Non-bankers. 5 reasons why the customers leave banks.

Who are the non-bankers? Perhaps, some would like to see them as illiterates, digitally excluded and civilized savages. The truth is, that non-banking market is mostly taken by hyper-connected consumers, much aware of the opportunities that today’s digital economy offers. Moreover, this group is growing every year. They are well educated, good paid and enjoy banking services not in banks, but… elsewhere. Banks have lost their monopoly on money services. How can they keep their best customers and is it anyway possible? 

Term “non-bankers” defines a group of consumers who do not use bank services and it was popularized by Brett King‘s book titled “Bank 3.0“. Non-bankers use prepaid cards or payrollcards, invest in electronic stock exchanges, take short-term online loans, use cryptocurrencies. And they do it simply because it is so much comfortable for them! 
 
Furthermore, CFSI’s Center for the Study of Finacial Innovation reports that, as many as 25% of these customers have the highest creditworthiness. The market for non-banking financial services is already worth billions of euros. How should banks work then, to save their relationship with customers? How can they prevent the customers from going away? What are the main areas for banks to make a priority change? 

1. Obsolete processes

   What seriously undermines the bank’s position (as seen by its customers), is the bureaucracy – completely unfit for the reality that we live in. The need of a personal visit to the branch, tedious forms, necessity of giving a personal signature along with paper registration documents – these are things we do not have time for, disagree with and would like to avoid – at all costs! From customer’s perspective, much better and more convenient are fast banking products, available from electronic banking platform or contextually designed into the process, or the ability to use electronic signatures and other digital credentials, like biometric methods.

2. Banking services mobility

   Paying with a cell phone, that we carry with us constantly, is a very convenient solution. The funds we use for payments, do not have to be deposited on an account. In addition, traditional account still does not have any extra capabilities. Today, when you can pay even with iTunes or Facebook credits, ROR is definitely not a distinguishing feature of the banks offer. Fast and secure instant access to ones money, virtual wallets, web-based support – it’s just the standards, already available elsewhere. Only the constant search for new, yet more convenient solutions for customers, will help banks stay competitive.

3. Other organizations’ example

   In digital economy, the hyper-connected consumer is becoming a center of attention. When he calls the helpline, he no longer has to go through the verification process and explain why he calls at all. He is instantly recognized, his account history and activity is familiar to the helpline, important informations, received during the call are available upon request and shortly delivered via SMS or email. Brands and corporations care a lot about their customers, and they want to make it all easier for them. They keep asking for feedback: “let us know, what else we can do for you”, “please, take a minute to evaluate our product,” “why don’t you rate our consultant?”.

   Typical bank, not open for change, not considering the correctness of customer-related actions (such as inviting them to the branch, which is available only two or three within a large city, which practically means a time-consuming trip) is now facing the urge for a massive internal change, so it can compete with the new approach types of companies. With those, who move everything online, provide cashless services, enhance the experience of the recipient with an automated, jet personalised manner. And in addition – provide banking services.

4. Disconnection of banking services from banks

   This is the biggest threat to their business and, in a way, to the existence of banks. If the customer uses twin services, while being the subject of interest, care – then why the bank? Bank products and services are a commodity today, like everything else. Only prepaid cards are a huge market. Publishers of this type of cards are supermarkets, telecoms, retail stores, sports clubs. There is a whole segment of loyalty cards. Consumers can take short-term and long-term loans, high-speed internet loans, repurchase products purchased directly at retail chains, or pay their bills at the store. The cryptocurrencies such as Bitcoin, Ven and Litecoin are growing. It is possible to set up a deposit (via the Internet) and earn interest at a different unit, than the bank. Money transfers are increasingly popular among cashless services. That way, banks lose billions of euros or dollars a year, and the trend is growing.

5. Lack of change-ready mindset

   PSD2 strongly pushes the banking sector to change. This is due to the transformation of the market, which is already taking place and banks do not keep pace with. They are not present and active in social media, they care for obsolete products, they are not transparent in their activities. Their inertia and closure actually delays the development of the global economy. They need to adjust at a faster pace, still the law does not give them a great deal of time to make the required changes. Those of the banks, that have already seen the pressing need for digitization, are one step further today and have a chance to survive in a competitive environment where – once PSD2 enters into force – it will be even harder.

 Read more:  PSD2 RTS – Regulatory Technical Standards for 2nd Payment Security Directive

He is an average citizen. We can meet him every day. He (or she) has several connected devices and quickly switches between them. It expects the operation on the laptop to be completed on the cell phone, or vice versa. He is used to personalized advertising and information. He uses video calling, he is actively buying and communicating with the world on his smartphone. He lives fast, searching for information here and now. He has immediate demands.

This type of consumers will wonder only where they will be better served: where they have to place a fingerprint, or where they have to go personally and sign up. Handling of such matters online is deeply ingrained already, and can (should?) only be adapted.

There is more non-bankers emerging every day. Just look at our everyday life. We have tablets, private and business smartphones, smartTV and other smart devices. We are almost constantly online, we are already a hyper-connected society. The number of mobile phones in Europe has nearly exceeded the state of the population, the use of the Internet on mobile phones is growing year by year, we have fewer and fewer desktop computers, everything strives for mobility.

91% of the non-bankers hold a mobile phone (compared to 87% of the overall consumer rating). They are mostly young people, digital natives, for whom hyperlink is obvious, and who will naturally find themselves within the Internet of Things. They do not have time for bureaucracy, they live fast and want to have everything “on demand”.

Only 15% of banks have a written strategy for digital transformation. This is reflected in the report  “The 2017 state of digital growth for financial institutions”, which examined 270 banks from around the world. Even if they have a portion of their services online, they do not care about the positive customer experience as much as other brands.

 Read more:  Open API and open banking – 7 product ideas

Today, when artificial intelligence (AI) is being promoted in customer and other areas, innovation is increasing, new technologies are emerging, digitization of the world is growing – banks are still lagging behind. PSD2 will practically help to verify the market. Banks will have to open up, change their structures – still, that will not save some of them from liquidation. As institutions, they are in fact a relic of the previous epoch, which in its original form no longer has the right to exist.