Retail Banks risk losing customers in the future if they fail to keep pace with the changing demands of a new generation of customers.
Customers are using Web 2.0 daily and banks are not keeping pace, according to a report from analyst company Celent.
It said the banking service expectations of Generation Y, the Net Generation, which grew up in the 1990s and 2000s, have been shaped by the internet.
"The wise retail banker will look at this segment's needs and begin a transition plan to ready the bank to serve them," said the report.
Generation Y will reach 84 million consumers in the US by 2010 and combined with generation Z, which is the next generation, will represent over half the US population in 2020 and nearly two-thirds in 2030.
"Addressing consumers' broadening expectations will require a cultural shift within the bank as well as a technical one," said Celent.
Online banking services have been slow to integrate Web 2.0 technologies, which enables engaging, interactive and collaborative activity. Banks risk a gulf between them and customers opening up.
"Consumers have continued to change, and so have banks, but at a much slower rate. While consumer expectations advance at a faster pace than banks can support, the gap between expectations and delivery grows, threatening many banks' bottom lines," said the report.
Celent said banks are missing out on significant business because they are not in tune with the demands of new IT savvy generations. The analyst firm recommends that banks acknowledge this shortfall and begin to address it.
Advice to banks
Realise that Web 2.0 is not a specific technology rather, it is a shift in consumer behaviour and the technology supporting it.
Understand the behaviour and expectations of post-Web 2.0 consumers.
Recognise that the gap between traditional banking products and services and the expectations of the post-Web 2.0 consumer grows every year the bank does not evolve.