FinTech Advantage? Driving Banks Towards a Connected Ecosystem

In a previous article, I shared some interesting findings around the state of banking customer experience across the globe from our World Retail Banking Report from Capgemini and Efma.

For a quick reminder, some of the findings I found interesting include:

Globally, positive banking customer experience levels rose from 39.5% in 2014 up to 54.7% in 2016, but younger generations still lag behind

Increases in profitable customer behavior have not followed increases in banking customer experience (e.g., Likely to stay with firm up 1.4PP to 55.1%; Likely to refer friends only up 1.0PP to 38.4%; and Likely to buy another product from primary bank up 0.6PP to 15.9%).

Likelihood customers would refer FinTech to friend (54.9%) was over 40% higher than for banks (38.4%).

It appears FinTechs have initially found some success in tapping customers’ referral mindshare. That may be partly explained by why some customers have begun to choose FinTech providers over banks. Out of the 16,000+ banking customers we interviewed across 32 countries, ‘Ease of Use” was the primary advantage they believe FinTechs have over banks. A very close 2nd and 3rd were ‘Faster Service’ and ‘Good Experience’. ‘Lower Fees’ came in a close 4th. Its clear customers are looking for simple, fast, and high quality experiences. They’re looking for minimal friction and they generally believe FinTechs are currently able to deliver this more effectively than banks.

When we asked banks what they believe customers view as FinTech’s value proposition vs. banks, they recognized ‘East of Use’ was the top differentiator. They also saw ‘Lower Fees’ as important.

However, when asked about the value proposition FinTech’s deliver to customers around ‘Good Services/Experience’ and ‘Quick Turnaround’, they greatly underestimated the value customers place on FinTechs’ ability to deliver those better than banks.

This could explain why nearly 2/3 of customers globally already leverage a FinTech for at least one product or service. And of those FinTech adopters, over 40% have multiple products with FinTech providers

None-the-less, banks still feel they have some clear strengths and advantages compared to FinTech’s.

Specifically, the top area noted by bankers was ‘Customer Trust.’ Over 70% of bank executives we interviewed saw trust as an advantage they hold over banks. ‘Established Relationships’ followed close with 65.3%.

Customers did provide some support to that assertion by banks. Banks still hold a strong lead with 54.5% of customers globally having ‘Complete Trust’ in their banks vs. only 30.8% feeling the same with FinTech’s.

However, that gap is closing as trust levels are nearly identical when you add in ‘somewhat Trust’ (93.7% for banks vs. 90.2% for FinTechs).

So what does this all mean for banks, FinTechs, and customers? I had the pleasure of Chairing the entire morning session of Day 2 at NetFinance this week in Miami and had the opportunity to moderate a couple of panels discussions where we covered this topic.

Each discussion centered around a couple of core themes of how to meet increasing customer expectations.

First, there is certainly a lot more talk about 'Customer First.' Leading banks have started to make this more than just a motto. It's not just about the technology implemented, but the overall culture of the organization to focus on the customer.

Second was around personalization and customization of the customer experience. How do you balance leveraging the data and insights you have on your customers and without crossing that line of being viewed as 'creepy.' Also, how can deliver personalized experience as interactions continue to transition from face-to-face to digital. Only 13% of banking customers visit their branch at weekly. Compare that to 59% engaging with the bank via internet weekly and 33.3% via mobile. The percent of customers are interacting with their banks weekly on social media (11%) has almost reached the same number of customers visiting the branch weekly.

Lastly, was the buzzword of 'Omnichannel' experience which doesn't seem to be going away. How can you start a conversation in one channel and accompany the customer as they move through the different channels.

None-of these themes are new to banking. However, there is a reason these are still big challenges in the industry. Banks' legacy systems are real inhibitors to change. While at the same time, these new FinTech players have an ability to move much quicker. Next week, in my concluding piece on the findings from the World Retail Banking Report, I'll share the findings on how banks view the evolution of the industry and what role they see FinTech players moving forward.