With open banking set to take off in January, established finance firms have been sent a dire warning with the publication of a new consumer study which reveals that 88% of those aged between 16 and 34 are disgruntled with the loyalty banks and lenders show them, even though they describe themselves as loyal customers.
And according to the research, by global reviews and customer insights company Feefo, over three-fifths (61%) of under 35s say they expect to switch banking provider more frequently in future.
All respondents in the survey (100%) had a bank account, while 68% had a savings account, 51% a credit card and a quarter (25%) had a mortgage.
Even with just 12% of respondents describing themselves as not loyal, UK banks and lenders are still in danger of sustaining severe losses of more than £1bn in the £8.7bn current account market, £156bn in the £1.3 trillion mortgage market and more than £8bn in the £67bn credit card market, Feefo predicts.
And, although the findings focus on the benefits of customer reviews – well, it was carried out by a review company – the real story is the opportunity this promiscuous behaviour offers to open banking.
By January, Britain’s nine largest lenders must have developed application programme interfaces (APIs) that allow third parties to access their customers’ data, with permission. Customers will be able to control how this information is shared digitally and provide a deeper picture of the way they manage their money.
Instead of doing all their banking through one or two companies, customers could have their current account with one provider and then add on other financial services, like an insurance policy, ISA, mortgage and investments through separate providers, all under one interface.
While it has been well documented that most older consumers simply cannot be bothered to look around for new financial services providers, the younger generation are far more willing to defect.
A separate study by business consultancy Ctrl-Shift and Callcredit, which interviewed leading figures from traditional banks, challenger banks and the wider industry, claims that traditional firms which do not enhance their services could need a Government bailout in the next five to seven years.
The Future of Finance study also predicts that open banking will see at least one major technology company – namely Google, Amazon, Facebook or Apple – enter the banking market. The research argues that these companies will look to either acquire a challenger bank, such as Monzo or Starling, or provide payment solution services.
It also suggests that Chinese companies, including the likes of Alibaba, Tencent and Baidu, will look to enter British retail banking, as they already provide payment services in China.
Feefo chief marketing officer Matt West said: “There is a big storm brewing for UK banks and lenders unless they do far more to engage with the under-35s. Although it was a surprise that the vast majority of Millennials regard themselves as loyal, if banks, building societies and credit card companies want to turn them into life-time customers they need to ensure they are open and transparent and respond to their requirements. It’s not just about having the most competitive offers.”
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