Loyalty lessons banks can learn from fintechs
To capture consumers hesitant to digital banking, FinTechs are focusing on customer satisfaction.
The “Digital-First Bankingn: Experience-Oriented Digital-First Banking” study, a PYMNTS and NCR collaboration, found that all age groups, led by younger generations, are moving toward making digital-only banks their primary providers. However, total consumer adoption of these neobanks is far from over, with only one in ten using them primarily. Digital-only banks have therefore been looking to win consumer trust (and thus market share) through improved customer service.
FinTech’s strategy of being more customized and experience-oriented than their traditional competitors seems to be paying off. Although full adoption remains low compared to brick-and-mortar institutions, 59% of consumers said they are somewhat interested in using digital-only banks in the next 12 months, with a further 36% very or extremely interested – which indicates growing curiosity, even if most consumers aren’t quite ready to make the jump.
The reasons why consumers consider switching primarily to digital institutions fall under the larger umbrella of experiential banking. While most major banks offer some form of digital tools and services, neobanks differentiate themselves by improving these offerings.
Amid this year’s record high inflation rates, digital-first banks such as Bunq have rolled out improved budgeting tools that allow European users to set different budgets for different household expenses. Bunq detects which category a payment belongs to and allocates funds from the appropriate sub-account.
One of the biggest loyalty strategies digital-first banks can offer is high-yield savings. Aside from potentially increasing customer retention, the strategy also unlocks additional capital that can enable neobanks to invest in more innovative technology.
Grant Sahag, CEO of neobank Novo, spoke to PYMNTS about how personalization and automation tools can help small businesses stay competitive. If major banks fail to provide these tools, customers will likely find alternative ways to access these capabilities.
“That’s why [these tools] has been so disturbing [to the banking market]”, Sahag explained. “And that disruption is felt [to customers] like getting a more personal experience.”
Traditional financial services companies looking to differentiate themselves may want to take note of how digital-first banks have updated and innovated the tools brick-and-mortar institutions already offer. The only crazy choice is to reject these upstarts altogether – because a growing base of digitally-minded consumers certainly isn’t.
PYMNTS data: Why consumers are trying digital wallets
A PYMNTS study, “New Payments Options: Why Consumers Are Trying Digital Wallets” finds that 52% of US consumers tried a new payment method in 2022, with many choosing to try digital wallets for the first time.
