Trust vs convenience: What matters most to banking customers?

Challenger banks first emerged in 2010, and have firmly dug their heels in the market ever since. The likes of Monzo, Starling and Revolut have shaken up the banking sector and forced incumbents to adapt to how consumers now want to manage their money.

Challenging the norms of traditional banking, these disruptors have captured the minds of consumers with the promise of branch-free banking, ultimate convenience and exceptional customer service.

Although a lot of UK customers have welcomed challenger banks into their day-to-day, their expected takeover hasn’t quite come to fruition. Traditional banks still remain number one when it comes to market share.

Why you ask? In the banking industry, trust and convenience remain crucial factors that greatly influence customer satisfaction and acquisition. And while convenience was considered the most important thing to consumers in managing their money, it seems they’re unwilling to compromise on trust to gain it.

Will challenger banks always be second best?

A survey by YouGov found that traditional banks are still used for four in every five purchases, and that only a fifth (19%) of recent customers used a challenger bank like Monzo as their primary current account.

Most consumers use traditional banks as their primary account to manage most of their money. These accounts are used for ‘more important’ and emotional financial transactions, including bills, mortgages, rent, and salaries. While challenger banks are often used as secondary accounts for everyday and travel spending (if at all).

A reason challenger banks are seemingly secondary in the way customers manage their money is because of the perceived risk involved. Consumers typically view traditional banks as more secure and reliable because of their long-standing presence in the market, and the assurance of physical locations for support when they need it.

Many individuals continue to rely on traditional banks as their primary accounts, preferring the perceived stability and familiarity they provide, despite the benefits of personalisation and convenience that challenger banks can provide.

So, should challenger banks try to increase their share of primary bank accounts, or accept they come in second place, and capitalise on their in-depth understanding of how customers behave, spend and manage their money on an everyday basis instead?

What can traditional banks learn from disruptors?

According to research by IBM, 34% of Gen-Z believe that traditional banks don’t understand their needs. While traditional banks might have the majority of market share, they can learn a thing or two from the disruptors about how to engage customers and provide the convenience they desire. 

• Personalised services

One of the key strengths of challenger banks lies in their personalised approach to banking services. They use data about customer spending to target individual customer needs with personalised services including spending reports, savings pots and personalised cards. With offerings based on their day-to-day behaviours, customers feel more seen and heard, helping them build greater relationships with their banks. 

• Friendly user experience

Challenger banks are known for their simple product offerings and easy-to-use platforms that make banking more accessible and intuitive. By streamlining complex money management processes, traditional players could reduce customer friction and increase satisfaction.

What can challengers learn from legacy players?

They may have been in the industry for a long time, but traditional banks need to continue learning and adapting to consumer behaviours to keep their share of the market.

• Culture of data protection

If traditional banks can survive hundreds of years and numerous financial crashes, why trust anyone else? Trust in banking hinges on security and reliability. Traditional banks invest heavily in security measures, risk management, and regulatory compliance which helps customers feel like their money and data are secure. Challenger banks can alleviate consumer fears and build trust by showcasing their dedication to data protection and security.

• Human interaction

Traditional banks have more touchpoints in which to build customer relationships. Customers find access to a branch network, and staff you can speak to in person reassuring. While one of the key selling points of challenger banks is that they’re entirely online, they can do more to bring human touchpoints into their digital services to show they’re there for customers when needed.

Is there a place for both challenger and traditional banks?

The debate between trust and convenience lies at the centre of how customers manage their finances. While challenger banks are streets ahead in leveraging data to personalise their services and empower customers, traditional banks maintain the edge in trust and reliability built over years of establishment.

There is certainly a place for both traditional and challenger banks, to help customers strike a balance between convenient digital solutions for everyday spending while assuring trust and security, especially for larger transactions.

Flexibility is key. Banks should adapt their strategies based on the preferences and priorities of their audience to build stronger customer relationships and satisfaction.

To better understand how your audience is thinking, acting, and spending, get in touch with Trinity McQueen.