Customer services and trust are key areas of concern for incumbent banks

Incumbent banks face a considerably more fragmented financial services space as new digital banks and other financial services institutions begin to develop propositions to entice away customers. A new report finds that banks face trust issues, with most consumers not trusting them to keep their money safe, nor provide unbiased advice. Customers do expect access to physical branches, however, while better customer service and lower fees are the biggest drivers of customers engaging with solutions from non-incumbent providers.

The banking industry has, for centuries, provided a means of securing financial assets as well as accessing a range of financial services, with relatively little perturbation within the marketplace. Today, however, the banking industry is facing multiple challenges, from an increase in FinTechs seeking to pick up customers, to customer demand for an omni-channel digital experience, to cross border activity from tech giants, and lastly from the need to meet more stringent regulatory requirements.

In a new report from EY, titled ‘The relevance challenge: What retail banks must do to remain in the game’, the professional services firm surveyed 55,000 consumers worldwide to gain a deeper insight into key trends within the industry, from preferences and behaviours to changing attitudes around services and trust.

Trusting banks

Banking, like many key institutional relationships, is built on trust. The survey finds that there is considerable variation in the levels of trust that consumers have of banking institutions across the globe, and that, on average, 52% of consumers do not completely trust primary financial services providers (banks) to keep their money safe.

Of the countries surveyed, Nigerian respondents have the highest level of trust, at 71%, followed by the US at 57%. When it comes to providing unbiased advice, however, respondents from neither country exhibit high levels of trust, at 36% and 33% respectively. In the UK, around 48% of respondents trust banking institutions to keep their money safe, while just 20% say that they provide unbiased advice. Hong Kong-based respondents are the most jaded, with 32% trusting the institution to keep their money safe, while 11% say that that banks provide unbiased advice.

The research finds that key competitors to banks are ahead in the level of trust reported by respondents. However, their lead in most cases is relatively low – with across the board respondents not trusting financial institutions.

For banks with branches, 25% of respondents believe that they provide unbiased advice, compared to 29% for internet/telephone-only banks without branches and 30% of other companies. People also do not trust that banks provide them with complete transparency about fees and charges – 31% say that they have such transparency at banks with branches, 38% say so for internet/telephone-only banks and 34% for other institutions.

When it comes to institutions looking out for their customers, by recommending products and services that meet their actual needs at the expense of revenues, just 21% believe that a bank with branches would act in the interest of their customers, while 26% say that internet/telephone-only banks would act in the interest of their customer.

The research also finds that, while digital channels remain important for customers, they too continue to demand a physical presence. Human interaction was seen as important by 60% of respondents globally, while a great digital presence was seen as important by 66% of respondents. Nigeria and Mexico see the highest level of demand for both digital and physical presence at 91% and 76% and 87% and 80% respectively.

Most developed countries show a slight digital preference, with the UK at 57% versus 48%. However, in Australia and France demand for physical presence outstripped that of digital presence.

Switching up

The study further sought to identify what pulls customers away from traditional bank providers, and towards digital-only or nonbank providers. Top of the list, cited by 24%, are more attractive rates/fees. Customer service related factors make up the following four reasons to switch, with 21% saying they are attracted by a better online experience and functionality, 21% saying access to different products and services, and 21% saying an easy to set up account and 16% saying a better quality of services.

The areas that were the least likely to attract away a customer were greater levels of trust over traditional institutions at 6%, to support new business/product ideas at 7% and being an early adopter at 8%.

How far customers are exploring options outside the traditional banking ecosystem is another area taken under scrutiny. Globally 42% say they have used a non-bank provider in the last 12 months, while 21% of customers using only traditional solutions are planning to use a non-bank provider. Emerging markets saw the highest uptake of non-banking use, at 67% in Nigeria and 56% in Mexico. In the US, non-banking use in the past 12 months stood at 39%, while in the UK it stood at 37%. France and Germany are the regions surveyed with the least customer interest in non-banking solutions, at 26% and 22% respectively.

David Ebstein, EY EMEIA Head of Digital Financial Services, says, “Banks are currently facing many challenges, as customers re-evaluate their relationships and consider alternatives. Despite these obstacles, the survey results are optimistic that retail banks can address these challenges and maintain relevance in consumers’ lives by utilising their scale, customer base, brand recognition and infrastructure.”