Banking: Over- & Under-Served Market Segments
Banking product aggregators provide information to their users on current banking products, often comparing them against each other with the aim of helping the user to make informed financial decisions whilst also offering tailored advice and services through online calculators, tools and personalized tips. Due to existing aggregators' online and smart phone based functionality, those who do not use online and smart phone services are already under-served.
When reviewing market segments in the context of financial products it is important to consider not only life stage (age, life position, career) but also the consumers affluence and motivation. With this in mind we have reviewed current banking product aggregators in relation to how they appeal to the following three market segments:
- Banking habits: They are not brand loyal and view banks as transactional rather than relational. They prefer to shop around for the best deals using predominately online services and seek digital tools to help them manage and view debt.
- Financial horizon: With high student debt and financial instability, millennials prefer access to ownership and seek advice and guidance towards large purchases such as homes and weddings.
- Banking habits: They do carry out online research but prefer to do the transactions in person, which demonstrates brand loyalty.
- Financial horizon: They have a high strain on their resources, with an average $142,000 in debt due to raising a family, paying off student debt, caring for aging parents, and a mortgage.
- Financial horizon: Most of the Baby Boomers are burdened by the increasing amounts of student debt of their children, funding retirement, declining pensions and social security in jeopardy, ongoing health care costs, and funeral and estate management.
Over-served market segments
- The millennial generation is over-served by the existing aggregators, all of which provide a wealth of information on products relevant to millennials. In fact, they are more likely to be drawn to banking product aggregators due to their ability to get objective guidance and advice quickly and easily.
- Those consumers who are confident using technology, such as websites and smart phone apps, are served by all aggregators reviewed in this research. In fact, 75% of millennials in the US used digital banking in 2018, which is set to rise to 77.6% by 2022.
- Those who are trusting of open banking services and have less brand loyalty are able to access more detailed and personalized information whereas those who are not comfortable trusting open banking are disadvantaged and unable to access such in-depth information.
Under-served market segments
- All aggregators are available online, which means that those who are less confident with online services are under-served by the current aggregators. Baby boomers are the most impacted generation in that regard, followed by generation X, who prefer to carry out transactions face to face. In 2019, 37.3% of Americans did not use online banking, with many of these among the older generations.
- Many of the aggregators require consumers to create an online account and input personal financial data in order to access personalized advice, tools and products. This immediately disadvantages those who are less trusting of open banking, namely generation X and the baby boomers. 23% of generation X and only 12% of those in the baby boomer generation are said to trust open banking.
- None of the aggregators that have been reviewed in this research offer advice on funeral and estate planning wishes and few offer in depth advice on retirement planning later in life, managing parent's finances and ongoing health costs. 27% of retirees plan to work part-time throughout retirement, with 1 in 5 current retirees already working part-time. Moreover, the current banking product aggregators do not offer relevant and accessible information to the older generations.
In order to determine which market segments were under or over-represented, we identified the three largest segments that use banking products in the US through researching each group and what their financial habits and horizons were. We then used this information to determine what each market segment's needs were and compared these with the products and services offered by 5 leading US banking product aggregators.