Nearly a quarter of consumers are likely to switch banks in the coming year
Caliber, a global data provider for stakeholder tracking, today announced the release of its 2023 Financial Services Reputation Report. The report, which provides a global snapshot of how financial institutions are perceived, surveyed over 10,000 consumer respondents globally between January and May. This year’s report compares results to the company’s survey from 2021.
Key highlights of the 2023 report include:
- Churn risk remains high, especially in the US: About a quarter of people worldwide (23%) say they’re likely to switch banks in the next 12 months. In the U.K., where over 1,600 respondents were surveyed, this decreases to just one in five people (22%) – down by 11% points from 2021.
- Fees and social responsibility fueling the desire to switch: 31% of people worldwide say bank charges are too high. The risk of churn is driven mainly by these high fees and prices – and the sense that banks do not always act in their customers’ best interests.
- New entrants gaining reputational ground: Overall, people engage less with their financial services providers than two years ago, and they continue to view the fintech sector as more trustworthy than the banking sector – but globally, the gap has narrowed since 2021. In the UK, the gap narrowed from 8 points to just 2 points between the most reputable bank and the most reputable fintech company.
Feel the churn – the impact of declining customer support
Caliber’s report reveals that public support for the financial services sector has declined since 2021:
- Only a third of people worldwide are likely to advocate for, recommend, or choose to work for financial services companies – a slight decline from 2021.
- Only 34% of people are willing to buy products and services from the world’s largest banks, down from 37% in 2021.
- 55% of people are familiar with the largest brands in the banking industry worldwide – down from 67% in 2021. In the U.K., the top traditional banking institution is Lloyds Banking Group, based on Trust & Like score.
Trust & Like Score is at the core of a proprietary measurement system used by Caliber to show the strength of a company’s brand and reputation. The system combines several attributes related to brand, reputation, ESG, and behavior, as well as information on demographics, professional background, and the touchpoints through which stakeholders interact with companies, summarized by a score on a 0-100 scale. Scores above 80 are considered “Very High”.
“Taken together, these numbers ought to concern the financial services sector. People tend to stay with their bank for a long time – longer than many marriages, in fact. So while traditional banks remain a safe harbor for customers in the current macroeconomic climate, they shouldn’t take that for granted,” said Shahar Silbershatz, CEO and co-founder, Caliber. “The data clearly shows that the fintech sector is quickly growing in popularity, and customers are increasingly willing to explore alternatives to traditional financial services. Banks, insurance companies, and other financial services providers around the world must heed this trend.”
In fintech we trust – people trust traditional banks less than new entrants
The report revealed that consumers are increasingly more focused on emerging brands – including new entrants in the fintech sector. People continue to view the fintech sector as more trustworthy than the banking sector – though that gap has narrowed since 2021. Based on Trust & Like scores, in the U.K., the gap between the most reputable bank and the most reputable fintech company went from 8 points in 2021 to 2 points in 2023.
The report also reveals that while the traditional banking sector is more widely known, it has more negative perceptions than fintech. 15% of respondents said the banking industry triggered “negative associations”, compared to just 2% who said the same of fintech.
This, and the more tailored service offered by fintech companies, have affected consumer perceptions and behaviors, particularly among Millennials and Gen Z. According to the report:
- Millennials and Gen Z are much more likely to use fintech products and services than Gen X and Baby Boomers.
- More than a third of global youth ages 18-24 prefer fintech/paytech alternatives for online payments and money transfers, indicating that traditional banks should act now to retain younger customers.
Little value added – the financial sector’s lack of societal contribution
Finally, Caliber’s data reveals what drives consumers when choosing a financial services provider. In particular, the report shows that:
- The top issues people want the industry to address are ethics, access to finance, and responsible investments.
- Negative associations come from the sector’s values, fees, complexity, and perceived lack of societal contribution.
“The reputation of the financial services industry is largely upheld by perceptions of its services and business conduct, while it struggles with creating interest and connecting with the public on its relevance for society and its values and purpose beyond business services,” said Silbershatz. “To address the risk of customer churn, financial institutions must prioritize customer-centric practices and social responsibility.”
To view the full global report findings, click here. The full Global Top 101 brands list can be found here.
