Published on November 8, 2023, 11:22 pm

A recent survey of 30,000 consumers around the world has revealed an interesting trend in the banking industry. More than 70% of respondents said they would be interested in their primary bank utilizing their personal data if it meant they could enjoy more personalized banking experiences.

This finding comes from a report by Bain titled “Customer Behavior and Loyalty in Banking.” The survey showed that there is a growing fragmentation or unbundling of services across all age groups and in all 11 countries surveyed. This can be attributed to the rise of digital-native and neobanks, which are offering customers simpler, engaging, and more affordable products compared to traditional banks.

While this fragmentation is evident across different income levels, it is most prominent in developing markets like Brazil and India. These markets have large groups of lower-income consumers who were historically underserved by traditional banks but are now gaining access to financial services through neobanks and other fintech capabilities.

Gerard du Toit, a partner at Bain & Company, highlights that consumers are seeking better solutions for their banking needs than what their current bank offers. They are increasingly trying out different offerings and are more likely to settle on digital-native providers. However, traditional banks still maintain the majority of primary relationships with customers across all countries surveyed. This gives them a competitive advantage in terms of customer data and access that they can leverage to offer more tailored and personalized banking services.

Another interesting trend observed from the survey is the rise of e-wallets as a preferred method of payment for e-commerce or online transactions. While consumers in most countries still use their primary bank account directly for most spending, e-wallets have gained significant popularity in some nations like China and India. They are lagging behind in others such as Hong Kong and Brazil.

Even banks in developed markets like the US and EU are not immune to this shift towards e-wallets. Younger consumers show a stronger preference for using e-wallets over credit cards. This poses a challenge for banks as e-wallets and payment fintech have the potential to make them less relevant in consumers’ daily lives and deprive them of transaction data.

Bain’s research also emphasizes the importance of getting the digital experience right for banks. They found that direct banks and neobanks earn higher Net Promoter Scores (NPS) than traditional banks when it comes to customer loyalty. Getting the digital experience right the first time can lead to significant benefits such as increased customer spending, lower servicing costs, and higher chances of recommendations to friends and family.

Personalization is another aspect that boosts customer loyalty. Customers who perceive their interactions with their bank to be personalized tend to exhibit higher levels of loyalty. Most respondents in the survey reported that their primary bank does a good job of personalization by offering products that meet their needs and proactively resolving issues while keeping their data safe.

To counter the fragmentation in banking relationships, banks can focus on engaging customers through a simpler, more seamless, and personalized digital experience. According to Katrina Cuthell, a partner at Bain & Company, excelling in personalization requires understanding and anticipating customers’ needs, engaging them at the right moments, and continuously improving personalized engagement over time.

The survey also revealed that customers care about environmental, social, and governance (ESG) factors when assessing their banks’ performance. Banks that are perceived as active and responsible along ESG dimensions receive high loyalty scores from customers. However, only 52% of respondents believe their primary bank performs well on ESG efforts. Lack of communication is a key reason why 22% of respondents are unaware of ESG initiatives undertaken by their primary bank.

Overall, this survey highlights the changing landscape for banks around the world driven by consumer preferences for more personalized experiences and the rise of new digital players like neobanks. It urges traditional banks to adapt by leveraging customer data, improving digital experiences, and delivering personalized solutions to ensure customer satisfaction and loyalty in an increasingly competitive market.

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