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Trust remains an important factor for many when it comes to choosing a banking provider.
A.T. Kearney found that four-fifths of respondents considered their primary account to be with a traditional bank, whereas only a fifth said a challenger. The same study also found that almost three-quarters of respondents chose to have their salary paid into a traditional bank, signalling the higher level of trust placed in them.
Backed by reputation and credibility, all that the big banks need is the technology and talent to level up the customer experience. Major banks are already doing this by acquiring small firms and expanding their developer talent. French bank Société Générale, for example, acquired Shine, a challenger bank last year, and another, Boursorama, back in 2015.
But acquisitions may not always work in the bank’s favour. Spanish bank, BBVA, had to close down the challenger bank Simple after acquiring them back in 2014, reminding us that challenger banks are still often operating on trial and error. So, how else could banks leverage their reputation and credibility and deliver on their customer experience?
The other route these banks could take is by doubling down on their own technology so that challengers can’t keep up. Most people rarely change banking providers, and this is particularly true amongst the older generation. According to finder.com, more than half (57%) of elderly account holders stayed loyal to the same banking provider for their entire lives. That’s why major banks need to deliver the same level of customer service – if not better – online than in-store. Stepping up user experiences will be vital to retaining existing customers and attracting new ones too.
On the other hand, challenger banks have continued to expand their offerings and grow their customer base. Buy now pay later (BNPL) provider Klarna, for example, announced its open banking solution to be rolled out to eight more countries, making a total of 24, and raised $1 billion in a new funding round, Klarna is catching up to the big players with its strong user base of 18 million customers. To measure up with the major players however, it has to work on convincing its customers that it can be trusted with their money.
Whether customers choose to bank with a traditional bank, a digital-first challenger, or even new fintech entrants, it all comes back to one thing: trust. Customers need to feel that their money is in safe hands, and the banking provider will do everything they can to protect and manage their money. Today, it’s no longer about the name and reputation, but the experience that the provider delivers.
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