New York – Nov. 14, 2018 – With banks increasingly under attack from technology firms, it is no surprise that their top priority is improving the convenience and quality of the experience for their customers. However, Bain & Company’s ninth annual customer loyalty in retail banking study, In Search of Customers Who Love Their Bank, finds that traditional banks fail to keep up with direct banks (such as USAA and First Direct) and technology firms in five out of five areas that matter most to consumers: quality, saves time, simplifies, heirloom, or a good investment for future generations, and reduces anxiety.
Bain & Company partnered with Research Now SSI to survey more than 152,000 consumers in 29 countries, across 287 different banks to understand what qualities they value most in a bank. These qualities are based on the Elements of Value ® – 30 fundamental attributes identified by Bain & Company that help companies gain an edge with customers.
According to the survey, 54 percent of respondents globally would trust at least one technology company—Apple, Amazon, PayPal or Google—with their money more than banks. This trust can translate into a willingness to try banking with these companies, particularly among young respondents. In the US, nearly 80 percent of survey respondents between the ages of 18 and 34 would be willing to bank with an established technology company that they already use, putting even more pressure on traditional banks to improve the customer experience.
“As the number, scale and trust of technology firms offering financial services grows globally, traditional banks find their core interactions and engagement with customers being picked off,” said Gerard du Toit, head of Bain’s Banking practice and lead author of the report. “With disruptors nipping at their heels, the big risk for banks is not only loss of revenues but also in the frequent customer engagement and valuable transaction data.”
Nowhere is this more evident than in payments, one of the highest frequency touchpoints for interactions between a customer and a provider. In many countries, such as Brazil, Hong Kong, South Korea and India, non-bank providers have become stronger and even dominant. According to Bain’s research, 65 percent of consumers surveyed are using third-party platforms for payments—both direct and peer-to-peer. In digitally maturing markets, such as China, this number jumps to greater than 95 percent of survey respondents.
Yet traditional banks have managed to hold their own in payments in select countries, notably Sweden, Poland and Singapore. These experiences suggest that although payments exhibit some winner-take-all characteristics, the dominant position is still up for grabs in many countries. Banks have ability to catch up to leading insurgents if they join forces to create an industry-wide platform that is highly functional and consumer-friendly. However, if banks do not figure out how to appeal to mobile-first customers, competitors will begin to overtake them.
To fend off further incursions by large technology firms and keep consumers satisfied, banks will need to provide the simple and digital experiences that customers demand, and close their performance gap on the Elements of Value ® dimensions of saves time and simplify. This will prove to be critical, particularly as Amazon reportedly plans to launch a no-frills account with a banking partner. Reaffirming the need for a simple and digital-first approach, customers ranked 92 percent of direct banks highly in saves time, versus only 28 percent of traditional banks. On the other hand, banks have the opportunity to extend their lead in reduces anxiety by continuing to offer highly valued human interaction when needed, especially when customers are faced with major financial or life decisions.
“Technology firms have traditionally excelled at providing simple, high-quality digital experiences that customers demand, and they are now marching into the banking sector on the strength of this consumer trust,” said du Toit. “There’s still time for traditional banks to respond to this threat, and many have been doing so already, with an emphasis on providing simple, digital experiences that will be the key to retaining customers.”
Editor's Note: To arrange an interview, contact Dan Pinkney at firstname.lastname@example.org or +1 646 562 8102
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