I received some survey results this week looking at why people are not moving their money to challenger banks at a faster rate.
Turns out that they actually quite rate their banks after all. The study of 1000 people from marketing agency True and research company Strive, found that 86% of people between 18 and 55 scored their current bank at 7 out of 10 or more for satisfaction. And 59% of people agreed that there is little to be gained from switching banks.
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Read the full report here.
As we know since the financial services turmoil, which began about a decade ago with the credit crunch, the UK government and the EU have been eager to introduce more competition in the sector. Making it a bit easier for banks to become regulated and introducing a system that can switch a consumer’s bank account quickly are good examples. But there has not been much take-up of the switching services and the challenger banks, as the new banks are known, have not had much impact on taking customers from traditional banks.
I opened an account with a challenger bank to see what all the fuss is about. I must admit the mobile banking experience is fantastic and there is some great functionality. But would I move my main business, which includes current account, savings account and mortgage? No I don’t think so. I don’t have enough reason. Give me a good interest rate combined with the great digital services and then we are talking.
So back to the research. Why do so many people rate their bank highly and why doe 58% see little reason to change?
The research found that new banks might be over estimating the importance of their user experience credentials.
“The era of open banking is upon us and these findings help established incumbents and new fintech propositions understand what they can do to get people to care enough to move their money,” Tim Jones, MD True.
The study included a test of the on-boarding experience of traditional high street giant Barclays and challenger bank Starling. It found that while most people preferred the Starling experience they were reluctant to switch accounts based on that. “The disruptor has to provide reassurance that they are legitimate, secure and worth the effort,” said the True report.
Another issue holding back fintech banks is that consumers want for face-to-face interaction with a real person. It found that. Sixty five per cent (65%) of those surveyed said they thought Barclays, Lloyds and other traditional banks would offer the highest quality advice, with their high street presence.
What does the future hold for the challenger banks? One of the earliest challengers, German bank Fidor, was acquired by French retail bank BPCE in July. Meanwhile all the big banks are investing heavily in fintech to ensure their digital experiences are close enough to the new banks to make switching more hassle than its worth for consumers. A recent Ernst & Young (EY) study of more than 200 of the world’s biggest banks, found that 85% of banks put the implementation of digital transformation as a high priority. Only improving cyber and data security ranked higher (89%).
So where do the challengers go?
Open banking and PSD2 have just come into force which help fintechs get closer to customers by using their banking data to provide relevant services, so who knows the next few years might bring the much sought after changes. Although differentiation on interest rates etc still seems the only way to convince large numbers of consumers to switch banks.