Foggy downtown lower manhattan woman walking with-umbrella

Winning the NextWave of consumer financial services

Banks need a customer-centric mindset to succeed in the next wave of consumer financial services.

In brief
  • Banks are increasingly competing for the economy’s scarcest resource — consumer attention — both within the flow of everyday life and at big moments.
  • Banks must adopt AI more broadly to deliver simplicity, convenience and value via concierge-like connectivity, and personalized assistance to all consumers.
  • Banks must build on foundations of trust and primacy to become customer value leaders in the highly dynamic next wave of consumer financial services.

Since the financial crisis of 2008, the financial services industry has been among the least trusted sectors in the US. Research by Ernst & Young LLP (EY US) highlights that the trust deficit results from many banking relationships being built more on apathy than on trust, which may lead some banks to mistake inertia for loyalty. That’s a risk when new players can break through with wellness-centric offerings that give consumers more control.

Download the EY NextWave Consumer Financial Services research report here (pdf)

PDF (18 MB)

Our survey of 1,000 consumers conducted just after the March 2023 bank failures demonstrates just how ready and willing consumers are to switch banks — for both deposits and investments. Switching has never been easier or more frictionless, thanks to digital technology and customer experience innovations. Smaller regional and community banks face the highest risk of deposit attrition, according to Federal Reserve data.

Top reasons consumers move their money:

  1. Reduced risks by splitting money between accounts
  2. Better rates and benefits
  3. Solutions that better meet their needs and expectations
  4. Lack of personalized experience and solutions
  5. Products/services not meeting current financial needs
Consumer readiness to switch static graphi

Fragmenting consumer attention spans

Banks are increasingly competing for the economy’s scarcest resources — consumer attention — both within the flow of everyday life and at big moments.

Continuously connected consumers want access to everything, all the time, from any device — plus the ability to jump between channels via superfluid experiences. The more financial services become deeply embedded in commerce, lifestyle, gaming and social media, the greater the risk that banking brands will become invisible. This attention gap will only widen as projected digital interactions grow exponentially in the coming years.

Banks are competing for the economy’s scarcest resource: consumer attention
1.3%
is the average time per month that a consumer spends on banking and financial services activities.
Source: Bureau of Labor Statistics

Mastering primacy and trust to create customer value

Based on five years of continuous market research into how consumers make decisions, we can identify the two primary factors that produce superior financial performance via customer value leadership: relationship primacy and the trust premium.

Companies whose customers choose them for their primary financial relationships (PFRs) and companies that earn loyalty and advocacy based on trust are more likely to increase customer acquisition, product relationship depth and profitable growth.

Higher trust pays off in increased loyalty and advocacy
2x
The consumer loyalty and advocacy advantage gained by institutions with higher trust premium scores when compared to those with lower trust premium scores.

How EY can help

Customer value leaders prioritize and invest in customer-centric capabilities

 

From the results of our survey of C-suite executives, it is clear that leading firms establish more customer-centric priorities and capabilities than lagging firms. These are the actions and investments that banks must make if they are to succeed, no matter which business model they choose to pursue. However, a consistent set of issues and challenges continue to plague organizations and prevent bold and thoughtful customer value acceleration.

Customer value leaders prioritize and invest in customer-centric capabilities to create space for deeper, trust-based engagement.

 

To become a customer value leader, banks should adopt a comprehensive plan, approach and organizational mindset that solves three critical dimensions in one connected agenda.

 

Crystallize growth ambitions and plan to execute

 

  • Think — customer is the P&L; a customer-centric mindset must anchor growth ambitions
  • Change the game — don’t just compete for share; create new value for customers
  • Unlock value — change how people, processes, platforms, data and controls work across organizational silos to accelerate growth

High-performance leadership culture

  • Promote vertical/horizontal alignment — align leadership across lines of business and enterprise functions around a common growth ambition with shared KPIs and incentives
  • Embrace change agents — empower change agents from within and align the right leaders to the required roles vs. fitting roles to the leaders who exist
  • Foster a performance mindset — don’t compete for talent; set the bar with a high-performance culture that makes the organization a “badge of honor” for talent

Executing beyond digital

  • Create connected value — quickly and consistently incorporate partners into connected journey experiences on an industrial scale
  • Win with closed-loop data — dominate the generative AI race with closed-loop data ecosystems that reinforce unique competitive advantages
  • Focus on delivery velocity — solve the “how a bill becomes a law” problem by adapting internal processes, capabilities, delivery model and governance to support continuous delivery velocity

For all the challenges they face, banks can take action to boost performance and engage more deeply with consumers. Tomorrow’s winners will meet consumers where they are today and keep moving forward to accompany consumers throughout their financial lives. And because personal finances and lifestyles are so profoundly interwoven, consumer needs will only get more complex as change accelerates and the impact of technology is amplified.

Thank you to Girdhar Agrawal, Prateek Agarwal, Ian Bond, David Clarke, Maggie Hogan, Griffin Pararas, John Radecki, Balakumar Rengaswamy, and Ridhima Sudan for contributing to this article.

Summary 

This report outlines what you can expect in the next wave of consumer financial services, including insights about the evolving competitive landscape and actions that firms need to take to thrive in the next three to five years. We developed an “igniting growth” framework, customer value blueprints and execution models to help clients accelerate on the path to customer value leadership in the digital age.

Related articles

How can banks transform for a new generation of customers?

EY’s consumer banking survey reveals how banks need to transform to meet rising customer expectations. Find out more.

07 Oct 2021 Jan Bellens + 2

How financial institutions can win the battle for trust

FIs that pivot around customers and deliver connected, personalized experiences can enhance trust and deepen financial relationships. Read more.

11 Jun 2021 Nikhil Lele + 2

Why financial well-being should be integral to banks’ customer strategy

With FinTechs offering customers greater opportunity to manage their financial health, traditional banks should follow suit.

02 Nov 2020 Jan Bellens

    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.