The Low and High Income Online Bankers Adopt In Very Different Ways

Craig  McLaughlin

October 16, 2007

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Adoption habits vary greatly based on demographics and we continue to see dramatic change in the ways that these groups are approaching online banking. According to Forrester, 76% of households will be banking online by 2011. Online bankers are more lucrative customers for financial services firms as they bring nearly double the salaries and investable assets as their offline banking peers.

At the 5th Annual Financial Services Marketing Symposium the team from Javelin Research and Strategy presented an interesting finding. Javelin’s Jean Garascia identified that there is an inverse reaction to a security breach between high and low income groups.

The low income demographic will jettison new technologies like mobile or online banking when a security breach takes place. For this group a security breach represents a more significant life impact in that a theft will be an extremely large inconvenience. As a result, low income users will assume that the breach occurred as a result of this new technology and simply discontinue using the channel. It is important for financial institutions to understand this trend and be prepared to engage in a dialog with these consumers about the actual driver of the breach. Fear of security still remains one of the top reasons for non adopters to avoid online banking.

The opposite reaction is true for the higher income group. In the event of a breach this group tends to increase high tech adoption. They actively seek out additional technologies to keep them in closer communication with their money. This is especially important for the roll out of mobile banking and SMS text alerts.

From a mobile banking perspective, risk adverse users still prefer a downloadable application in lieu of a web based mobile banking interface. Mobile internet users (MIUs) still remain the most likely to adopt mobile banking. As of today, mobile is still not a significant enough value for customers to switch financial institutions. Consumer Adoption for mobile banking remains a function of the perceived risk and Javelin goes on to say that zero-liability is the key to mobile banking adoption.

Education will continue to be a critical component of any high tech roll out strategy – this is even more important for the low income groups.