The average household has up to five financial service provider relationships. And 63% of consumers consider fintech options for their financial services. So how can you differentiate yourself in this age of competition?
Customers have endless choices. Go to the grocery store or have a meal kit delivered? Take your car or use a ride-hailing service? Go to the movies or stream? This world of options is also affecting how customers manage their money.
Managing finances is necessary for every demographic, but it doesn’t mean that customers are one-size-fits-all – each have their own needs and goals. More and more, customers demand ease and simplicity as managing finances takes a great deal of effort and time. Financial institutions need to be agile and ready to adapt as customer behaviors change.
In the past, people would choose their financial institutions based on the convenience of the branch location or a family member’s relationship with one. Now we’re in a financial landscape where increased fragmentation is the norm. Consider that 63% of customers now consider fintech options for their financial services, and it shows, with the average household having up to five financial service provider relationships. They may use one institution for making deposits and paying expenses and another for financing a mortgage. So, what drives a customer to use multiple service providers for their financial needs?
Similar to those who select an institution because it’s conveniently around the corner, today’s customers want to carry out their financial activities with minimal fuss and in the most convenient way possible. They will choose to have more than one financial services relationship if they believe it will simplify their finances and accomplish practical tasks. If a firm fails to make basic financial tasks simple and functional, customers will move on until they find an option that does.
Additionally, customers want banking products and services that offer a little extra bang for their buck. In their survey analyzing consumer trends, CGI, a business consulting services firm, found that 81% of respondents expected to receive some form of an incentive from their financial services provider. Customers favor the flexibility to leverage products – apps, loan financing and debt consolidation – where they can get the best offer or rates. If it has to be through several institutions to do so then they are comfortable with an expanded number of financial relationships.
It’s clear that customers expect a lot from their financial institutions. The challenge for institutions is to differentiate themselves in the crowd of competition. They should focus on creating and highlighting their value to make their customers’ financial lives easier and become their preferred institution rather than attempting to be their only one.