- Our research shows that the definition of primacy is changing, from owning the direct deposit relationship more toward payments as different generations come into the banking space.
- Wallet fragmentation is higher than ever and will make activating primacy more competitive for the primary-account provider, giving secondary players more “at bats” to dislodge the core relationship.
- Digital players now capture 58% of the primary churning population and they’re continuing to shrink the pie that’s available to traditional institutions.
The 10th Annual Curinos U.S. Shopper Survey results are in and the takeaways can be summed up in three words: Redefinition. Fragmentation. Disruption.
The research study is fielded every year across the largest 70+ Designated Market Areas (DMAs) with a keen focus on primary checking switchers 18 years and older, including those who are new to checking. It looks at who they considered and who they ended up choosing, with insights that surround that decision.
Based on Curinos’ primary checking churn model, primary bank switchers make up about 6.6% of the total adult population annually. This is consistent with the trend of the last several years of 6-7%, or about 20 million consumers who choose a new primary provider every year. The sheer volume makes this consumer group highly sought after, and increasingly expensive to acquire.
Takeaway #1: Redefinition
The definition of primacy itself, is changing. Historically, the industry has thought of primacy as owning the direct deposit relationship—and certainly consumers have agreed. But as different generations come into the banking space, the definition of primacy is shifting toward payments. The paycheck-to-paycheck (P2P) segment’s definition is geared toward access, ease of payment and where their cash sits. The HENRY (high earners, not yet rich) and affluent segments continue to define primacy as direct deposit, but both are increasingly shifting their consideration of primacy toward credit card and where they build their wealth (Figure 1).
Figure 1: Definition of Primary FI | by Segments | 2024
Note(s): Ordered by total
Source(s): Curinos Customer Knowledge | 2024 US Shopper Survey | Q9B: You selected your primary Financial Institution earlier, why do you consider it to be your primary FI?
This divergence in definition can have a significant impact on product design and an FI’s overall value proposition.
Takeaway #2: Fragmentation
Given the evolving definition of primacy and the increasing openness to digital-led experiences, more players have found their way into consumers’ wallets than ever before. Over 50% of primary bank switchers say they now have more than four checking relationships – maintaining more secondary accounts than they ever have in the past.
That said, the primary relationship remains the most valuable, with consumers allocating 57% of their deposits to their primary checking, which for banks is a source of core deposits. Going forward, however, fragmentation of the wallet will make activating primacy more competitive for the primary-account provider, giving secondary players more “at bats” to dislodge the core relationship. To preserve the customer value, the speed to activation and the ability to deepen are more important than ever before.
Takeaway #3: Disruption
Redefinition and fragmentation have resulted in a seismic shift: digital players now capture fully 58% of the primary churning population every year. As they continue to broaden their product and servicing capabilities to grow relationships, they’re continuing to shrink the pie that’s available to traditional institutions. Both sets of digital players are over-indexing in core growth segments: fintechs are winning with P2Ps while direct banks are making gains with the more affluent (Figure 2).
Figure 2: Primary Acquisition | by Segment and Bank Type | 2024
Note(s): Paycheck-to-Paycheck: Less than 1 month liquidity; Mass Market: Under $100k HHI and not Paycheck-to-Paycheck; HENRY: Under 35 years old with $100k+ HHI and not Paycheck-to-Paycheck; Affluent: Over 35 years old with $100k+ HHI and not Paycheck-to-Paycheck
Source(s): Curinos Customer Knowledge | 2024 US Shopper Survey
But there’s some good news for traditional providers. Although consumers continue to find “useful online/mobile capabilities” the most important attribute of what influences their perception of convenience, about 30% of the churning population still will not choose a primary bank without a physical presence. This represents a critical opportunity for branch-based institutions to rethink the role of the physical network in their growth engine.
The Future Favors Those Who Adapt
To paraphrase Charles Darwin, “It’s not the strongest of the species that survives, nor the most intelligent. It’s the one that is most adaptable to change.” Timeworn to be sure, but maybe because it’s so true. As it pertains to our industry: retail banks must adapt, and the adaptation needs to come in three forms:
- Segment. Given the divergence of needs by segment, the one-size-fits-all approach is no longer viable. FIs need to choose which segments to design themselves fo—across product, experience and marketing—to effectively acquire and deepen. This becomes the core of an adaptive value proposition.
- Geography. Market-level dynamics have a dramatic impact on results. The ability to leverage the branch network, sales force, marketing, experience and product levers fully coordinated at the market level is critical. Market-level strategies drive significant incremental performance, and with lower operational expenditures.
- Future-proofing. As the value proposition and marketing become the critical drivers of bank choice, FIs need to alter the typical go-to-market model to a marketing-led machine that drives effective acquisition while it activates and deepens relationships. These are the core capabilities that banks will need to advance over time across their go-to-market strategy, operating model and the tech/data stack.
How will you adapt?
