Lack of trust and nontraditional offerings erode bank relevance

*  40% of consumers globally report decreased dependence on their bank

*  Average bank relevance score stands at 75.1 out of a possible 100

*  Trust in traditional banks lags behind digital-only banks, fin techs and supermarkets offering banking services

Forty percent of 55,000 consumers surveyed worldwide report decreased dependence on their traditional bank and increased excitement around alternatives, according to the EY 2016 Global Consumer Banking Survey.

A lack of trust, changing consumer behaviours and expectations set by digital innovators, and increased competition from new players are eroding traditional bank relevance. Retail banks scored 75.1 out of a maximum value of 100 on the EY Bank Relevance Index (BRI), which measures how customers interact with banks now and how they expect to in the future. 

In terms of bank relevance the survey findings indicate that South Africa is in line with the global average, with Nigeria’s score lower, at 71.8. This also suggests that in other emerging markets, banks are more susceptible to losing market share to new market entrants in comparison to their counterparts in South Africa. A closer look at underpinning drivers suggests that banks remain the primary financial services provider for the majority of surveyed consumers; however, decreasing bank relevance results arise from the decreasing relevance of products and services.

Despite higher trust levels among South African consumers, many are not utilising traditional banks to buy new products and services, severely diminishing overall bank relevance in these markets. The research shows that consumers trust banks to ensure their money is secure, but tend to question whether banks provide high quality, unbiased advice. In addition, consumers question whether their bank’s products will remain relevant to their needs in the future.

EY BRI: average bank relevance, by country 

The survey further finds that African consumers are in agreement that getting a consolidated view of their financial activity is challenging. Both South African and Nigerian consumers equally agreed on this measure. The required changes that African banks needing to make relate to the digital experience for Nigerian banks, and improved pricing and value for money for South African banks.

Marius van den Berg, EY Financial Services Africa Director, points out that this could be due to infrastructure availability. “South Africa’s banks, for example, have been providing online services for a longer period of time, and offer best practice offerings. In addition, one’s online experience is driven by access to telecommunications and thus infrastructure plays a role in these consumer perceptions.” 

As a result, the survey finds thatcustomers in Nigeria are most eager for new options to be launched; (just under 70% of Nigerian consumers would switch providers for a better digital experience, compared to 46% of South African consumers).

The report outlines four ways for traditional banks to improve their relevance among consumers:

1.  Build and earn trust, not only in a bank’s ability to securely look after customers’ money, but in the ability to always do the right thing for the consumer and provide unbiased, high-quality advice.
2.  Better understand customer behaviors and attitudes and tailor propositions to different types of customers.
3. Rethink distribution and customer engagement, in particular the role of branches and customer journeys across channels.
4. Innovate like FinTechs to radically simplify products and deliver exceptionally simple customer experiences.

Van den Berg concludes, “Disruptive bank alternatives pose new challenges for the banking industry and also create a pivotal opportunity for banks to regain relevance with consumers. With the emergence of digital and innovation, traditional banks’ connection to their consumers is more important than ever.” 

View the report online at www.ey.com/bankrelevance.