World Fintech Report 2017: The battle is about ‘Trust’ not ‘Tech’
“FinTech” might be the most overhyped and underestimated term of the year. Venture capital funding of financial technology has been staggering, resulting in billions of dollars of investment. Traditional firms are trying to incorporate new technologies into their businesses, while FinTech startups are striving to compete with their brick and mortar competitors in crucial areas like fraud protection, quality of service and transparency.
While FinTech companies and traditional institutions are facing more competition than ever, both are starting to realize excellent customer experience is critical to remaining competitive in this new landscape.
To determine how customers view financial institutions and FinTech startups, LinkedIn, Capgemini and Efma surveyed over 8,000 customers across 15 countries. We discovered tech-savvy customers adopt FinTech at twice the rate of non tech-savvy customers (67% versus 34%). Millennials have greater adoption (61% versus 44%) as do affluent customers (61% versus 49%).
In terms of sectors, FinTechs have made the greatest inroads into investment management, where 17% of customers rely on them solely and another 27% use them in addition to their traditional providers. With so many FinTechs specializing in niche services, this report also found that 46% of FinTech customers are using services from three or more FinTech providers.
You can read the full survey results in the World FinTech Report, but read on for a window into how people view FinTech providers and traditional firms.
FinTechs are finding adoption but still need to gain people’s trust
Despite FinTech’s steady adoption among tech-savvy banking customers (67%), millennials (61%), and affluent consumers (61%), our survey revealed a significant trust gap between financial brands and FinTech companies. Incumbent financial brands maintained a trust rating 13 percentage points higher than that of FinTech challengers (37% to 24%).
“Trust” has many meanings, so we surveyed banking customers about specific attributes they valued in financial brands. When we questioned more deeply, incumbent brands scored particularly well against FinTechs when it came to:
Fraud protection (45% vs. 15%)
Quality of service (37% vs. 24%)
Transparency (36% vs. 25%)
Financial brands have a clear advantage over FinTech companies in safety, reliability, and transparency. To capitalize on their growing adoption, FinTech startups will need to double down in these areas and demonstrate their commitment to customers.
Incumbent institutions are tackling an entirely different problem: staying innovative in the eyes of their customers. Banks have been successful in that endeavor: our survey demonstrated that customers do not view FinTech companies as leading banks in areas like user experience and ease of use.
Customer Experience Will Quickly Close the Trust Gap
Despite their trust advantage over FinTech companies, incumbents can’t afford to take consumer confidence for granted. Our survey revealed a spike in customer trust once they have a positive experience with a FinTech brand. 56% of respondents said they trusted FinTech companies they had a positive experience with, compared to 53% for financial institutions.
These findings suggest banks may underestimate the ability of FinTech companies to change consumer perception about their services. By ceding features and services to FinTech, banks risk “death by a thousand cuts,” where startups chip away at their ecosystems over time. To maintain their advantage, financial institutions must work to strengthen their relationships with existing customers and become a go-to, trusted source for those seeking their services.
It’s Still Anyone’s Game
Our survey showed that neither traditional firms nor FinTech companies are adequately meeting customer expectations. While traditional firms have closed the gap in certain areas like quality of service, there is still a lot of work to be done. Both traditional and non-traditional firms are struggling to meet customer expectations, especially on key interaction points.
To win customers’ hearts (and wallets), both financial institutions and FinTech companies need to look into the ‘Moments of Truth’ in the customer journey, or instances that build customer loyalty, like transparent fee structure and quick account openings.
For the full results of our study, download World FinTech Report 2017.