Consumers Are Crowdsourcing Their Financial Services, While Banks Risk Losing Primary Status

Personal Finance
12.06.2024 09:15 am

85% of consumers say they have positive experiences with their primary financial institution (FI), yet they’re using as many tools or services with other financial providers as they are with their primary FI, according to a new study released today by Galileo Financial Technologies, a leading financial technology company owned by SoFi Technologies, Inc. (NASDAQ: SOFI), in collaboration with Datos Insights.

The Galileo Consumer Banking Report by Datos Insights reveals that, while traditional banks still claim most of the market, they are at significant risk of losing their role as primary FI, and the customer retention and lifetime value that goes with it.

“To remain competitive, financial institutions can provide services that are digital-first, intelligent and eventually autonomous. Financial institutions that fail to deliver will lose their most valuable customers to their digital competitors,” said Derek White, CEO at Galileo. “Banks and credit unions of all sizes can embrace technology and unlock the data they already have to deliver timely, more relevant financial services at the customer’s point of need.”

Key takeaways from the report include:

The concept of using one provider for all financial needs is eroding. Even among satisfied customers, “primary” status doesn’t mean what it used to. Across all age groups, customers are curating their own suite of financial services through multiple providers. Gen Z and younger millennials are leading this diversified strategy: On average, they use more than six financial tools or services. And they are using more than half of these tools outside of their primary FI.
Personalization is paramount, but many FIs aren’t cutting it. More than a third (37%) of consumers surveyed don’t agree their primary FI makes offers that are tailored to their financial situation, and 32% don’t agree that same provider understands their needs or offers personalized service, underscoring the need for banks and credit unions to unlock and use customer intelligence to personalize offers and experiences.
Customers don’t want to talk to their financial institutions. Instead, they want DIY financial services. 60% of people said they prefer to do everything without human interaction, and 42% of younger millennials have used a virtual assistant to conduct financial activities – more than any other generation.
Retail banks are missing a prime cross sell opportunity with gig workers. On the surface, gig workers may look like an average consumer, but their needs are decidedly different. Not only do gig workers use a wider variety of financial tools or services, they over-index for specific services that their primary FI may not be offering to them today, such as credit building, budgeting and expense tracking tools. These customers want their financial service providers to recognize and respond to their unique needs in real-time.

“Consumers are making more sophisticated, informed financial choices as the youngest digital natives build their own financial habits,” said David Albertazzi, the director of Datos Insights’ retail banking and payments practice. “And there are bigger shifts coming, as baby boomers begin the biggest transfer of wealth ever to younger generations who have significantly different financial preferences and behaviors. Banks and credit unions will serve themselves well by maximizing their own accountholder insights to offer more personalized financial services that push customers deeper into their financial ecosystems.”