RFi Group Opinion - Technology companies gaining on banks in the battle to win consumer trust

Increasingly at RFi Group we are being asked by our clients about what the future of banking holds and, in particular, what role fintechs will have in comparison to traditional players in the new banking landscape. Will fintechs disrupt the market and steal share from the incumbents? Will banks adapt to a changing banking landscape and begin to offer their customers fintech like services? Which fintechs will prove to be real challengers to traditional players and which will fade into obscurity? And what impact will regulation changes like PSD2 and Open Banking in the UK have?

To answer these questions, and more, RFi Group has recently launched the Global Digital Banking Council, speaking to 20,000 consumers across ten key markets annually to enable us to identify key trends in digital banking at both the local and global level, and to begin the process of predicting what the future of banking will look like.

Promisingly for traditional players, consumers remain more likely to trust a bank to hold and maintain the privacy and security of their personal information than any other organisation...In comparison, 26% of consumers indicated that they have this same level of trust in established technology companies (such as Apple or Google) and just 19% trust new or emerging technology companies.

Assessing the current state of play between fintechs and traditional banks, RFi Group’s Global Digital Banking Council data highlights opportunities for both sides. Promisingly for traditional players, consumers remain more likely to trust a bank to hold and maintain the privacy and security of their personal information than any other organisation, with 38% of consumers globally indicating that they consider banks to be highly trustworthy (8+/10) in this regard. In comparison, 26% of consumers indicated that they have this same level of trust in established technology companies (such as Apple or Google) and just 19% trust new or emerging technology companies. Being considered trustworthy is important as trust remains the number one driver when it comes to choosing a provider for banking products. In fact, trust is the most important factor influencing choice of a banking product provider across all ten markets.

These results highlight a key advantage traditional players have over fintechs. Banks and other traditional financial service providers can, and should, leverage perceptions of trust to maintain market share and to ward off new market entrants looking to disrupt existing relationships. However, traditional players cannot simply rely on strength of brand to win share. Comparing these results on trust for existing and emerging technology companies highlights the extent to which awareness and understanding of a brand lead to higher levels of trust, with existing technology companies much more likely to be trusted than emerging companies. We also know that even though consumers say they don’t trust technology companies with their personal data, companies like Facebook are already accessing this data; consumers don’t always actively think about what they are and are not comfortable sharing with these companies. We can’t assume that because consumers are more likely to trust banks with their personal information that they won’t give this information to other providers if an alternative provider offers a better service.

Furthermore, if you look at these results by age, trust in technology companies has increased at such a rate among Millennials that banks are now only just ahead on this metric, with 39% of Millennials considering banks highly trustworthy with their personal information compared to 31% of Millennials who trust existing technology companies.

Another potential threat to traditional players, or an opportunity for fintechs and other challengers depending which side of the fence you sit on, is the fact that over the last 18 months trust in existing technology companies has increased at a faster rate than trust in banks. Technology companies are beginning to close the gap when it comes to perceptions of trust. Furthermore, if you look at these results by age, trust in technology companies has increased at such a rate among Millennials that banks are now only just ahead on this metric, with 39% of Millennials considering banks highly trustworthy with their personal information compared to 31% of Millennials who trust existing technology companies. This age view is an important one when thinking about potential for disruption as Millennials are more likely than any other segment to take out a new banking product in the next 6-12 months and are also more likely to take out a product they have never held before. This means that fintechs and other challengers have a greater opportunity to sell products to this segment and won’t necessarily have to encourage them to switch from an existing product provider, overcoming a key barrier to acquisition. Millennials are also less loyal to their banking providers than other segments and are more likely to be driven to choose a provider based on the provision of a good digital service. As such, this segment represents a key opportunity for fintechs to disrupt and win banking relationships that would have otherwise gone to traditional players.

As the market continues to change traditional players will need to adapt their strategies to ensure they are able to compete with new market entrants. Leveraging perceptions of trust and security will be key to this but may not be enough to ensure that consumers do not switch to challengers as consumers become more comfortable using alternative product providers, especially if these providers offer something unique or different in the way of digital service. At RFi Group we will continue to watch this space as it evolves.

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