If you knew with certainty an event would occur in the several years down the road that would jeopardize your organization’s ability to remain viable, what would you do to remediate that threat?  Would you purchase additional insurance to provide a financial safety net?  Or would you brainstorm remediation strategies, prioritize those and take immediate action to address the coming threat?  While I have a great appreciation for the value of insurance, taking action to remove a probable future threat should be the priority.

If you are regular reader of this blog, you know I have written extensively on the issue of whether financial institutions are able to attract and keep the younger customers they need to remain viable in the coming years.  Each year your institution loses a certain number of customers. Some of those losses represent older customers who unfortunately pass away. So an immediate question is whether the institution is adding new, younger customers that equal the number of lost customers.  This is a simple numbers question.  Go to your core system and run a report of the number of customers aged 50 or older whose accounts closed (or went to zero or virtually zero) in 2023. Then run another report of the number of customers added that are 35 or younger.  Compare those two numbers.  Did the younger new accounts equal or exceed the older customers you lost?

Or you can look at a different number, deposit volume. As seniors represent the segment of customers with the highest value of deposits, the issue of where those deposits will go is certainly an issue worth your consideration. How many younger customers would it take to add to equal the amount of deposits to cover one senior’s account going to zero?  It will take anywhere from 10 to 15 new young millennials or Gen Z accounts to equal one lost baby boomer. Now you might suppose that the baby boomer’s wealth will pass to their Gen X children.  Or, they might skip a generation and gift money to millennial grandchildren. Additionally, you might further suppose those individuals already bank with you.  Yet, research indicates that fewer younger customers are relying on banks to provide basic financial services. If you fall behind on replacing customers or their deposits, there is a timeframe some years down the road where your institution may no longer be viable.

FNBB deeply cares about this issue.  We focus on Service Beyond Comparison and anything that affects community banks is a subject on which we should pay attention. FNBB’s CEO Pax Mogenson and I had a chat about this issue in the summer of 2022.  What could FNBB do to address the issues regarding financial services in which younger people would consider important? As Chief Innovation Officer, I brought together a group of FNBB employees who themselves represented the young millennial and gen z generations and began to have monthly conversations about how they and their friends conduct financial transactions. We discussed how they consume marketing and advocacy messaging and how that compares to what banks traditionally have offered. We brainstormed what would a bank need to do to specifically appeal to…them.

The result is a white paper titled “The Next Generation of Banking.” I could not be more proud of the work this group did over a 14 month period.  While I moderated the discussions and assisted in organizing the content, they did the hard work: performing research, creating drafts and ultimately condensing the myriad volume of data and statistics into a tight expose that illustrates the challenge banks face in attracting and keeping younger customers.  The statistics I referenced in an earlier paragraph (and many more) are included in the white paper with citations of source material used.  More importantly, the white paper provides tangible options for how a bank might choose to change course on the technology, marketing and advocacy elements they would deploy to ensure they were strategically planning for the future of their institution.

If you are part of the C-Suite, you should read the initial 5 pages of the document which includes a narrative from the 4 primary authors and an executive summary. If you are in charge of marketing or deposit ops, I encourage you to consume this document thoroughly and make sure your C-Suite gets access to and reads the first 5 pages.  Then perhaps this document can form the basis of an ongoing dialogue about how your institution is addressing the challenge of replacing an aging customer base.

You can access a copy of the white paper here.  I value your comments or questions.  You can reach me at dpeterson@bankers-bank.com.  Depending on the nature of your inquiry, I might lean on my young co-workers to provide the insight. After all, if we are not regularly looking to them to educate and inform on issues directly related to those individuals who are like them, then we are never going to truly create compelling stories about why our institution is suited to fulfill their financial needs, both today and into the future.

The views expressed in this blog are for informational purposes. All information shared should be independently evaluated as to its applicability or efficacy.  FNBB does not endorse, recommend or promote any specific service or company that may be named or implied in any blog post.