Consumers willing to pay for digitalized banking services

A new Capco study has revealed that consumers are willing to pay a premium for personalized, tech-driven banking services that are proactive in meeting financial needs.

Capco surveyed over 1,000 customers at banks of varying size to gauge the average expectation from a financial institution – spanning the relationship with advisors; specific products and services; and factors that breed loyalty to a particular bank.

The backdrop is a banking industry in turmoil: the Covid-19 health and economic crisis threatens to wipe out trillions in interest and credit income over the next few years. Retaining and winning customers will be key to survival, and Capco’s Atlanta-based partner for banking and payments Lane Martin explained how the latest study aims to help banks achieve this without overspending.

“The survey results ultimately drive insights into investment opportunities for financial institutions by detailing what digital features and level of customization customers expect and do not mind paying extra for; myth-busting the concept that innovation must be woven into the product cost itself,” he said.

So what are these all-important expectations? For one, consumers seek that personal touch in banking. They want products and services specially tailored to their needs – "highly important" for over 70% of respondents – and most prefer a phone conversation with an advisor rather than automated support or branch visits.

In short, banks must meet customers where they are. Key to making this happen is a well-equipped digital banking portfolio – another feature that most consumers rate highly. Many would even pay a premium for tech-based banking tools, as long as they serve a concrete purpose.

Alerts before recurring charges; photo bill pay; customizable, unified dashboards for an overview of finances; paperless banking; and automatic bill-splitting for shared purchases are just some examples of digital banking for which customers would pay that bit extra.

And the trust in technology goes beyond day-to-day functions as well. Between 20% and 30% of banking customers would pay for value-added digital services – such as personalized training on financial subjects; alerts when there is extra money in the account to invest; or lifestyle-based recommendation of banking products and services, among others.

Incumbent banks that want to retain and win market share should invest in these key areas, and fast. As explained by Capco managing principal Kevin Miologos, competitors from all industries are swooping in to meet the ever-expanding set of customer expectations.

“Digital-first institutions, FinTech providers, and even common retailers, like Apple, are beginning to bring this level of digital innovation to financial services; shifting the balance of power away from legacy sales and servicing models to customer-centric, digital models,” he said.

According to Martin, most banks already have the tools at hand to fend off this competition – they just need to learn how to use them.

“Financial institutions have a significant volume of customer information at their disposal, but many fail to take advantage of this due to an insufficient understanding of the data and how it can provide a holistic view of the customer’s personal preferences.

“The arrival of big tech and its loom over stagnant players in the banking industry is daunting. Action is a requirement.”