It’s been said that people are more likely to change their spouse than they are to change their bank. But in a bespoke survey we carried out recently, we found many consumers are thinking about filing divorce papers to their main account provider.
45% of UK and U.S. millennials want to change banks in the next 12 months.
But changing banks is just one part of a bigger picture of disruption in the financial industry.
With the new Payments Service Directive (PSD2) rolling out across the EU, financial providers will have to adapt and innovate. But this isn’t an EU-exclusive phenomenon; more U.S. internet users and banking customers are thinking about changing bank than in the UK.
This new law forces banks to open their most prized data to third parties, who can use it to refine their core functions, or to initiate payments.
In this rapidly changing environment, customer experience and sentiment has to be looked at closely. Our research uncovers the latest banking trends and what consumers want to see from the finance industry in 2019 and beyond.
Mobile banking has yet to fully disrupt.
Mobile banking systems are well-established in Western markets, but mobile finance hasn’t proven to be truly disruptive just yet.
Our research finds checking account balances and paying for products on-the-go were the most common things to do on mobile. Only a minority had used an online budgeting tool or split a bill through their phone.
So while the technology is new, the applications of mobile banking are still quite conventional.
If anything feels the effects of mobile banking at the moment, it’s the ATM.
Consumers use their phones to avoid having to track down a machine to check their balance or withdraw cash. Stats from LINK, the British cash machine network, show year-on-year decreases in ATM activity.
This state of affairs betrays the breadth of features consumers, particularly younger ones, want to see.
To analyze this in more detail, we’ll hone in on millennials, who have a strong desire to shop around for banks and possess an intriguing perspective on what finance should look like in the coming years.
Millennials want finance integrated with their lifestyles.
When it comes to key trends, perhaps true to form, millennials want a little bit of everything. For context, let’s look at them side-by-side with Gen Xers.
With the exception of more age-specific resources (like pensions and business tax returns), millennials want to see more from almost all areas of finance in the digital space, such as budgeting tools, investments, and loans.
But Gen X aren’t digital laggards when it comes to finance. They’re actually more likely than millennials to have checked their bank balance online in the past month. But with millennials, we get a sense of not just what the most in-demand features are, but what a redefined relationship between bank and customer might look like.
Millennials want financial services to be more integrated with their day-to-day lives. This includes their most common payments and more proactivity with cash management, including warnings on unsustainable spending habits on their accounts or credit cards.
The relationship has to extend outside the walls of a bank branch.
So what does this move towards lifestyle patterns means in a post-PSD2 world?
Apps and companies that engage with users throughout the day have a new business stream available to them and won’t hesitate to move into it. They already have a vast amount of customer data, and world-class expertise in artificial intelligence, data science, and personalization – and they’re unlikely to wait for banks to catch up.
Big tech looks set to make a move.
If banks don’t seize the open banking initiative in adhering to consumers’ lifestyles, other contenders may beat them to the punch with new technologies.
In the UK retail banking sector, there’s been a lot of attention on challenger banks like Monzo and Revolut, but Google, Amazon, and even Facebook will not just sit and watch this trend pass by.
They will have the advantage of a bigger foothold in consumers’ day-to-day, and rich datasets to build out their financial offerings and gain market share.
The Amazon business model in particular would have a massive advantage. It could conceivably help people budget for items on their wish list, or give shoppers favorable credit rates.
It may seem far-fetched, but it’s already happening in some corners of the globe. Ant Financial has become one of the dominant financial service providers in China by leveraging billions of data points from Alipay users and using them as the basis for financial products.
The company’s branding offers some hints for how these changes occur in the West. In its press releases, Ant Financial tends to refer to Alipay as a “lifestyle platform”. While China is a fundamentally different market, the idea of a “lifestyle platform” captures something of how millennials in the West think about financial providers.
And there are signs of new finance initiatives coming from Silicon Valley.
Amazon is the obvious contender to follow Ant Financial’s example, but it’s not the only one. Apple is reported to be building out digital banking services with Goldman Sachs, while Facebook could move into the area if their new payments strategy – identified as a priority by Mark Zuckerberg – takes off.
Education can be the most valuable tool.
One of the most interesting findings from our research was that millennials want to see something quite old-fashioned in future financial services – a good financial education.
Millennials aren’t just motivated by what financial tools can do for them, but also what they can teach them.
They’re 31% more likely than the average internet user to want financial advice delivered by chatbots, and 27% more likely to want educational resources, like videos. This is an area where the experience and expertise of a traditional bank may resonate more powerfully with a consumer than a fintech challenger.
But whether it’s a bank, a fintech challenger, or something else entirely (such as the blockchain and cryptocurrency industry), any future financial offerings are immaterial without solid security.
Consumers are fully aware of the security risks involved with the digitization of financial tools. Fear of hacking was by far the biggest drawback of future finance given by respondents of our survey, regardless of age.
And the second most requested future feature in finance was biometric security, only beaten by the prospect of being given rewards for staying in budget.
We’ve kept a focus on millennials here, as older consumers tend to be more satisfied with their current bank and less willing to engage with digital finance tools. But security is one way to bring them onto digital platforms. Worries about security increase with age, but with the help of biometrics, digital transformation tools could offer better security layers than current solutions.
PSD2 will make waves in the finance sector in the next few years, but the legislation is just a figurehead for long-standing digital trends.
Mobile-first browsing and the growth of personalized real-time services through the worlds of entertainment and retail are helping to reshape expectations for financial providers just as much as the new law.
There’s serious interest among younger internet users in changing banks, but the future of finance is more than just moving accounts.
Financial services are moving from a separate part of a consumer’s life into a more integrated ecosystem in their day-to-day. But any new developments in the post-PSD2 world have to be built on foundations of security above all.