The speed with which the ten largest U.S. banks are gobbling up retail market space might suggest that smaller institutions are in trouble.  Yet in an ironic twist, big banks may be the ones in greatest danger.

Big banks have largely amassed their commanding market share by giving consumers what they want: the convenience of banking from laptops and mobile phones, backed by a large network of branches and ATMs. In the process, the big banks took the person out of personal banking. They cut costs by replacing face-to-face transactions with digital efficiency, slick software and standardized products.  Huge sign-up bonuses and extensive advertising lured customers in. Younger and tech-savvy account holders shifted to national banks.  But while big banks may have won the battle for customers’ bodies, they have lost the war for their minds.

Forty-three percent of customers at big banks are dissatisfied with their institution, according to the 2014Consumer Banking Insights Study.  They would prefer to bank with smaller, local institutions, but the pull of convenient technology and the hassle of uncoupling electronic services is too powerful a force to break.

But just because customers use big banks doesn’t mean they’re loyal to them.   Seventy-one percent see their banking relationship as transactional rather than relationship-driven, according to the survey.  Fifty-three percent say they see little difference between banks, and are poised to move to any financial provider with better service and lower fees.

As a result, big banks are sitting on a huge base of apathetic, unhappy or trapped customers—an unstable keg of potential dynamite.  Retailers, banks included, create brands to build emotional relationships with clients.  Relationships with an emotional component tend to be enduring and help customers resist the pull of lower prices. But when customers view their banking relationship as purely functional, they have no hesitancy about switching.

Millennials, the 18-to-34-year-olds who lead the digital revolution, are a particular problem for big banks.  Although millennials make up just a quarter of the U.S. population, they account for 43% of all mobile banking and finance users, according to “The Future of Account Opening,” a study conducted by Andera in January 2014. By 2020, they will have more income than Gen Xers and baby boomers combined, according to Javelin Strategy and Research.

Millennials distrust big banks and put the four largest—JPMorgan Chase, Wells Fargo, Bank of America and Citigroup—among their least favorite ten brands in the U.S.  Underscoring the problem, a third believe they won’t need banks at all in five years.

This poses a big problem for large banks, which stand to lose millennials to competitors.  Online upstarts like Moven, GoBank and Simple have appealed to young people by using  a formula of lower  fees and helpful advisory services.  Spain’s largest bank, BBVA, recognized the threat and launched a counter-offensive by acquiring Simple earlier this year.

That’s not the worst of big banks’ problems.  Just before BBVA acquired Simple, in fact, the Spanish lender’s chairman and chief executive Francisco González penned a Financial Times op-ed titled, “Banks need to take on Amazon and Google or die.” He was right to worry.  Apple, Amazon, and Google  have the technology, financial expertise and existing customer relationships to steal a huge percentage of big bank clients—especially millennials.

These digital behemoths already have financial relationships with customers. Apple has credit card or banking information on about 600 million customers, while Amazon has financial and personal  data on more than 240 million customers.   Google recently introduced its own prepaid card, which allows customers to transfer funds between bank accounts and permits 500 million customers to transfer funds via Gmail.

In addition to the strength of their financial relationships, Apple, Amazon and Google are among the most revered brands in the world.  Consumers trust them and seek out their products. Seventy-three percent of millennials say they’d be more excited about a new financial offer from a tech company than from their bank, according a survey by Scratch, a brand consultancy division of Viacom. Half expect Google, Amazon and Apple to revolutionize banking as they have music, retailing and advertising.

To the big banks’ regret, when millennials go looking for a new financial institution, they won’t compare banks. They will be looking for the customer-friendly services and intuitive technology they get from online giants.  And that’s where the national institutions will fall short.

Extensive branch networks and high legacy costs will prevent big banks from cutting fees enough to match the rates offered by online giants. Big banks can’t change their size, corporate structure or ethically-challenged history. And they can’t match the tech giants’ innovative technology.  As tech companies make further headway in the financial services industry, big banks will gradually lose market share. There’s little they can do about it.

On the other hand, well-managed, progressive community banks will be in relatively good shape.  Tech-driven customers departed years ago, and older and underbanked customers—those who need a little extra, personalized help—remain.  As community banks and credit unions have always known, personal service and a community focus breeds customer loyalty and ensures longevity.  It’s a formula that the big banks gave up on their way to becoming a national presence.

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