50% customers ready to switch banks in next 12 months: Bain & Company

If it's a good deal, many willing to shift to fintech players, neo banks, among others

With banks already facing a big challenge in retaining customers, they will not be pleased with the new data that shows 50 per cent of the customers are willing to switch banks in the next 12 months.

A survey by Bain & Company based on its proprietary tool, Net Promoter Score Prism, which tracks changing customer experiences, found customers willing to switch if they were being offered a competitive product or service by another company, which includes fintech players, neo banks amongst others.

The data, which has been made public for the first time, is based on responses from over 100,000 customers. Bain released the first customer data in mid-October but has refre­sh­ed it periodically.

With the growth of neo banking and digital fintech alternatives, there has been a higher rate of customer defection, which is not limited to loans and investment products but extends to high transaction products such as saving accounts and credit cards. This is in contrast to the UK where only 20-30 per cent of respondents talked of switching; in the US, this number was about 10-20 per cent.

In fact, Bain’s analysis sho­ws that 56 per cent of custom­ers are prepared to switch ban­ks even for a savings acco­unt; 59 per cent for a credit card; 63 per cent for an auto loan; and 69 per cent for a personal loan.

Retaining customers is important for banks. Loyal customers are likely to buy 2.5 times more banking products with the same provider. They also provide a 20-30 percentage points higher share of wallet, give 3-4 times more referrals and are 2-3 times less likely to switch providers for add-on products and services.

The growing willingness to embrace digital platforms is clearly discernible from the survey. One of the questions Bain asked was that if a tech firm offered financial products such as a savings account, a loan, a credit card, digital stock trading or insurance tech, would they be open to considering it?

Between 85 and 90 per cent said yes, higher than in China (85 per cent) and in the US (75 per cent).

Trust for fintech is growing. Bain’s analysis shows that fintechs, especially those focused on payments and consumption financing, have scored highly on the trust scale, below primary banks (the banks where you can buy more than one product) but higher than secondary banks.

The Bain survey also shows that ease, speed and conveni­ence are very important for under 40-year-old customers who are more focused on the di­gital experience. Those above 40 tend to value the physical and face-to-face experience.

However, there is one area where there is concern about using digital channels whether for transactions, opening acc­o­unts, or boarding, and this is Digital Failure Rates (DFRs), namely, journeys that start in digital but conclude in a hum­an interface. For banks, DFRs are pretty high when benchmarked with global trends — they are twice as high as banks in the US.

Taking account

• 59% of customers ready to switch their saving accounts from their existing bank
• Loyal customers buy more products, offer a larger share of wallet and give more referrals, helping banks’ growth
• 90% of bank customers say they are open to buying financial products from tech companies, much higher than in China or the US
• Trust for fintech companies is growing
• Ease, speed and convenience becoming key factors for consumers, though trust is still important