A global survey of 30,000 consumers reveals that 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 personalised.
The Bain report “Customer Behavior and Loyalty in Banking” 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 behaviour 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.
Gerard du Toit, a partner at Bain & Company, says consumers are looking for better solutions to meet their needs than what their bank currently offers.
“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."
Gerard du Toit
"This provides them a competitive advantage of customer data and access that they can use for more tailored, personalised banking services that customers will love,” he added.
Rise of e-wallets
While consumers in most countries surveyed use their primary bank account directly for most of their spending, e-wallets have spread quickly, dominating in some countries as the preferred method of payment for an e-commerce or online transactions.
E-wallets and payment fintech 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” because 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 personalised banking
Highly personalised propositions and engagement can also lead to boosts in customer loyalty. Bain found that customers who perceive interactions with their bank to be personalised to them exhibit higher customer loyalty than those who don’t.
Most respondents reported that their primary bank does a good job of personalisation 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 personalised digital experience,” said Katrina Cuthell, a partner at Bain & Company.
“Excelling in personalisation 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 must measure the outcomes so that personalised engagement can improve over time.”
Katrina Cuthell
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 a 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.
