Branches are dead – long live branches? Neobanks: does the grass still seem greener to customers? Apropos green: where do banks, old and new, stand on impact investing? Finshape’s Gellért Vinnai and Karel Beran have recently weighed in on the trends that are currently shaping the financial services industry. Here’s what they’ve had to say.
After a blip during the pandemic, Forrester says, current account switching is back on the rise. As of 2022, 8% of personal current accounts are held with challenger banks, up from just 1% in 2018. How can and should incumbents respond?
K: I don’t think the competition is between incumbent and challenger banks anymore. It’s between banks who can deliver the value and experiences people crave and those who can’t. More and more incumbents seem to have got the memo and are looking to tackle this challenge head-on.
That said, high service fees and overcomplicated fee structures have driven lots of customers away from traditional banks. They’ve caused a loss of trust that made people eager to jump ship to new market entrants with their free-of-charge services and cushy digital experiences. But this is about to change.
Neobanks are now at a point where they simply have to make money, so they’ve started introducing fees, too. There’s nothing surprising about this, of course – there’s no such thing as a free lunch after all. But this will probably frustrate customers who have made the switch and level out the pricing differences so neobanks and incumbents can compete in a fairer way. And incumbents are ready this time, having invested a great deal in digital transformation and customer experience in recent years.
In the financial services space, empty environmental promises are out, concrete action towards driving the ESG agenda is in, with fintechs positively riding the green wave. Will incumbents be able to keep up with the fintech pack?
G: What we see at incumbents, who make up the majority of our client base, is a growing interest in carbon footprint and sustainability-related solutions. But not only in terms of product offering. Many of them have started measuring how sustainable their operations are and putting greater focus on socially responsible investing. So what they offer as a service to customers is actually only a small piece of the puzzle.
We’ve been asked a lot about our carbon footprint insights solution, especially since we demoed it at Finovate Europe. It shows banking customers how their spending habits impact the environment. Not only that: it also translates CO2 emissions estimates into something that’s easier to grasp, like a trip from one city to another. The banks who are interested in these types of solutions typically have big-picture initiatives in place, too.
K: Traditional banks are a major driving force behind the transition to a green economy. Not only because they have a wider reach but also because through corporate banking they can support organisations in pivoting toward sustainability or actively fund businesses that are leaders in green initiatives. Plus, they can encourage retail customers to make greener choices by, say, offering better mortgage rates on energy-efficient homes.
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