The rise of fintechs: Generation fintech
Traditional banks have been trusted to look after our most important assets for hundreds of years. When an institution has been established for so long, has an excellent reputation and offers great customer service, how could any newcomers compete?
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FINTECH REPORT GENERATION FINTECH
The rise of fintechs Challenger banks, sometimes referred to as fintechs, have been hot on the heels of traditional banks for some time. Revolut, for example, now has more than 12 million users and hopes to acquire an additional 100 million within the next five years, while Starling Bank recently received a £50 million investment from Goldman Sachs and is now valued at £1.1 billion . [1]
[2]
Although traditional banks have moved online, many still struggle to compete with the digital experience that challenger banks offer. The biggest advantage traditional banks once had over challenger banks, an offline presence, is now diminishing – fewer people feel the need to walk into a branch and more and more are closing down. After all, why would anyone bother to wait in line to pay a cheque when they can do it on their phone?
falling behind, they could lose out on an entire generation of customers. In this insight report, we delve into who uses fintechs and why, how digital-only banks are standing out from their traditional counterparts, and why we believe customer experience is the key to the evolution of banking.
It is not just technology where fintechs are succeeding. For too long, traditional banks have not done enough to attract younger audiences. Unsurprisingly, 64% of Monzo customers are aged 18-34[3]. Generation Z is growing up fast and has started banking; why would they choose Lloyds or Natwest over Starling or Monzo? If they do not do something soon, traditional banks are not just in danger of
64%
of Monzo customers are aged 18-34
[3]
References: [1] Finder https://www.finder.com/uk/revolut-statistics [2] Starling Bank https://www.starlingbank.com/news/goldman-sachs-invests-50m-in-starling-bank [3] YouGov https://yougov.co.uk/topics/finance/articles-reports/2021/01/26/what-kind-brit-banks-fintech
Fintech Report: Generation Fintech
FINTECH REPORT GENERATION FINTECH
What makes fintechs so appealing to Millennials and Generation Z? We have already mentioned that it is younger consumers who are drawn to these new challenger banks, but why? Let us dig a little bit deeper.
Generation Z research found...
70% 40% check their finances every day
[4]
believe it is important to put money aside for the future [4]
Tailored technology 64% of Monzo, 55% of Starling and 48% of Revolut customers are aged 18-34[3]. It is clear that these challenger banks are actively trying to appeal to two key generations: Gen Z and Millennials. Generation Z → Born after 1997 → First generation to grow up in a truly digital world → More money conscious and financially savvy than previous generations Millennials → Born between 1981 and 1996 → Technically knowledgeable → Grew up during a financial crisis
Saving money, cutting expenditure, and reducing impulse purchases are key for both these generations, and challenger banks have done an excellent job of focusing in these areas and attracting these audiences. Personalised features, such as the ability to set up savings goals so people can put money aside for specific items or experiences, and spending insights so customers can see exactly where their money is going each month, are exactly what these audiences want and need. Over half of Revolut (55%), Monzo (55%), and Starling (51%) customers admit they make impulsive purchases, compared to two-fifths (40%) of the wider public[3]. Traditional banks are starting to offer similar product features, but the catchup is slow. The fact is, challenger banks thought to offer these products first because they knew what their audiences wanted, and needed.
References: [3] YouGov https://yougov.co.uk/topics/finance/articles-reports/2021/01/26/what-kind-brit-banks-fintech [4] Zopa https://www.finextra.com/pressarticle/78523/zopa-profiles-financially-savvy-gen-z
Fintech Report: Generation Fintech
FINTECH REPORT GENERATION FINTECH
Making finances fun and accessible At first glance, the main difference between traditional banks and challengers is the way they are marketed. Compare the adverts for Lloyds Bank versus Monzo, for example, or even take a quick glance at their social media channels, and it is clear how different the tone of voice and branding are. Lloyds Bank say they are for ‘every generation’ in their advertising, but they do not speak to younger consumers in their marketing in the same way challenger banks do.
Traditional banks have long tried to inject some fun into their marketing campaigns, to make finances seem less boring and more accessible (see Santander with their Ant and Dec campaign), but few have captured the attention of younger audiences and got them interested in managing their money early. Challenger banks, however, have done an excellent job of engaging younger consumers and providing the tools they need to understand and manage their own finances.
Fintech Report: Generation Fintech
From simple guides for small businesses, to videos on how to do your own tax returns, challenger banks are making finances easy to understand, without appearing patronising. When it comes to the fun side of things, offering features such as the ability to add personal photos to different accounts and savings pots is a simple but effective way to market towards younger consumers without alienating older audiences.
FINTECH REPORT GENERATION FINTECH
Customer experience is the key to banking evolution There is no doubt that banking is evolving, and traditional providers are playing catch up. Fintechs have truly shaken up the industry, but both they and their traditional counterparts face numerous challenges in the years ahead.
Their audiences are changing, as are their customer expectations. The COVID-19 pandemic has increased the importance of digital channels. It is no longer enough to provide an ‘okay’ digital experience; it has to be exceptional. Feefo’s own data recently revealed that service levels dropped by 18.5% at the height of the pandemic[5] as businesses struggled to keep up with changing expectations. The good news is, there is an easy way for traditional and challenger banks to keep up with their evolving audiences: listen to their customers. A quick Google search for ‘bank reviews’ shows that not many traditional banks are actively collecting public-facing feedback. In a world where 96% of consumers use reviews in some way[6], collecting and displaying customer feedback is vital if banks want to retain current customers and attract new ones. More importantly, the insight customer feedback gives businesses is truly invaluable for building a better customer experience.
Feedback allows businesses to identify their strengths and weaknesses, understand what products they need to develop or improve, discover who their customers are and what they want and need from their services, and so much more.
Thank you for banking with us. We would love to hear what you think.
References: [5] Feefo ‘The demand on customer experience during COVID-19’ https://www.feefo.com/en/business/resources/reports/april-2021-report [6] Feefo ‘The 2019 Feefo Consumer Report https://www.feefo.com/en/business/resources/reports/the-2019-feefo-consumer-report
At Feefo, whether big or small, challenger or traditional, we can help banks discover more about their customers and give them the tools and insight they need to improve their customer experience. To find out more, get in touch with our friendly experts today. sales@feefo.com | 020 3871 8457 | www.feefo.com
Fintech Report: Generation Fintech