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To capture consumers who are hesitant about digital banking, FinTechs are focusing on customer satisfaction.
The study “Digital-First Bankingn: Experience-Oriented Digital-First Banking”, a PIMNTS and NCR collaboration, found that all age groups, led by younger generations, are moving towards digital-only banks becoming the main providers. However, full consumer adoption of these gadgets is far from over, with only one in 10 primarily using them. Digital-only banks therefore want to gain consumer trust (and thus market share) through improved customer service.
FinTech’s strategy of being more customized and experience-oriented than its traditional competitors seems to be paying off. While full adoption remains low compared to brick-and-mortar institutions, 59% of consumers said they were somewhat interested in using digital banks in the next 12 months, with a further 36% very or extremely interested – indicating a growing curiosity, even if most consumers aren’t quite ready to make the leap.
The reasons why consumers are considering switching primarily to digital institutions fall under the broader umbrella of experience-oriented banking. While most major banks offer some form of digital tools and services, neobanks differentiate themselves by enhancing these offerings.
Amid this year’s record high inflation rates, digital banks such as Bunk have introduced improved budgeting tools that allow European users to set different budgets for different household expenses. Bunk detects which category the payment belongs to and allocates funds from the correct sub-account.
One of the biggest loyalty strategies digital banks can provide is high-yield savings. In addition to potentially increasing customer retention, the strategy also unlocks additional capital that can allow non-banks to invest in more innovative technology.
Grant Sahag, executive vice president at neobank Novo, spoke with PIMNTS about how personalization and automation tools can help small businesses stay competitive. If the big banks don’t provide these tools, customers will likely find alternative ways to access these capabilities.
“Because [these tools] they were so distracting [to the banking market]Sahag explained. “And you can feel that disturbance [to customers] like getting a more personalized experience.”
Traditional financial services companies looking to differentiate themselves could take note of how digital banks have updated and innovated the tools that standard institutions already offer. The only wrong choice is to dismiss these upstarts altogether — because the growing base of digitally savvy consumers certainly isn’t.
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