14 minute read 11 Jun 2021
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How financial institutions can win the battle for trust

Nikhil Lele

EY Global and Americas Consumer Banking Leader

Work toward advancing industry dialogue. Stay at the forefront of key challenges and help leaders face constraints across the financial ecosystem.

Akshata Udiavar

Principal, Consumer Banking and Wealth Strategy, Ernst & Young LLP

Customer-centricity evangelist. Passionate about advancing industry dialogue and transformation on customer and digital innovation. Fierce advocate for inclusion and belonging. Singer. Wife. Mother.

Rob Mannamkery

Senior Manager, Financial Services Digital Strategy and Business Transformation Consulting, Ernst & Young LLP

Advisor to banks, capital markets firms and asset managers on digital strategy and enterprise transformation. Deep experience with platform modernization and innovation to drive growth.

14 minute read 11 Jun 2021

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

In brief
  • The pandemic has accelerated the movement from selling and servicing products to providing integrated, personalized customer experiences.
  • COVID-19 has impacted consumers’ financial health, with many reporting lower levels of financial well-being, depleted savings and difficulties repaying loans.
  • FinTech firms are rapidly gaining relationship primacy with consumers, posing a competitive challenge to incumbent financial institutions (FIs).

Digitization is changing how FIs serve and value customers in ways that will quickly separate winners from the also-rans. Everywhere we look today, emerging technologies are challenging existing business models: Streaming has altered the way content is developed and delivered. Real estate marketplaces have changed how people experience new travel destinations. Online platforms have transformed how people buy everything from coffee to cars. 

In each of these cases, a once-thriving industry was disrupted by the impact of new technologies on customer behaviors and preferences. Incumbents that failed to adapt their business models and practices to the changing market conditions lost consumer trust and ultimately brand relevance. 

The financial services industry is at this crossroads today. Consumers, conditioned by their experiences in those other realms, expect financial experiences that address their wants and needs seamlessly no matter the channel or point of interaction. While this transformation was already in progress, the pandemic has accelerated consumer demand for hyper-personalized, connected experiences across the digital landscape. 

This is a game that FIs could easily lose to nimbler FinTech and Big Tech firms that are eager to build financial services businesses. To compete, they can invest in targeted digital strategies and leverage data more effectively to improve their understanding of customers and curate value propositions that foster trust. 

Ecosystem business models, along with the technologies that enable them, are table stakes for the competition ahead. At the same time, the benefits of a physical presence as a touch point for solving problems and receiving services cannot be overlooked. More than ever, the goal for FIs is to create holistic, personalized and connected experiences that meet customers seamlessly where they live, work and play.

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Chapter #1

Research highlights

Our survey of more than 5,000 consumers highlights how quickly the landscape is changing.

The story told by our research is not so much about the need to embrace data and new technologies. Rather, the story of our latest NextWave Consumer Financial Services research is about the rapid changes in customer needs and expectations brought on by that ongoing wave of digitization and the COVID-19 pandemic, and how FIs can respond to those changes.

Part of an ongoing research series, our census-weighted survey of 5,368 consumers from across age groups, wealth tiers, geographies and genders, highlights how quickly the landscape is changing. It also points to a path forward that involves mixing new strategies and paradigms with existing strengths.

Among our key research findings:

Evolving trust dynamics

Thirty-seven percent of consumers now say a FinTech firm is their most-trusted financial services brand, compared with 33% who name a bank as their most-trusted brand and 12% who say they trust a wealth management firm the most. Further, 51% of Gen Z and 49% of millennials named a FinTech as their most-trusted financial brand, a sign of incumbent brands’ struggle for relevance with younger audiences.

Shifting battleground for relationship primacy

Among U.S. consumers, 31% name a FinTech as their primary financial relationship (PFR), up from just 6% in 2019. Significantly, 53% of those consumers now set up direct deposit with a FinTech, compared with 91% of consumers who have established direct deposit with a bank identified as their PFR. While incumbent banks still maintain an edge, FinTechs are capturing more of consumers’ daily operating cash flows.

Deteriorating financial health

About 30% of consumers say their household finances are worse today than prior to the COVID-19 pandemic. Thirty-three percent report that their personal savings and investments have decreased or been depleted, while 46% of consumers either are struggling or expect to struggle with making required loan payments.

The channel conundrum

Thirty-five percent of consumers expect to increase usage of mobile channels with their PFR in the post-pandemic world; more than half of Gen Zers and millennials expect their usage to increase. While 24% of consumers expect to visit a branch less often in the future, 82% say they view the presence of a local branch as extremely or very important. This is an advantage for incumbent PFRs, but also poses a challenge from a cost-to-serve perspective.

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Chapter #2

Reframing finance for a digital world

Experiences are the new product.

The consumer is king in the digital world; experiences are the new product.  This represents a different way of thinking about achieving growth, and requires a re-engineering of how the organization acts, organizes, invests, measures and more.

For example, FIs have made great strides in bundling products and services for customers, but have yet to create the connected, “super-fluid” experiences that can make managing financial lives as seamless as purchasing a book on Amazon. Taking that next step by embracing what we call “personal financial operating systems” — artificial intelligence-driven financial health platforms filled with transactional, advice and predictive capabilities to help guide customers’ digital journeys — is the new objective for many forward-thinking institutions.

Reorienting around customers, as opposed to product or business silos, is as much a cultural challenge as a process or technology one. And it must be executed amid a rapidly evolving competitive landscape.

While FIs still count trust as a differentiator to help fend off nimble FinTech and Big Tech competitors, for example, that advantage is eroding. Consider that 24% of our survey respondents identify PayPal, a FinTech, as the most-trusted financial brand — more than double the figure of the closest bank.

Large technology firms, such as Amazon, Google and Apple, are gaining ground, as well. They possess reams of customer data and already operate fluid ecosystems. To them, financial services offerings are necessary — and potentially lucrative — parts of their broader “super app” ecosystem strategies.

This represents an existential threat to incumbent FIs. While they still possess important regulatory imprimaturs, long-term relationships and product expertise, nonbank platforms can now offer many of the same capabilities via M&A or partnerships. For example, several FinTech firms, including SoFi, have leveraged acquisitions to obtain banking charters. Green Dot, another FinTech, provides a platform and back-office support to allow nonfinancial firms to design their own customized banking and money movement solutions.

The digital evolution has put FIs in direct competition with this new generation of nimble rivals, and it seems a good part of the battle will be fought on those rivals’ turf. To keep pace, FIs will need to fundamentally reframe their strategies and business models to meet evolving customer needs and create the lifestyle-enabled, ecosystem-based experiences those customers now expect. In our survey, 63% of consumers said they would “highly value” open banking and embedded finance solutions that curate, connect and personalize their experiences with trusted third parties.

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Chapter #3

Financial health declines

21% of consumers face challenges making required loan payments. Another 25% foresee challenges in the future.

The pandemic has shaken consumers’ sense of financial wellbeing presenting opportunities for FIs that can provide convenient access to tailored advice and solutions traditionally reserved for high-net-worth (HNW) customers.  Think of it as private banking for the masses, enabled by technology and customer-centric operating models.

In our 2019 survey, consumers were notably sanguine about their personal financial situations. Across all age and asset groups, 83% of respondents rated their financial health as good, very good or excellent, despite empirical savings and debt measures suggesting that the opposite was true.

The pandemic has jolted consumers out of that complacency, challenging them to confront shortcomings in their financial plans. While many consumers — especially those who have continued working from home or have been able to ride gains in the stock market — have done well during the pandemic, the results of our survey show that consumer perceptions of their own financial health are much less positive than just a few years ago. In essence, their expectations are more aligned with reality.

In broad terms, younger, less-affluent people report faring more poorly than their older, better-off counterparts. Just 19% of mass market consumers rate their financial situations as better than before the pandemic, while 34% say their financial well-being has declined. In contrast, 44% of HNW customers report that their well-being has improved during the pandemic, while 15% note a decline.

While the Federal Deposit Insurance Corp. reported that bank deposits grew 22.6% during 2020, our survey found that 28% of consumers have decreased or depleted their personal savings during the pandemic. Again, the impact has not been uniform. HNW consumers (38%) are more than twice as likely as mass market consumers (18%) to have grown their personal savings; they also are far less likely to have seen their savings decrease or become depleted than their mass-market counterparts.

This is more than a passing curiosity for lenders. Twenty-one percent of consumers said they already face challenges making required loan payments, while another 25% said they could have problems with payments in the future. Younger consumers have been the hardest hit, with 72% of Gen Zers and 57% of Millennials reporting that they have or could have issues repaying their loans, but the issue hits all age groups.

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Chapter #4

Shifting trust dynamics

The erosion of trust has accelerated and the winners are FinTechs and Big Tech companies.

FinTech and Big Tech firms are making inroads in building financial trust as core providers of financial solutions and are no longer viewed simply as novel innovators. FIs have long counted trust in their brands as an ongoing strength, but for most of the last decade that trust has been eroding.

In our 2019 survey, we noted a significant “trust paradox” in financial services: trust in the industry was declining, but consumers said they still trusted their own PFR. We hypothesized then that the trend would open the door to differentiated trust-related capabilities — around both matters like security and privacy and also perceived value received by customers for sharing their information — that could lead to the movement of $11.3 trillion in assets over the next five years.

The erosion of trust appears to have accelerated, with COVID-19 making a local physical presence, a traditional trust advantage for incumbent FIs, less meaningful. The clear winners coming out of the pandemic are FinTechs and Big Tech companies, which are riding agile strategies and platform business models to gain not only acceptance but trust.

In our survey, 37% of consumers name a FinTech firm as their most-trusted financial brand. In contrast, just 33% of consumers say a bank is the most-trusted brand, while 12% name a wealth management firm.

The biggest driver of financial trust is confidence that the FI is protecting customer data, with between 14% and 18% of all ages listing it as the top consideration. The quality of product and services offerings is the next biggest driver, while affordability and the ability to help meet financial goals also rate highly for most groups.

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Chapter #5

Creating personalized experiences

PFRs need to continuously improve and integrate existing and new channels to meet customer needs.

More than 86% of survey respondents rate a PFR’s ability to provide seamless cross-channel experiences as important, with the highest figures among younger demographic groups. Amid the pandemic, mobile apps have been the most-used channels among younger consumers, while older groups favor interacting via FI websites.

The results indicate that PFRs will need to continuously improve and integrate existing and new channels to meet customer needs. For example, 51% of Gen Zers expect to use PFR websites more frequently post-COVID-19. The same percentage that say they will make greater use of mobile apps, while 22% expect to use branches more frequently.

Other demographic groups show similar expectations of increased cross-channel usage, including around 40% of customers under age 45 who say they will use video conferencing, and about one-quarter who expect to use smart watches and smart speakers to interact with their PFRs. Those capabilities will need to be developed and supported to meet customer expectations.

Significantly, respondents place a high value on branches going forward, with more than 90% saying it is highly important to have a physical presence available to address problems. Seamless cross-channel experiences, including those that occur at branches, are universally important to all segments and should be considered table stakes to compete in the years ahead.

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Chapter #6

The path to customer-driven growth

We offer five areas to consider when pursuing strategies and solutions to be truly customer-centric.

Embracing a lifestyle-aligned business model requires rethinking approaches to marketing, product design, channel strategies, technology investments and the use of data to help create holistic experiences for customers and drive growth. Below are five areas to consider when pursuing strategies and solutions to become truly customer-centric in the digital age.

Curate personalized solutions

Pivoting from today’s product-and service-driven operating models to those that provide customers with hyper-personalized lifestyle solutions is increasingly viewed as an imperative for growth-minded FIs eager to retain PFR status. The process often starts with using needs-based segmentation to curate financial experiences that are unique to the customer.

For example, our NextWave data show that members of Gen Z are more focused on planning for their financial futures than millennials. They also care more about personalized communications that show the FI understands their life circumstances and values. Curating tailored experiences for Gen Zers that seamlessly anticipate their life and financial triggers and connect with individual priorities will be crucial to winning their business.

Needs-based segmentation allows FIs to interpret and anticipate consumer needs to create more daily relevance in their lives

The stressed striver | Sarah, 21 | About to graduate college
"I need to get a quick start to my career and set myself up for the future" Source: EY NextWave Consumer Finance Research, February 2021
Chart showing most important upcoming life events (priority order)
Chart showing most valued features (”acquisition hooks”)

Connect with embedded finance

At its core, embedded finance is about leveraging customer data to create seamless, connected journeys and experiences across the growing universe of digital ecosystems. In our NextWave research, 63% of consumers assign a high value to such functionality, particularly in the personalization area.

FIs today devote increasing amounts of time and resources to the “how” of building open banking solutions and leveraging APIs to connect with the outside world. The why — improving the value proposition for end users by leveraging customer data — is often absent from the thought process.

To grow the business, FIs can seek out customers through multiple parallel pathways and play to their strategic strengths. The success of an embedded finance strategy ultimately depends on aligning value-creation business models with broader strategic objectives.

Business models
Graphic image of Business models

Personalize across the enterprise

Personalization is about the next step: delivering truly customized experiences across channels, products, lines of business and other silos. Our research shows that personalization features that help maximize functional benefits linked to products, such as loyalty programs, are most valued. Younger consumers care more about personalization than older groups, with 81% of Gen Zers identifying it as a feature that could deepen their relationships, compared with just 47% of consumers over age 65.

The end game is to create segments of one — microsegments where each customer is treated uniquely. FIs understand the vision, but often lack the models, processes, governance structures, cadences and execution capabilities to implement needed changes at scale across the enterprise. Orchestrating the transformation to create full vertical and horizontal views often requires a systematic approach built around scaled agile principles and intelligent automation.

Activate the organization to deliver

Creating customer-centric ways of working is the elusive last mile for the industry. FIs have talked for years about pivoting to the customer, but few have embraced the organizational change required to achieve it. Redesigning the way people work, incentive structures and how the culture is organized can help maximize value from personalization efforts.

The most effective way to pursue activation is often to take the same tools that are used to guide the customer transformation — journey mapping, service-design composition, targeted KPIs, goal-management frameworks — and turn them inward. For example, a service-design blueprint approach that is used to organize, deliver and execute customer-based functions can be modified and employed to manage the internal transformation.

Enable platforms to accelerate the transformation

Without a robust platform approach, it is difficult to deliver the benefits of personalization to create superior customer experiences and drive growth. Platform enablement is about embracing what we call the mechanics of scale to accelerate the transformation to customer-centric business models while also maintaining reliability and resiliency.

To respond effectively, FIs can embrace a three-step learning process:

  1. Start small with precise, agile experiments that can provide rapid insights into the moments that matter the most along the customer journey
  2. Fail smart in ways that encourage continuous, iterative learning in real time
  3. Scale fast by building the mechanisms and agile-decisioning frameworks to apply the best learnings quickly across the enterprise to create holistic customer experiences


The world of finance is being reframed faster than ever before, driven by customers’ changing needs and expectations. As our research illustrates, the digital acceleration is creating opportunities for FIs willing to rethink their strategic approaches to curate personalized, connected customer experiences. They can help their chances for success by rebuilding organizational structures and capabilities for a customer-centric world.

The authors would like to thank Akshata Udiavar, Puneet Singh, Eric Disend, Niema Alimohammadi and Gavin N. Cadwallader for their contribution to this report.

About this article

Nikhil Lele

EY Global and Americas Consumer Banking Leader

Work toward advancing industry dialogue. Stay at the forefront of key challenges and help leaders face constraints across the financial ecosystem.

Akshata Udiavar

Principal, Consumer Banking and Wealth Strategy, Ernst & Young LLP

Customer-centricity evangelist. Passionate about advancing industry dialogue and transformation on customer and digital innovation. Fierce advocate for inclusion and belonging. Singer. Wife. Mother.

Rob Mannamkery

Senior Manager, Financial Services Digital Strategy and Business Transformation Consulting, Ernst & Young LLP

Advisor to banks, capital markets firms and asset managers on digital strategy and enterprise transformation. Deep experience with platform modernization and innovation to drive growth.

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