TRADITIONAL banks must continue to innovate and focus on the customer experience, otherwise they risk losing market share to tech companies and retailers.
This warning was issued by Accenture, after a survey of 2,000 UK consumers revealed that younger consumers are interested in interacting with their bank through social media, wearables and instant messaging.
A little under 40 per cent of Generation Z respondents (born after 1996) said they were likely to use ‘open banking’ rather than traditional methods of payment in the future. This compares to 13 per cent of baby boomers (born between 1946 and 1964). Open banking refers to a new initiative that will make it easier for banks to share data in a bid to build more useful applications. The end goal is to improve the banking experience for customers, in line with their needs.
One third of consumers surveyed by Accenture said they were willing to give online retailers permission to initiate payments directly from their bank account, using apps or websites. This figure rose to 42 per cent among millennials (born between 1980 and 1995) and 52 per cent amongst those from Generation Z.
This indicates the potential growth opportunity for online retailers and fintech companies which target younger consumers.
“If banks move too slowly to adapt to this transformed, open banking landscape, they could miss out on the platform-based business models and the strategies they enable,” said Jeremy Light, who leads Accenture’s Payment Services Practice in Europe.
“In short, banks will need to up their digital game or risk failing to meet growing consumer demand for a seamless digital experience.”
Personal data fears
Nevertheless, concerns about personal data and fraud represent a significant obstacle for fintech and retail businesses alike. Close to 85 per cent of respondents highlighted the risk of fraud as the largest barrier to them sharing bank account information with third-party providers. They also cited data protection and the potential for cyber attacks as key concerns.
“The immediate challenge for participating retailers, fintechs, social media companies and banks is to develop propositions for those consumers willing to use open banking, encouraging repeated use and fuelling wider adoption,” Light added.
Fraud and data protection concerns help to explain why trust in online platforms and social-media companies as providers of payments services appeared to be low. According to Accenture, 58 per cent of respondents said they wouldn’t be willing to initiate a payment through an online platform, while 82 per cent said they would not consider payments via a social media company. This could pose a challenge for social media companies that are seeking to build commerce platforms.
Only 26 per cent of consumers surveyed said they trusted online payment companies to make and schedule their payments.