Customer education within financial services has increasingly come under the regulatory spotlight, and there seems to be every reason to devote more attention to the issue, according to a new study by pollster YouGov.
The study surveyed 12,507 bank customers worldwide, and looked at attitudes toward the banking industry. Among the aspects investigated was the effectiveness of banks’ customer communication.
When asked if they agree that banks use confusing language, here’s what respondents had to say:
- Japan, the US, and UK expressed similar levels of confusion. Japanese bank customers are the least mystified by bank jargon, at 58%; and the US and UK came in at 60% and 59%, respectively. Although significantly over 50%, these figures are the lowest in the survey. It could be that customers in these countries expressed themselves as least confused due to their national regulators’ strong emphasis on consumer protection and education — the FCA in the UK, and the CFPB in the US, in particular, have devoted much attention to consumer fairness within financial services, while in Japan, regulators have taken precautions wherever they believed consumers might be perplexed and at risk, like when the government refused to recognize bitcoin as a currency until suitable laws controlling it were put in place.
- Italians are the most confused by banks’ language, at 73%. Italian consumers’ high confusion levels may well be attributed to Italian banks not prioritizing customer education and communication due to the country’s ongoing banking crisis. These tough conditions are likely putting more pressure on Italian banks to put regulatory compliance and capital flow above consumer-facing aspects of their business.
That over half of customers in all countries surveyed are confused by bank jargon should give these players serious food for thought. Improving their communication efforts — including by moving their education materials from a print to digital format, and streamlining the content of such materials — is becoming especially important as more neobanks enter the financial space. These newcomers base their proposition, to a large extent, on optimizing customer engagement and transparency, meaning that if big banks want to retain customer loyalty and market share, they will have to start thinking about communication from their clients’ perspective.
Weighed down by a sluggish global economy, turbulent capital markets, and heavier regulation after the 2008 financial crisis, many big banks have scrimped on innovation.
In doing so, they’ve failed to keep up with customers’ embrace of and demand for all things digital and mobile. That’s opened the door to a new breed of banks dedicated to delivering an optimal digital customer experience: digital-only “challenger banks,” or “neobanks.”
These players’ agile, modular, wholly digital systems let them adapt quickly to changing consumer demands and expectations, threatening incumbents. However, the big banks still have the edge in consumer trust. This gives legacy firms a window of opportunity to launch digital subsidiaries of their own to fend off the upstarts.
Maria Terekhova, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on digital-only challenger banks that looks at the features that make neobanks a distinct new competitor, the range of models they’re adopting, and the regions in which neobanks are particularly flourishing. We also discuss the challenges neobanks still face, and the opportunity these obstacles present for incumbents to get ahead in the transition to digital banking.
Here are some of the key takeaways:
- Digital-only challenger banks, also called neobanks, focus on digital delivery channels, either online or mobile. They are dedicated to improving on incumbent retail banks’ weakest point — customer experience.
- Now that customers have more options focused on a better user experience, incumbents are being forced to raise their game. Challenger banks are finding ways to deliver cutting-edge banking services to consumers, meaning incumbents no longer set the terms.
- Neobanks’ biggest challenge — winning consumer trust and users — is also incumbents’ best chance to fight back. They can use their brand recognition and trust to promote their own digital subsidiaries.
- Challenger banks’ emergence is about banking moving over to digital. The only question is who will win in the race to transition to this new landscape: independent players or incumbents’ digital subsidiaries.
In full, the report:
- Looks at the different business models neobanks are adopting to compete with incumbents.
- Gives an overview of the neobank scene in different geographies.
- Explains the biggest obstacles neobanks still face, and how they can navigate them.
- Examines the opportunity big banks have to win the race to digital.
- Discusses what the banking scene of the future will look like, and who might come out on top.
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May 15, 2017 at 10:11PM
from Maria Terekhova