‘Changing customer choices challenge banks relevance’

The financial services market place and its customers’ behaviours are changing rapidly, calling into question the relevance of the traditional bank, the 2016 EY Global Consumer Banking Survey has said.

According to the report, while customers have typically identified a traditional bank as their primary financial service provider, the function is now eroding, as emerging non­traditional institutions appear to redefine the services, which may affect banks.

Already, consumers are turning to new service providers to manage their finances and purchases, especially with the growth of mobile banking that is evident in emerging markets.

Again, while banks often consider trust as their foundational strength, the Bank Relevance Index of the report showed waning conviction of customers over a broad range of relationship issues like privacy, security, fee transparency and provision of unbiased advice.

Consequently, the report showed that consumers no longer consider banks as the first or only option for managing their financial lives, despite assessed domination of mortgages services, leaving other product offerings to competition.

For Africa, banks’ relevance are declining just like in other parts of the world, with South Africa meeting the global average, while Nigeria is well below average, although high.

“While most consider their PFSP to be a bank with a fair degree of trust, the biggest contributing factor to the declining bank relevance is that customers do not consider holding products with traditional banks in the future.

“With the relatively recent emergence of Fintechs and new competitors providing financial services we are already seeing a considerable portion of customers migrating to these providers as their primary option, especially in Nigeria,” the report said.

The Partner, Advisory Services, EY, Colin Daley, said: “This means banks now need to rebuild trust, better understand customer attitudes and behaviour and re-think distribution channels and engagements.

“Digital innovation needs to be key in Nigeria today. Banks need to protect customers from data piracy and cyber threats, while eradicating errors and minimising lead times.”

He strongly advised banks to improve experience through innovation and convenience like financial technology institutions, a warning that is timely due to the country’s level of financial inclusion, where people could easily develop apathy.

The Director, Advisory Services, EY, Adedapo Adewole, pointed out that traditional banks need to partner financial technology institutions as the latter is now taking a big global place.

“There are digitally-savvy customers who are not financial savvy. They are not worried about rates and are interested in fintechs. Fintechs are taking up a large share across the world and banks need to innovate and partner with them,” Adewole said.

But EY’s Financial Services Leader, Africa, Andy Bates, said the report showed what customers are looking for when it comes to digital. It also showed that people want to do digital services outside the banks, while they want banks to become places for value creation.

The Global Consumer Banking Survey (GCBS) is EY’s flagship piece of thought leadership for the retail banking industry, which surveys banking customers globally to understand their perspectives on how banks can remain relevant and achieve higher satisfaction and loyalty with their customers.

It sought to understand the evolving behaviours, attitudes and concerns of retail banking customers in 32 markets and involved over 55,000 online interviews with nationally representative samples of the banked online population.