on optimization. I pictured somebody sitting in a room flipping a big switch. Once we did that, engagement with our emails increased by more than 50%.

 

So the difference isn’t that we’ve reinvented everything. We’re still doing some of the same things and using some of the same math, although some of it is better. The real difference is that we can be more persistent, differentiate the experience, and learn from those interactions over time.

 

Are you using generative AI tools to help actually create and craft the emails?

 

We’re using generative AI in parts of our creative studio today, but we haven’t taken it into the email process yet. The creative team would probably say, “Yes, please, thank you.” That’s another stage of maturity they’re ready to reach.

 

To the point I was making, it’s difficult to scale personalization if people have to manually craft four different versions of an email about Zelle to get Ron interested. Is the message, “Hey Ron, everybody on your block is doing it. Why aren’t you using Zelle?” Or is it, “Ron, Zelle is safer”? Which message is going to resonate?

 

That takes a lot of effort. We’re not yet using generative creative tools for those emails, but we are using them in other parts of marketing.

 

For example, it used to take somebody a few hours to take an image we wanted to put on a website, resize it, and make sure it had the right features. Now we can put that image into an AI-based creative tool and have it populate a new yard or background around the person in the photo. Instead of searching for 10 different pictures to find the right one, we can start with the right person and create the surrounding scene we need.

 

That has definitely been a step up for us, even though we’re not yet using it at scale in email.

 

So it sounds like it’s making you more efficient, if not necessarily more effective yet.

 

That’s a good way to put it.

 

Before I lose the thread on changing behaviors and attitudes, I have to share a belief I have. There are a lot of banks that seem to think anybody over the age of 60 or 65 is a technology idiot who doesn’t know how to use a smartphone. They assume older consumers aren’t online and that only younger consumers are mobile and digital users.

 

Are you seeing changes in behaviors and attitudes among the over-60 crowd, or maybe even the over-65 crowd? I’m not even sure where the baby-boomer line is anymore. I’m clearly a boomer, and I’m not 65 yet.

 

We do see changes, but the behavior has to be provoked differently.

 

Younger generations tend to seek these things out. When I look at people closer to my age, there are some things we adopt easily and others we’re more hesitant about. As you move up the age scale, there tends to be more resistance.

 

But there are events that provoke adoption. COVID motivated a lot of people to adopt digital banking, and we saw that very clearly in our digital adoption numbers. Fraud can have the same effect. It can cause people to adopt tools they previously resisted.

 

I have a small business I visit once a month for personal services, and the owner calls me anytime she has an issue. She’s had a couple of fraud problems and swore she would never use things like online bill pay or online accounting for certain tasks. Then she got to the point where she was physically going inside the post office to mail a check and finally said, “Okay, I’m done with this. I have to figure out how to do things differently.”

 

So yes, we see behavioral change among older consumers. It admittedly isn’t as aggressive as it is among younger generations, but it is happening.

 

People used to believe that getting online would make them less secure. We’re changing that thinking by demonstrating that digital banking can, in some cases, be more secure. It’s a little like saying driving a car feels safer than flying because you feel more in control, even though the numbers tell a different story.

 

I had a grandmother named Ruby who lived to 105. I use the “Ruby” analogy for her generation, “Gram” for my mother’s generation, and then my daughter’s generation. We do a lot of behavioral discussions based on those kinds of profiles.

 

My belief is that you shouldn’t spend a huge amount of time trying to convert the Rubys. They’re going to be a smaller population. You can try, but I still believe there’s plenty of opportunity with my mother’s generation, even people in their mid-70s. It just takes more of a provoking event to get them there.

 

I look at my mother, who is coming up on 88 years old and is proud to say it because she’s still kicking and doing what she’s doing. But I can’t even get her to use the iPad to FaceTime with her great-grandchildren. You’re right that I’m probably never going to provoke her to do it.

 

The bigger opportunity, though, may be giving digital tools to the children of older consumers, the people in their 40s, 50s, and 60s who are helping manage their parents’ financial lives. I see companies such as MyFloc in Atlanta and a newer digital tool called Charlie doing things in this space.

 

I’ve said before that the emerging generation of banking consumers may actually be baby boomers rather than Gen Zers. I don’t think Gen Z’s needs are all that complicated yet. The emerging new needs may be among older consumers who require new products and services that are digitally delivered, even if they aren’t always the hands-on user of those tools.

 

I think you’re spot on. If you can show older consumers the benefit of one thing, it can spark a hunger to learn more.

 

When I gave my mom an iPhone, she didn’t want to use it. Then she learned two things, and now I joke that I have to monitor social media to make sure she stays off certain things.

 

One capability we’re looking at right now is a layer within our digital experience that could let me monitor a parent’s accounts. I could receive alerts alongside them. Older consumers are often scared of alerts because they don’t trust what’s coming to them, but imagine being able to review those alerts side by side with a trusted family member who can say, “This is real,” or “This isn’t.” You learn together.

 

I don’t think a bank can solve that problem entirely on its own. Banks need to use their client base and trusted relationships to extend the experience across generations. Ultimately, it may be somebody the customer trusts personally who helps them adopt the technology. They trust their bank, but they may trust a family member a little more.

 

Which is funny, because family members can also be a source of fraud, but let’s not go down that path.

 

I want to leave a minute or two for another really hot topic in banking right now: deposit gathering. What’s working for you? What have you seen that isn’t working?

 

Well, CD rates work really well, Ron.

 

I’m kidding, but when we had the liquidity run-up in 2023, that was where a lot of the money movement went. Economically, it made sense. Interest rates were going up, a lot of people had stockpiled cash, and they were looking for places to deploy it as rates rose.

 

For us, we’ve had really strong deposit performance even through the regional bank crisis. I’m tired of hearing the word “crisis,” but there was a regional bank crisis, and we can argue about that another day.

 

We stayed very strong through it. There’s no magic formula. At the end of the day, you have to stay very close to where money is moving and make sure your value proposition remains strong.

 

You can always create superficial growth by simply pushing rates higher. We don’t chase that, and it can be difficult to stay disciplined. We have a couple of relationship products that are our bread and butter, and we make sure we’re constantly taking care of those customers and reaching out to ask what they want to do next. Those fundamentals continue to serve us well.

 

All right, last question. Is deposit gathering still going to be a top priority at the end of the year?

 

Heck yeah. We want to grow.

 

No, I mean from an industry perspective. I’m wondering whether this is going to pass by the end of the year and priorities will shift.

 

No way. A lot of money moved into time-based instruments, and those instruments are expiring. We’re going to continue to see tremendous amounts of money movement throughout the rest of 2024 as those maturities come due and people reposition their funds.

 

Competition is going to remain high, money is going to stay in motion, and I don’t think this issue is going away.

 

Okay, I’m with you. I’ll leave it at that. Liz Wilton, EVP at Cenovus, thank you so much for being on. And to everybody listening, thanks for joining us. I hope you’ll join us for another episode of What’s Going On in Banking. I’m Ron Shevlin. Thanks a lot, Liz.

 

Thanks.