Consumers want digital personalization, but 40% of financial institutions are ‘static’, research study finds
Following a study by World First published last week that found that 87 percent of small and medium enterprises in the UK get better services from Fintech companies rather than traditional banks in foreign exchange related support, and a study by Efma and Mysis in late 2015 that suggested banks to act quickly in responding […]
Following a study by World First published last week that found that 87 percent of small and medium enterprises in the UK get better services from Fintech companies rather than traditional banks in foreign exchange related support, and a study by Efma and Mysis in late 2015 that suggested banks to act quickly in responding to clients’ digital needs and develop their CRM and core technology, today a report called “The Power of Personalization in Banking” was published.
Targeting the misperception of what banks think consumers want and need, the report authored by Jim Marous was based on a survey in partnership with GfK, interviewing approximately 1,000 people in 2015, being 50% male adults and 50% female adults, about their primary financial institution (PFI).
The 64-page research study found a “perception gap”, as of the surveyed financial institutions, 319 interviewed in Q1 2016, 38% expected consumers to consider them a “necessary utility”, an overestimate how consumers view their relationship with banking given that when questioned, 57% of consumers had that response.
Perception about how well financial institutions knew their clients also had disparities, with financial institutions unaware that twice of the expected consumers think their banks make them feel like a number. They expected 43% of consumers to say “my bank has my best interest in mind when conducting business with me”, but only 34% did so.
A research conducted by CGI found that consumers are willing to switch to non-bank alternatives to find new and personalized services that reward them for their business. This goes in line with the latest trends in the finance industry, as disruptive applications conquer a growing share of the market via online financial businesses, including the Forex industry.
Consumers want financial institutions to gather their personal and transaction data the way tech companies do, understanding their goals and preferences, proactively offering new solutions for them, in a sort of “GPS” view of their financial lives. They are willing to share more information about themselves to facilitate a more complete analysis to respond to their short and long term goals, and 20% of the surveyed consumers said they’re willing to pay for such developments.
The report concludes that the significant gap between consumer expectations and what banks are actually delivering provides a great opportunity for differentiation. “As the cost of technology and advanced analytic tools drops, the personalization tools once only available to the largest banks are now available to virtually any organization. The key will be to leverage these tools to provide contextual solutions the consumer wants”, wrote Jim Marous, owner of The Financial Brand and publisher of the report, also pointing to a concerning static behavior of financial institutions in about 40% of them (little or no digital personalization with a possibility of offering in the future). Being a threat to future viability of their business, it is an opportunity to firms willing to approach the market in a modern way, embracing the digital culture.
Among the key takeaways of the report, it is worth noting that consumers look for personalized solutions and advice, fintech players and non-financial firms are increasingly able to provide, with highly customized digital solutions, while most financial institutions cannot. So, personalization across stages such as advice, communication and offers will be a key differentiator for banking in the very near future. For now, a false sense of confidence in the sector may be delaying the prioritization of leveraging advanced analytics, according to the report.
The document published today comes in nearly a week after UniCredit’s announcement of a $200 million fintech fund in partnership with London VC firm Anthemis in order to target mid-stage startups and follow-on investments in more mature fintech firms.
BNP Paribas has also made an announcement last week that it would take eight fintech startups in a four month accelerator program in fields including insurance, payment methods, compliance, customer experience, cyber security and risk analysis.
Making the headlines last week were also UBS and Credit Suisse, partnering with Swisscom, Swiss Life and Ernst & Young to launch a fintech accelerator.