BOSTON—March 30, 2023— Of the nearly 30,000 global consumers that Bain & Company recently surveyed, more than 70% said they are interested in having their primary bank use their personal data if it means their banking experiences will be more personalized. This is among the findings of Bain’s 2023 “Customer Behavior and Loyalty in Banking” report.
This new research from Bain shows a fragmentation, or unbundling, of services in all 11 countries and across all age groups surveyed. This is due in part to the rise of digital-native and neobanks, which, when compared to traditional banks, are providing customers with simpler offerings, more engaging experiences, and more affordable products. While fragmented behavior is observed in people of all income levels, it is most pronounced in developing markets, such as Brazil and India, where large groups of lower-income consumers who have been historically underserved by banks are now gaining financial access through neobanks and other fintech capabilities.
“Our research shows more and more consumers are looking for better solutions to meet their needs than what their bank currently offers,” said Gerard du Toit, a partner at Bain & Company. “As consumers try more offerings, they’re increasingly apt to settle on digital-native providers. However, in every country we surveyed, traditional banks still hold the majority of primary relationships with consumers. This provides them a competitive advantage of customer data and access that they can use for more tailored, personalized banking services that customers will love.”
Rise of e-wallets
While consumers in most countries surveyed use their primary bank account directly for the majority of spending, e-wallets have spread quickly, dominating in some countries as the preferred method of payment for ecommerce or online transactions. E-wallets and payment fintechs could make banks less relevant in consumers’ daily lives and deprive banks of transaction data. Research shows that e-wallets are the leading payment method in China and India for e-commerce purchases and across all activities; by contrast, they are lagging in Hong Kong and Brazil. Banks in the US, the EU and other developed markets are not immune to the rise of e-wallets, and young consumers show the strongest preference for e-wallets over credit cards.
Higher customer loyalty scores when digital is done right
Bain’s research shows that getting the digital experience right the first time can “pay big dividends” as a result of customer loyalty, which is measured by Net Promoter Score℠ (NPS). This includes consumers spending more with their bank, costing less to serve and being more likely to recommend the bank to friends and family. Bain found that direct banks and neobanks earned higher NPS than traditional banks.
The value of personalized banking
Highly personalized propositions and engagement can also lead to boosts in customer loyalty. Bain found that customers who perceive interactions with their bank to be personalized to them exhibit higher customer loyalty than those who don’t. Most respondents reported that their primary bank does a good job of personalization in terms of offering products that meet their needs and proactively resolving issues while keeping their data safe.
“To counter fragmentation in consumers’ banking relationships banks can focus on engaging customers through a simpler, more seamless and personalized digital experience,” said Katrina Cuthell, a partner at Bain & Company. “Excelling in personalization means getting several critical moments right. First, a bank must be able to understand and anticipate its customers’ needs. Then, it needs to actively engage those customers at the right moments, adjusting the content of communications based on the customers’ actions. And finally, it has to measure the outcomes so that personalized engagement can improve over time.”
Customers care about ESG
Survey respondents who perceive their primary bank as active and responsible along ESG dimensions tend to give the bank a high loyalty score, highlighting the importance of clear ESG communications. Yet only 52% of respondents believe their primary bank performs well on ESG efforts, while some 22% of respondents said they are wholly unaware of ESG efforts by their primary bank due to lack of communication.
Bain’s research shows that consumers figure many products or features into ESG priorities, including waived fees for sustainable investments, sustainable deposits and insights that help customers to improve their carbon footprints.
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