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Can New Digital-Only Financial Providers Compete When It Comes To Trust?

Can new digital-only financial providers compete when it comes to trust?

By Georgina Clarke, IFF Research

 

Trust within the financial services sector is defined in different ways by different customers, with the factors influencing trust in financial providers – both positively and negatively – incredibly varied. When looking at personal finances, trust plays a vital role in customers’ consideration of prospective providers and their loyalty to a provider in the longer term. While the financial services sector is notably ‘sticky’ in terms of customer retention (with customers often not changing providers due to a combination of long-term loyalty and perceived hassle), challenger brands in the fintech space are changing the financial experience landscape and, through this, starting to redefine the basis of trust.

Recent research with IFF’s Fintech Beacon community has sought to understand how the digital only financial services providers are competing with the established providers when it comes to trust.

There are two important factors that influence trust in the financial services sector, which impact how consumers feel about providers.

 

1)    Reputation and history

Many consumers give trust automatically to established banks who have a longstanding history and brand heritage. However, trust has been impacted by scandals and data breaches which have a significant impact on their reputation.

New digital players are not automatically trusted, and they will have to build this over time by demonstrating their longevity. It will take time to build trust to the level that established players have, but the trust that consumers have in these digital providers is continually growing.

Although [new digital bank] are a new company and are just digital, I trust them… Although I’m not sure I fully trust them yet with my whole wage - just because they are new and not a traditional bank.”

 

2)     Physical presence and accessibility

Traditional banks that have maintained physical branches generate trust as there is somewhere to go and actually speak to a person if things go wrong, rather than relying on remote support. Although branch use may be limited among some consumer segments, having the potential for face-to-face interaction provides reassurance.

However, the new digital players gain trust from offering a 24-hour service, available through different channels, as well as enabling customers to obtain personal support, quickly and easily, without the need to navigate various options.

Digital-only providers are becoming trusted partners

Overall, digital providers stand out in building customer trust through their position as being a ‘partner’ and ‘helping hand’ in improving their financial situations. This is demonstrated by providing products and features that exceed customer expectations and support them in their financial goals, whilst also being honest and transparent with customers and communicating with them clear and understandable language. Features like spend analytics and recommendations, no foreign transaction fees, easier transfers to family and friends, real-time updates and notifications and savvier savings tools are all commonly referenced features that make digital banking customers feel their bank is helping them succeed. Furthermore, in customers’ limited experience, there have been few negative experiences with these new providers, not to mention limited technical issues, data breaches or scandals that might be cause for concerns about security or trustworthiness.

 

[New digital bank] is very transparent and upfront about what they are and what they do. When they introduced the limit on ATM withdrawals, it was a bit annoying, but they explained why they have to do it.”

 

The only barrier to trust is the new, riskier nature of these businesses (including the limited ‘paper trail’) and some concerns about what might happen if these young businesses do fail (most, however, recognise that their money is insured to a certain amount).

Ultimately, while most customers recognise that this trust is new and limited, their experience to date creates a solid foundation to continue building trust through further, positive experience of their providers as financial partners.

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IFF Research is one of the research industry’s leading players. With over 50 years of experience, we have a proven track record of delivering high-quality strategic research for a wide range of organisations, across the public and private sectors.

 

Author

Georgina Clarke, Director, IFF Research

Georgina has worked in the research industry for 20 years, joining IFF Research in 2017 as a Director. Georgina specialises in financial services research, working with many of the leading banks, insurers, pension companies, investment providers and asset managers. She is passionate about establishing close client relationships and helping clients embed research findings to ensure they lead to actions within their business.