To Win the War with Fintech, Financial Institutions Must Rethink Their Relationship with Customers

Shahar Silbershatz, CEO, Caliber

Traditional banks and insurers aren’t just in a commercial battle against fintech companies. They’re fighting a reputational battle, too. 

According to our recent report on the reputation of the financial services sector:

• In the US, the highest-ranking fintech company (Paypal) scored 5 points higher than the highest-ranking financial institution (Truist) – the biggest gap across markets.
• 15% of survey respondents said traditional banks are saddled with “negative associations”, compared with just 2% for the fintech sector.

This perception gap matters.  

For years, most people had a relationship for life with their bank. Today, according to our report, almost four in ten people in the US say they’re likely to switch banks in the coming year. The reasons mentioned most were high prices and the perception that banks don’t always act in their customers’ best interests.

Our report also found that people today are less familiar and less engaged with the financial industry’s largest companies compared to two years ago.

In short, the banking industry isn’t just finding it hard to convey its value proposition; it’s struggling to get people’s attention.

Consequently, the sector is fragmenting. Around a third of Americans say they use an alternative to their bank for online payments, transfers, and credit purchases.

The changing nature of stakeholder expectations

Traditional financial institutions need to fundamentally rethink how they engage audiences and build customer relationships.

Yes, they must improve their digital products and customer service. But they must also show they’re acting in their customers’ best interests. If almost 20% of Americans think their banks make them borrow more than they can afford – and provide misleading information about their services – there’s a problem.

Moreover, clearer, more transparent, and more interesting communication is required – if companies are to come across as more engaging and relatable.

Banks and insurance companies must also reconsider their values, ethics, and responsibility to society — all areas respondents pinpointed as critical for the industry to address.

In short, financial institutions need to re-assess their relationship with consumers — because the competition is fiercer, the scrutiny is greater, and breaking up is no longer hard to do.