Financial services: Bank customers expect more

A house bank is no longer up to date

In the past, it was generally the case that customers had most products at the bank that kept their salary account - the house bank. However, as digitalization progressed, direct banks appeared, which motivated customers to open another account or custody account with attractive conditions and sometimes more sophisticated online and/or mobile banking apps. As a result, accounts, deposits, loans or loans with several banks are now the rule rather than the exception. One Bank customer study confirms this: At least every second interviewee had more than one bank account.

The trend of “disloyal” bank customers results from their Dissatisfaction with the house bank or their offerings, as a recent study shows: Only just under half of bank customers are generally satisfied; for the other half of the respondents, the mood has at least tilted. A fifth of all survey participants are already planning the switch. Discontent and willingness to change are particularly high among younger people.

Many customers do not understand the positioning, pricing and value proposition of their own bank. There is also an enormous gap between their actual needs and what they actually offer. Bank customers are not asking for anything impossible. They want high-quality and individual advice, comprehensive and competent service, a transparent pricing policy and a wider, accessible range of products.

Customer requirements: software, service, product diversity

When the first ATMs were set up in Germany in the early 1970s, it was a small revolution on the financial market. In addition to improving banking services by allowing you to withdraw cash around the clock, seven days a week, ATMs also serve other purposes. They reduce personnel and administrative costs, relieve bank employees and minimize the risk of errors by eliminating the “human factor.” Another major advantage of ATMs was that customers could suddenly withdraw money from various credit institutions and use various self-service offers. First only across Germany, later even in most countries around the world.

Today, it goes without saying that we can withdraw money or pay by card almost anywhere. But many bank customers want more: mobile banking, financial apps, a wider, more flexible range of products and 24/7 service via telephone, email or chat.

Despite technological innovations, traditional values such as security, individual advice and a personal contact should also be taken into account. Not an easy task for financial institutions that, in times of low interest rates and at the same time growing competition from online banks (e.g. N26) or trading apps (such as Robinhood), have to invest in sustainable business models — but are only reluctant to do so.

A study clearly shows that the Banks are not meeting customer expectations when it comes to providing digitized services. In the current “platform age,” most customers want to request and manage banking products digitally. Ideally in a single, clear app that covers all of your financial needs and offers the appropriate consulting service if required. Customers also want to manage current accounts, call money accounts, securities accounts from different banks in a single app (multi-banking). For almost all respondents (96 percent), security is the most important factor for assessing the trustworthiness of a bank when it comes to online or mobile banking. This is immediately followed by an intuitive user interface in the app and on the desktop.

84 percent of online banking users would also like it if they could simply and digitally apply for and purchase additional banking products as existing customers. In the group of 30 to 39 year olds, this proportion is even higher.

Upselling potential among 84 percent of bank customers

For banks, customer requirements mean significant upselling opportunities that have not yet been exhausted. The most important lever for sustainably increasing earnings is to systematically increase customer satisfaction, as loyal customers are more willing to use additional or new, digital products from their bank. These include innovative, proprietary omni-channel offerings that seamlessly connect online and offline worlds, as well as multi-banking and embedded finance solutions.

However, the majority of (multi) banking solutions currently on the market are just account overviews without significant added value. In principle, however, financial institutions could also integrate products from other financial service providers and even companies from other industries into their own portfolio using technical interfaces. This so-called “embedded finance” is not limited to accounts and payment transactions — including loans, insurance and blockchain-based token products can include third-party providers in their offerings exactly where they are needed.

Brands like Apple, Amazon, Samsung or Walmart have already recognized this and seamlessly integrate accounts, payment cards or loans into their own offering. While there are only a few embedded finance providers in Europe, China and the USA are considered pioneers. Worldwide, forecasts are based on gigantic growth figures. Last year, the market volume was around 22.5 billion euros worldwide, Lightyear Capital expects 230 billion euros by 2025.

German banks have often not yet exploited the enormous market potential and major advantage of embedded finance products to meet customer needs where they arise. A missed opportunity, because embedded finance gives financial service providers access to new markets and innovative products create, increase customer loyalty, reduce customer acquisition costs and open up lucrative revenue streams.