London – 1 February 2021 – Through the ongoing Covid-19 pandemic, as bank branch visits have dropped, customers have turned to digital channels for all kinds of transactions, including the purchasing of banking products. This change has led to an increase in hidden defection of consumers, who are now increasingly buying products from banks and providers other than their primary bank. Now, depending on the country surveyed, between 25 percent and 51 percent of all banking product purchases are going to banks that aren’t the surveyed customers’ primary bank. These are among the findings included in Bain & Company’s latest report, As Digital Banking Takes Off, Hidden Defection of Consumers is Rampant.

Over the past few years, banks have focused on improving their digital services due to increased consumer demand. Improvements to banks’ mobile apps and websites have paid unexpected dividends for customers during the Covid-19 pandemic. While deposits and core current (checking) accounts generally remain at customers’ primary banks, they are losing customers on high-margin products such as loans, credit cards and investments -- those that better suit their needs.

“We surveyed more than 56,000 consumers in 11 countries and found that while respondents most frequently cited affordability of a competing offer as their reason for purchasing products from another bank, they also cited better digital tools, a simpler purchasing process and convenience as key reasons,” said Katrina Cuthell, a partner with Bain & Company in Sydney and a co-author of the report. “These numbers were higher among younger customers, who put an even greater emphasis on digital tools, convenience, branding and security.”

If current trends hold, hidden defection will likely intensify in many countries due to the spread of regulations, which will make consumer data portable and thus encourage competition. The UK, which has one of the most competitive banking markets in the world, has the highest defection rate of the 11 countries surveyed. As consumer-friendly, “open-banking” types of regulation take hold in more countries, competition in those markets could intensify as well.

“We saw that while some respondents actively search for product options, others respond to ads, with 29 percent of those who defected receiving a direct offer from a competing bank. Of the latter group, 78 percent said they would be willing to buy from their primary bank if it made a compelling or equivalent offer,” said Gerard du Toit, a Boston-based partner with Bain & Company and the leader of the firm’s global Customer Experience practice. “In order to halt the current defection of customers, banks will need to remove the friction that exists in their marketing so consumers won’t feel compelled to shop around, and excel in the basics of opening accounts, so prospective buyers don’t drop off.”

Editor's Note: To arrange an interview, contact Aliza Medina at aliza.medina@bain.com or +44 207 969 6480