Customer experience levels at banks have failed to improve for the second year in a row and customers are more likely than ever to leave their bank, according to the latest World Retail Banking Report (WRBR) from Capgemini and French retail banking association Efma.
The report, which studied 32 markets and data from more than 16,000 retail banking customers, said stagnating customer experience levels, combined with an increase in customers willing to leave their banks, is leading to weaker bank-customer relationships. This is opening doors for new non-bank challengers, it said.
“There is an increased possibility of disintermediation by non-bank competitors, such as brand-name retailers, financial technology firms, crowdfunding websites, peer-to-peer lenders, internet/mobile service providers and Apple payment systems based on near-field communication,” said the report.
Many of these non-bank financial services providers put customer engagement at the heart of their businesses.
The report said the percentage of customers who said they were likely to leave their primary bank in the next six months rose into double digits in every region except western Europe. Less than 50% of Generation Y (those born from the early 1980s to the early 2000s) said they were likely to continue with their primary bank in the next six months.
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In the UK, factors contributing to people changing banks include the arrival of technology companies offering banking services, new banks and the seven-day switching service, which is designed to make it easier to change current accounts.
The launch of a current account comparison site from Gocompare.com in March 2015 is another threat to banks. It gives consumers access to the electronic data businesses hold about them, allowing them to make informed decisions about which service providers to use. This can be used by the Gocompare.com comparison site to match people with a current account that suits them.
“Internet and technology firms, in particular, with their simple, agile, and intuitive offerings and freedom from legacy systems, are at the top of the list of competitors, with 83% of bank executives viewing customers as comfortable with banking through these entities,” said the report.
Capgemini global financial services chief sales and marketing officer Jean Lassignardie said disenchanted customers, along with the agile and innovative nature of non-bank competitors, leaves the door wide open for capturing market share.
“Improving customer experience is the best strategy to deflect competition from non-bank players," he said.
"While investments in improving front-office customer experience have expanded banks’ offerings, middle and back-office transformation has been plagued by underinvestment and will be the key to resolving disjointed customer experiences and improving longer-term loyalty rates.”
According to research from Infosys and Efma in 2014, banks consider Google, Apple and Facebook their biggest competitive threat as technology firms offer consumers financial services. It revealed that 45% of banks rated the threat from technology companies as "high".
Banks are responding to the challenge with more attractive accounts. Barclays is now offering customers up to £180 a year for banking online and using its mobile banking app.