Don’t forget baby boomers in the race to go digital

Digital transformation for banks and wealth management firms has been all about targeting millennials, people born between 1981 to 1996, and the digital natives who are expected to drive the next generation of growth and profitability. In fact, organizations are spending 500 percent more on marketing to millennials than any other demographic group.

But there is another segment of customers with equal spending power that companies cannot afford to overlook: Baby boomers, or people born in the years following World War II.

While stereotypes might argue this older generation resists technology and is slow to adopt new products, banks and wealth management firms need to reassess. They must digitize and adapt to new technology to meet changing consumer demand, but at the same time they cannot overlook those that have been a part of their customer base for far longer. A middle ground must be found between adopting technology and making it user friendly for those who are not digital natives.

They may not be digital natives, but older Americans are increasingly getting online — 66% of Americans aged 65 and older used the internet in 2018, according to a study by Pew Research Center, and that figure has doubled in just 10 years. Yet it is young digital natives who are designing the next generation of interfaces, including on smart phones and mobile devices. The problem is that in many cases these young designers do not fully understand the challenges older customers face while using the technology, including more limited agility and the reduction of cognitive and visual abilities.

As such, it is no surprise that baby boomers don’t always take easily to new-age banking or digital financial advisors. But that doesn’t mean they don’t hold value for financial institutions. Baby boomers currently hold two-thirds of all deposits in the U.S. and they will remain the nation’s wealthiest generation until at least 2030.

Converting baby boomers to new products and services could spur as much as $82 billion in additional deposits and $443 billion in additional investable assets, the American Bankers Association has estimated.

There are also generational differences in loyalty and trust — 58% of older customers have never switched financial institutions. By comparison, millennials are three times more likely to open an account with a competitor and five times more likely to close all of their accounts with their primary bank. According to A.T. Kearney’s 2017 Future of Advice study, 53% of mass affluent investors ages 18 to 24 switched primary investment firms, while 30% of investors ages 25 to 34 switched. These figures compare with 21% for consumers ages 35 to 44 and single-digit rates for those over 45.

However, like all other demographics, older customers are also disengaged with their banks. According to Gallup, only one out of three baby boomers are fully engaged with their primary bank, meaning surveyed customers reported feeling a strong connection to their bank and are true believers in the company, while two out of ten are actively disengaged, reporting a negative connection to the company, and nearly half (46%) are indifferent, reporting feeling simply satisfied. The reason behind this disenchantment is that banks just don’t understand them and largely ignore them.

To improve this engagement, there are a few simple things firms can do. For starters, they can take into account age-related and perceptual motor issues by involving older customers in usability tests, increasing font size on websites and mobile applications and keeping error messages simple and clear. They can also use brighter colors and pointers to ensure older customers can use debit and credit cards more easily out in the non-digital world, and offer more voice options on customer help lines.

Banks also need to focus on getting older customers more comfortable with digital and online banking and advice. As older customers adjust to digital products, their willingness to conduct more complex interactions through websites and apps will also increase.

Baby boomers are the last frontier in the digital transformation of banks and wealth management. Helping these customers adapt could easily boost growth and profitability.