Click-and-Mortar™ Banking: Customer Loyalty Hinges on Both Digital and Physical Experiences

Today, the opposing pulls of digital transformation and tradition are challenging banks to step up the customer experience to retain consumers. Trust is eroding, and many individuals are considering leaving their financial institutions (FIs). In addition, between the emergence of neobanks and consumers’ increasing tendency to hold multiple financial accounts, competition is heating up. To keep customers engaged, banks must deliver and maintain a strong omnichannel presence.

While effective digital experiences are essential, consumers still value access to physical branches. Balancing both is critical for banks aiming to build loyalty, attract customers and stay competitive in a rapidly shifting landscape.

Banks Have to Work Harder for Consumers’ Loyalty

Banking Customers Want Individualized Experiences

An Omnichannel Strategy Is Key to Banks’ Competitive Edge

Prioritize Personalization to Secure Loyalty and Win New Customers

Banks Have to Work Harder for Consumers’ Loyalty

Trust in retail banks is declining as consumers increasingly question their loyalty to financial institutions. This shift is fueled by rising competition from new players in the banking sector, prompting many to consider alternative options.

Consumers are losing trust in their banks.

Retail bank customers’ trust in their FIs has been on the decline for the last several years. According to a recent study, 13% say they will probably or definitely change banks in the next year. Only a minority — 46% — are sure they will stick with their current institution.

Indeed, many consumers are switching banks. Fifty-five percent have shut down a financial account at some point. Nearly one-quarter open new accounts yearly or even more frequently.

54%

of consumers are unsure whether they will remain with their current bank in the next year.

Competition for consumers’ banking loyalty is growing.

New players are emerging, with 43% of banking leaders in the United States now seeing neobanks as a competitive threat.

Moreover, U.S. consumers are divvying up their loyalties. In fact, 77% believe it is possible to have more than one main financial relationship. The average banking customer holds five to seven accounts across multiple FIs.

Banking Customers Want Individualized Experiences

Customers increasingly demand personalized experiences from their banks, but they feel these FIs are falling short in addressing their unique needs. Younger consumers especially show a willingness to share data to receive more relevant messaging, highlighting a generational shift in expectations.

Banks need to strengthen their ability to meet individuals’ needs.

74%

of consumers want a more personalized banking experience.

Consumers do not feel their FIs are providing experiences that are relevant to them. Just a small share of consumers — 22% — say their banks can anticipate their needs. Against this backdrop, nearly three-quarters (74%) want a more personalized banking experience.

Indeed, banks are adopting more targeted analytics capabilities to meet this demand. Liberty Bank, for instance, recently tapped Salesforce’s technology to personalize the customer experience.

Younger banking customers are more willing to trade privacy for better experiences.

Only 36% of consumers want their data to be shared across financial accounts. The remaining 64% prefer to keep their information siloed within each account to protect their privacy.

However, younger generations are more inclined to trade that security for a more targeted, relevant banking experience. Forty-one percent of millennials and about half of Generation Z consumers favor sharing their financial data across accounts to receive more individualized advice and insights.

An Omnichannel Strategy Is Key to Banks’ Competitive Edge

Banks must balance both digital and physical experiences to drive customer acquisition and retention. While a strong online presence is essential, many consumers still value access to physical branches. Without this brick-and-mortar component, FIs risk losing consumers’ trust and loyalty.

Both digital and physical experiences are important for acquisition and retention.

Customer acquisition and retention are highly important for banks, with 29% citing both as the combined primary objective guiding their technology strategy. The majority of banks (58%) see having a digital presence and maintaining physical branches as equally important to growth.

58%

of banks say digital presence and physical branches are equally important to growth.

Neglecting the brick-and-mortar experience sends customers packing.

Branch closures and reduced hours are among the top reasons consumers lose trust in their FIs. Even young, digitally native consumers prioritize the on-site experience. Among Gen Z, more than 42% would consider proximity to ATMs when choosing a bank, and roughly 29% would consider proximity to branches.

Major banks are seizing on this desire for positive brick-and-mortar experiences. JPMorgan Chase, for example, plans to open 500 new branches and renovate 1,700 in the next three years.

Digital platforms are also vital to acquisition and retention.

Nearly 8 in 10 banking leaders say mobile apps and other digital features are a powerful way to acquire customers. Almost three-quarters say the same for retention. Relatedly, 56% of banking and asset management CFOs expect to increase their IT and digital transformation investments in the next year.

Prioritize Personalization to Secure Loyalty and Win New Customers

To remain competitive, banks must prioritize personalization as a cornerstone of their customer experience. Consumers, particularly younger generations, are increasingly willing to share data in exchange for tailored services and relevant insights. FIs should invest in advanced analytics and customer engagement tools to fulfill this growing imperative.

The following insights offer guidance on how banks can effectively meet customer expectations, rebuild trust and foster loyalty:

Bank customers demand personalization. Consumers want a more individualized banking experience, yet only a handful feel that their current bank is anticipating their needs.

Younger consumers prioritize relevance. Millennials and Gen Z consumers are the most willing to trade privacy for personalized insights.

Data-driven strategies are key. By leveraging predictive analytics, banks can better tailor products and services to individual customer profiles.

Human interaction still matters. Despite digital advancements, the value of in-person assistance at branches remains a key trust factor for many customers.

Bridging the gap. Institutions are finding success by focusing simultaneously on technological innovation and the in-branch experience. By blending digital convenience with face-to-face service, they can provide a seamless omnichannel experience.

Banks that embrace personalized, data-driven services are better able to satisfy evolving consumer needs and drive loyalty. By balancing these advancements with a consistent focus on traditional physical branches, FIs can strengthen customer relationships and differentiate themselves in an increasingly competitive market.