A major new research study by the European Financial Management & Marketing Association (Efma) has found that efforts by major banks to fight the threat posed by fintech to their retail business may have result in a better customer experience but very little additional business. Are the banks getting more love, but no more cash?
The Efma research included 16,000 participants in 32 different countries and explored customer expectations, behaviours, and preferences. The good news for the big banks is that the customer experience has been improving in over 85% of the markets surveyed – often it has only increased a little, but at least the CX is generally moving in the right direction.
Over half (55.1%) of customers said they plan to stay with their current bank for at least another six months but only 38.4% would recommend their current bank to a family member. Even worse though, just 15.9% of respondents said that they would seek out additional products from their current bank. It seems the days when a customer would automatically go to their bank for new services, such as a loan for a new car, are gone.
As might be expected, it is millennial customers causing many of the problems for traditional banks, as they are both the most demanding and the most willing to change their bank when not satisfied. The 2016 World Retail Banking Report suggests that almost two-thirds (63.1%) of global bank customers have already experienced products or services from Fintech firms. This is extremely worrying for the traditional retail banks especially the same research shows that millennials only have about half the loyalty to their bank of older customers.
The Efma research found that 88% of customers trust Fintech providers ‘completely’, or ‘somewhat’ demonstrating that the banks cannot rely on their traditional role when innovative competition is already widely trusted to offer reliable financial services. Less that a quarter of the Efma respondents inside retails banks feel that they can offer an advantage to customers above what the Fintechs are offering.
These numbers appear to show that even if the banks focus on improving the way they interact with customers, it may not be enough. The innovative approach of the Fintechs has been built from the start with customers in mind, not modified after decades of process have created a certain way of doing things. Can the banks change?
Efma suggests that banks partner with Fintech, offering a large customer base and brand heritage that could be coupled with a new innovative approach. Will this work or will the Fintechs feel they can just go alone and pick off retail banking services one by one?
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Photo by Uditha Wickramanayaka licensed under Creative Commons.