WHITE PAPER

Double Down on Key
Demographics to Dodge
Digital Bank Threat

January 2024
By Holger Sachse, Alasdair Keith and Ankur PatilDouble Down on Key Demographics
to Dodge Digital Bank Threat
Agile digital banks are winning customers over from slow-moving incumbents, maintaining a
10-point net promotor score (NPS) lead on average according to recent BCG analysis. Basedon the 2023 REBEX Consumer Survey, younger and more affluent customers are two key
demographics for incumbents to pay attention to, with both groups significantly more likely tochange their primary bank than others. To stem these losses, banks must take swift, strategicaction and make innovation a top priority. We have pinpointed where digital challengers aremaking the greatest gains, and revealed the key defensive steps incumbents need to take.

Crucial Customer Segments
Younger customers and affluent customers are two of the most critical and profitable demographics for traditional banks, but our survey found that 19% of 18 to 24-year-olds haveswitched their primary bank in the last year. Under 24-year-olds are three times more likely
to make this transition than those aged between 35 and 45, underlining the importance of
this category for incumbents. A substantial 12% of 25 to 34-year-olds have also swapped
primary providers in the past year.

Exhibit 1 - Younger customers are most likely to switch their primary banks;
they also have the most products on average with digital/direct banks
Customers who have switched their primary bankin the last 1 year

Number of products held by customers
with digital/direct banks

19%
1.3

1.2

1.2

1.1

12%

1.0

7%
4%
2%
18–24

25–34

35–44

45–54

55+

18–2425–34

35–44

45–54

55+

Source: REBEX Consumer survey 2023, study conducted in April–May 2023, sample size is 26,067 respondents.
Question: Have you switched your main bank in the last one year?
Question: Which banking products do you own and with which banks?

1

DOUBLE DOWN ON KEY DEMOGRAPHICS TO DODGE DIGITAL BANK THREATIn the case of affluent customers, two key factors are presenting an increased risk for traditional banks. Affluent customers tend to use more products the higher their income, and they
are more likely to shop around. They hold the least products offered by their primary bank.
High income customers tend to own 6.9 products on average, just 44% of which are issued bytheir primary provider. Low-income customers have 3.6 products on average, with 59% provided by their primary bank.
The findings outlined above point to the fact that despite the critical importance of affluent
customers for incumbents, this demographic is frequently under-serviced in terms of tailoredoffers and branch services. The analysis also shows that customer stickiness tends to behigher among those owning investment products. In most markets, affluent customers whohold an investment product are up to 6 percentage points more likely to stay with their bankfor two or more years, compared to similar customers without an investment product.

Exhibit 2 - Stickiness (Affluent customers only)% of Aﬄuent customers who stay with the bank more than 2 years+2.3%

90+5.9%+1.7%

92

Australia

8785

Canada90+6.2%

96

Germany

Customers without an investment product

+3.6%

9286

Italy+5%87

83

Spain8783

USACustomers with an investment productSource: REBEX Consumer survey 2023, study conducted in April–May 2023, sample size is 26,067 respondents.
Question: Have you switched your primary bank in the last 1 year?
Question: Which banking products do you have and with which banks? Which of your banks do you consider as your main bank?

BOSTON CONSULTING GROUP

2

Innovation and Digital Experience
As part of the survey, respondents were asked about the reasons they would and would notrecommend their banks to others, including both incumbents and challengers. According toour findings, one factor making customers more likely to recommend digital banks over traditional players is the strength of their mobile banking apps. The speed and ease with which
accounts can be opened also stands out as an advantageous factor for challengers.
Another area in which digital banks are winning favour is customer understanding, specifically in terms of how easy it is to understand product offerings. Despite having fewer staff andno physical branches in most cases, the effective digital experiences offered by challengers
are helping customers to determine which products they need and how they work. Although
digital challengers are gaining ground on incumbents, customers still favour traditionalbanks when it comes to trust and keeping their money safe. The knowledgeability of callcenter support staff is also a category in which incumbents continue to lead.

Exhibit 3 - Digital banks outperform incumbent banks in customer advocacy,
key reasons include better mobile apps and fast and easy account opening
Traditional banks

Digital banks

Good mobile banking app

–9%

37%

–10%

I trust to keep my money safe

–7%

36%

–9%

30%

Good internet banking platform–8%

33%

–9%

33%

Knowledgeable and professional staﬀ in branches

–10%

29%

Is fast and easy to open an account with

–8%

29%

Has ATMs in convenient locations

–10%

28%

Easy to understand product oﬀerings

–8%

26%

% of detractors

–9%

–10%
% of promoters

43%

39%

29%

Signiﬁcantly higher % recommenders

Source: REBEX Consumer survey 2022, study conducted in June–Sept 2022, sample size is 41,884 respondents.
Question: What are the reasons you are likely to recommend your bank? What are the reasons you are NOT very likely to recommend your bank?

3

DOUBLE DOWN ON KEY DEMOGRAPHICS TO DODGE DIGITAL BANK THREATA Call to Action for Incumbents
To remain relevant and competitive in the future, it is crucial that traditional banks attract
younger customers today. As stated by our survey, retaining customers under the age of 45,
and particularly those under 24, will hinge on an incumbent’s ability to offer superior digital
experiences. By offering innovative, tailored services and experiences for young and affluent
customers, traditional banks can maintain their critical primary relationships. Dynamic mobile app experiences are essential when it comes to satisfaction among these customer segments, as are speed and ease when opening accounts.
Incumbents can also win a greater share of wallet (SOW) among older customers by providing easily understandable investment products that help them achieve their goals. By issuinginvestment products to more customers, banks can tap into the increased levels of loyalty
associated with the ownership of this product type, as revealed by our survey. With these
considerations in mind, traditional banks and challengers alike must plot a course towards
deepening customer relationships and driving cross-product holding.

Exhibit 4 - Customers who are unlikely to recommend their bank to friends
and family because of poor mobile banking app% of customers who cited poor mobile banking app asa reason they are not likely to recommend their bank
10% of customers who cited poor internet banking asa reason they are not likely to recommend their bank

98

7

8
6
4

4

18–24

24–34

35–44

45+

18–24

24–34

35–44

45+

Source: REBEX Consumer survey 2023, study conducted in April–May 2023, sample size is 26,067 respondents.
Question: Have you switched your main bank in the last one year?
Question: Which banking products do you have and with which banks? Which of your banks do you consider as your main bank?

BOSTON CONSULTING GROUP

4

About the Authors
Holger Sachse is a Managing Director and Senior Partner at BCG based in the Düsseldorf
office. He is the Head of BCG’s activities in retail banking in Europe. You may contact him atSachse.Holger@bcg.com.
Alasdair Keith is a Knowledge Director based at BCG and is based in the London office.
You may contact him at Keith.Alasdair@bcg.com.
Ankur Patil is a Solution Delivery Director in the Retail Banking Excellence (REBEX) teamand is based in the Singapore office. You may contact him at Patil.Ankur@bcg.com.

Acknowledgments
Special thanks to Jaimini Pattani, Senior Knowledge Analyst in the BCG London office andHarshini Sankaranarayana, Consultant in the BCG Bangalore, India office for their contributions to the report.

For Further Contact
If you would like to discuss this report, please contact the authors.

5DOUBLE DOWN ON KEY DEMOGRAPHICS TO DODGE DIGITAL BANK THREATBoston Consulting Group partners with leaders in businessand society to tackle their most important challenges andcapture their greatest opportunities. BCG was the pioneerin business strategy when it was founded in 1963. Today,
we work closely with clients to embrace a transformational
approach aimed at benefiting all stakeholders—empoweringorganizations to grow, build sustainable competitive
advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional
expertise and a range of perspectives that question thestatus quo and spark change. BCG delivers solutions
through leading-edge management consulting, technology
and design, and corporate and digital ventures. We workin a uniquely collaborative model across the firm andthroughout all levels of the client organization, fueled by
the goal of helping our clients thrive and enabling themto make the world a better place.

For information or permission to reprint, please contact
BCG at permissions@bcg.com. To find the latest BCG content and register to receive e-alerts on this topic or others,
please visit bcg.com. Follow Boston Consulting Group on
Facebook and X (Formerly Twitter).
© Boston Consulting Group 2024. All rights reserved. 1/24

bcg.com