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 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. The study revealed that a large majority of survey respondents in the UAE are willing to get banking services from an established technology company.
Prominent management consulting firmBain & 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 (50 percent in the UAE) 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 UAE, over 80 percent of survey respondents 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.
“Despite a rate of mobile and digital penetration among the highest globally, the UAE has a comparatively larger share of banking interactions still happening through traditional channels; this points to significant further digitization potential of the industry,” said Julien Faye, head of Bain’s EMEA Financial Services practice. “The majority of UAE customers, especially those in the 18-34 age range, now see major technology players as credible alternatives to banks. Banks, therefore, face an increased risk of their key customer interactions being taken over.”
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 Hong Kong, South Korea, India and Brazil, non-bank providers have become stronger and even dominant. In the UAE, according to Bain’s research, over 50 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 Singapore, Sweden, and Poland. 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 the 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 digital-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.
“In the UAE, technology firms like Google and Apple rank higher than many banks on key functional and emotional attributes. If we combine this to the high level of customer trust that these technology firms enjoy, the potential for disruption is clear,” said Faye. “Traditional banks still have time to respond to this threat, and many have started doing so, by focusing on providing simple, high-quality digital experiences that will be the key to retaining customers.”