24 Nov 2021
Tourist with backpack walking

How traditional banks can make the most of consumer trust

Authors
Nigel Moden

EY EMEIA Financial Services Banking and Capital Markets Leader

Passionate believer in the banking industry as a force for good. Leading advocate for the talent agenda in EY. Builder of diverse teams. Avid cricketer.

Cat Haines

Partner, Financial Services Business Transformation, Ernst & Young LLP

Building high-performing teams to solve complex challenges around transforming customer experience. Helping clients navigate increasing complexity and competition. Fitness enthusiast. Keen cyclist.

Peter Neufeld

EY EMEIA Financial services Digital Customer Experience Leader

Experienced digital executive. User-centered design champion. Emerging digital trend analyst.

24 Nov 2021
Related topics Financial Services EMEIA

The European findings of EY’s global consumer banking study reveal opportunities for traditional banks to strengthen their market position.

In brief
  • Incumbent banks are trusted by European banking consumers, but neobanks are gaining traction across all generations of customers – not just Generation Z.
  • European banking customers are showing an increased preference for “super apps” to support their banking needs.

People have talked about “the need for banking but not banks” for more than a decade. It is popular to suggest that traditional banks face a “Kodak moment” as challengers of all shapes and sizes go on the offensive. The truth, at least in Europe, is much more nuanced. EY’s NextWave Global Consumer Banking Survey shows that while traditional banks face threats from challengers, they also have a real opportunity to strengthen their position in the market.

Here are three observations from EY’s latest research:

1. The threat from neobanks is gathering pace across all generations

Traditional banks continue to dominate primary financial relationships (PFR); more than three-quarters of consumers in key European markets (UK, France and Germany) say that their main financial relationship is with a traditional bank. However, neobanks are gaining ground, with just under 8% of respondents across these markets citing a neobank as their principal bank. Importantly, this market share is consistent across all age groups — neobanks aren’t just for Generation Z.

Beyond that primary relationship, challengers are gaining ground. In fact, in Germany, one-third of respondents say they use a neobank for a product or service. This compares with around 13% in the UK and just 5% in France.

The payments domain is a key battleground with neobanks capturing more of consumers’ daily operating cash flows by focusing on digital payments and related offerings.

2. Incumbents are trusted, but the trust equation is changing

When it comes to trust, incumbent banks continue to operate from a position of strength. Of those European consumers who consider a traditional bank their primary provider, around four-fifths say they trust them (completely or mostly). In fact, incumbents have a slight edge on their competitors, including neobanks.

Share of consumers who completely or mostly trust their primary financial provider:

Share of consumers who completely or mostly trust their primary financial provider

Source: EY

Our research also shows that European retail banking customers are likely to have both longer relationships with their bank than global peers and fewer banking relationships overall. Globally, of those who see incumbents as their main bank, 45% say they have had a relationship with their provider for more than 10 years; this rises to nearly 60% across our three European markets (and hits nearly 68% in France). Similarly, while 45% of respondents globally say they have three or more financial relationships, this falls to 36.5% in Europe.

However, these advantages cannot be taken for granted. Three key reasons driving trust in primary providers are:

  1. Confidence that they will protect your data
  2. Making you feel empowered
  3. Having a branch nearby, so you can reach them when you want

Incumbents are considered to do well on the first and last of these. Our research highlights that, for European customers, strong privacy policies and features (e.g., ID theft protection, control over data usage) are consumers’ top priority in terms of influence over purchase decisions. But neobanks are not far behind, and there is clearly more that incumbents can do to empower their customers.

Our research shows that neobanks have gained traction with consumers primarily because they are perceived to offer better products and to be more innovative. However, they also appear to do a better job making their customers feel empowered than traditional competitors. For European consumers, elements of personalization are becoming a key part of the trust equation, and there is much more that incumbents can do to address this need.

3. Growing interest by banking consumers of the “super app”

Our research shows consumers’ growing preference for a “one-stop shop” with a range of super apps to satisfy their banking needs. Super apps combine multiple financial services (e.g., checking and savings accounts, investments and payments) via one app or digital experience. Typically, super apps have a higher degree of integration and consumer-centricity than typical banking ecosystems, enabling them to serve as consumers’ personal financial operating systems.

Almost two-thirds of European respondents expressed an interest in super apps, bringing their whole financial services portfolio together. Interest in super apps is particularly high in the UK among consumers with three to five financial relationships. Owning a customer relationship through a super app offers banks the opportunity to better tailor their own offerings and, in turn, help consumers consolidate their banking relationships. But it is also an opportunity for competitors and we have seen early signs of major European neobanks thinking about super apps.

The potential for super apps to enable greater insight and more personalized offerings to retail banking customers, empowering them and giving them greater financial confidence, could be a gamechanger. Firms that do this well will strengthen customer trust and win market share.

Traditional banks still dominate the European banking landscape. That position of strength has, if anything, been reinforced through the pandemic as consumers have turned to established brands to see them through difficult times. But new players are gaining ground at a pace that should focus the minds of the C-suite across the banking sector.

Consumer expectations are rapidly evolving and, to maintain their advantage, incumbents need to build new business models capable of satisfying the evolving needs and market developments. They will need to be more agile, innovative and accelerate their digital transformation.

Summary

Traditional banks still dominate the European banking landscape. That position of strength has, if anything, been reinforced through the pandemic as consumers have turned to established brands to see them through difficult times. But new players are gaining ground at a pace that should focus the minds of the C-suite across the banking sector.

Consumer expectations are rapidly evolving and, to maintain their advantage, incumbents need to build new business models capable of satisfying the evolving needs and market developments. They will need to be more agile and innovative to accelerate their digital transformation.

About this article

Authors
Nigel Moden

EY EMEIA Financial Services Banking and Capital Markets Leader

Passionate believer in the banking industry as a force for good. Leading advocate for the talent agenda in EY. Builder of diverse teams. Avid cricketer.

Cat Haines

Partner, Financial Services Business Transformation, Ernst & Young LLP

Building high-performing teams to solve complex challenges around transforming customer experience. Helping clients navigate increasing complexity and competition. Fitness enthusiast. Keen cyclist.

Peter Neufeld

EY EMEIA Financial services Digital Customer Experience Leader

Experienced digital executive. User-centered design champion. Emerging digital trend analyst.

Related topics Financial Services EMEIA