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PNC enjoys the success of “virtual” banking
What does Gen Y want? Well, where can I start… They operate differently than any other generation: they’re technologically savvy, used to getting what they want and getting it now, connected to friends and family through cell phones and social networking sites almost all the time.
To target this group with specific (and often fickle) needs, PNC introduced its Virtual Wallet account in mid-2008, followed by the Virtual Wallet Student Account a year later. The company reports that the account has been a success, attracting 30,000 new customers in 2008, 60% of which are new to PNC. In addition, these virtual accounts have higher balances and better retention than traditional accounts.
A way to win Gen Y customers
The product portfolio is actually three accounts in one, which allows customers to direct money into different buckets labeled spend, reserve and grow. This is then enhanced by a personal finance tool. The product was built based on research as to how young people compartmentalize money in their minds.
Changing the online banking experience
The account works differently from traditional online banking tools, mainly because focus groups indicated that Generation Y feels that most banking sites are “clunky.” Instead of transferring money the traditional way, customers can drag money from account to account on one screen. Instead of presenting information in a traditional ledger format, customers view things on a calendar. The displays estimate future cash flow based on when customers are paid, when they pay bills, and on their spending habits. Customers can also set various saving rules with a feature called “Savings Engine.” All in all, the product is uniquely designed to respond to exactly what and how Gen Y wants to bank.
Marketing support
The company uses direct mail, email and print to promote the Virtual Wallet. One email targets existing customers aged 18-25, stating, “What are you waiting for? Go for the upgrade!” In direct mail, the account is marketed as a “high-definition online view of your money where you can pay bills, plan for monthly expenses, and save for the future.” Print ads go into more detail about the account and the features that make it different from a traditional account.
Looking forward
PNC stated that the cost of the project was $15 million and it expects to break even in two years. The company was smart to also release Virtual Wallet Student, since it allows the student to move right into the young adult version of the account. This helps ensure that PNC retains customers as they move into different life stages and need more financial products. Mintel Comperemedia expects other innovative products, targeted to specific demographic segments, to launch in 2010.
More predictions for the banking industry in 2010
With the turn of the New Year and news about potential banking legislation, I’ve been thinking about how the banking industry will change this year. We just put out a press release with five of my predictions, but here are some more things I’ve been thinking about for banking in 2010:
Prepaid cards could be a good alternative to checking accounts
The prepaid industry claims that, for some lower-income consumers, prepaid cards can be cheaper than traditional bank accounts with overdraft protection. This will certainly be true if banks begin to institute monthly fees or fees for bill payments and other types of transactions that are currently free. In a sign that there is more interest in prepaid cards, MasterCard reported it is looking at ways to market prepaid cards to the affluent.
Banks will seek to create “financially literate” customers
Much has been said about how the ongoing economic situation was caused—in part—by a lack of consumer knowledge about financial matters. The “Great Recession” been a wake-up call for every generation. According to Mintel consumer surveys, each generation is reacting differently, but young Echo Boomers have a strong desire to learn more about financial matters. Wells Fargo is tapping into this with its Virtual Island on Facebook.
Mobile banking is here to stay
The success and ubiquity of smart phones is driving banks and investment firms to develop applications that allow mobile banking and payments. User demand will be the reason that mobile banking succeeds. With teenagers and young adults relying on their phones in ways never imagined, mobile banking will become an expected service for the younger generations. At the same time, banks must carefully consider how they’ll engage mobile banking customers to ensure a long-term relationship.
Banks will begin to figure out social networking
Banks have struggled with how to embrace social networking sites such as Twitter, Facebook and You Tube, but 2010 will see them finding new and better ways to get involved. Jwaala, for example, recently announced technology that allows customers to receive alerts through social networking sites rather than through email.
Overall however, 2010 won’t be about financial services companies setting up pages and groups on social networking sites. Instead, banks will start developing applications for use in social media and creating a presence that says something about their brand. They will begin to use social media to network with new groups of customers.
Q&A about 2010 Financial Services Trends
I spent the weekend crafting answers to the many great questions people sent during and after our “2010 Financial Services Trends” webinar. If you’d still like to check out the presentation slides or watch the webinar recording, click here.
Also, please don’t hesitate to use the comments field below to post more questions or to add to my answers. I’m very eager to hear what you think about our predictions and to get a dialogue started about major financial services trends for this year.
Without further ado… the answers.
Q1: Why do you equate saving with simplification?
This is a continuation of discussion we had in webinars last summer about how consumers are simplifying their lives. The basic premise is that saving money = buying less stuff = simpler lifestyle. Consumers generally save more during recessions, but in this case, it is part of a more general and longer-term trend that encompasses simplification.
Q2: Please expand on how social marketing provides “highly measurable ROI?”
Social and digital media tracking can provide a tremendous amount of behavioral data that can be used to determine ROI (return on investment). In terms of measurability, social marketing compares favorably to other marketing channels, such as TV or direct mail. For example, online data like click trails can show how well the social media strategy is driving visitors to the company website.
Q3: What was presented as a reasonable alternative to traditional banking during your research?
We often use examples in our survey questions, but in this case we didn’t. We simply wanted to measure the degree of consumer dissatisfaction with banks, not the degree of attraction to specific banking alternatives. However, some alternatives we could have mentioned would be accounts at brokerage or mutual fund firms, or perhaps prepaid cards with online bill pay services.
In a survey Mintel conducted in September of 2009, 5% of respondents said they “would leave my current bank if Walmart offered all the same financial services that my bank does”. In this case, Walmart could be considered a bank alternative.
Q4: Can you further explain Blippy? We do not understand the way it works.
Check out their website at http://blippy.com/. The site is basically a social media site that posts financial transactions so that everyone can see what you are buying. You can either designate a primary credit card or you can share your information at Amazon.com or iTunes for instance. People are calling it the “Twitter of personal finance.” This indicates that the trend of all our behavior being shared online is continuing.
Q5: Isn’t P2P lending a legalized version of loan sharking?
It is if the fee structure is exorbitantly high. However, our data indicates that many consumers don’t pay as much attention to fees as one would think. And the convenience of P2P will probably be a draw for a certain portion of consumers.
Q6: You indicated that 29% of people tend to ignore FS companies on social networking sites. How does this compare to other industries?
That’s a very interesting question, and it will certainly be included in our next round of consumer surveys on the subject of social media. Stay tuned!