Financial Services Ireland

The relevance challenge - what Irish retail banks must do to stay in the game

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Global Consumer Banking Survey 2016

The rate of innovation and disruption across the financial services industry continues to challenge banks as they struggle to keep the pace whilst maintaining their current business and meeting ever-increasing supervisory obligations. The perennial question is how can banks remain relevant, retain customers and protect future revenue streams?

The rate of change in the financial services industry is something that everyone can recognise and yet it is difficult to tie it down beyond narratives – changing consumer behaviors, blurring of industry boundaries, disruptive megatrends and stagnant or declining financial markets. EY recently launched our Global Consumer Banking Survey 2016 and this helps bring some colour to the consumer perspective along with some unique insight into Irish consumers and their changing behaviours.

We interviewed 55,000 consumers across 32 countries on the role and expectation of retail banks with a view to assessing their ‘relevance’. In Ireland we conducted interviews with over 1,000 consumers. The resulting data and analysis has enabled a deep understanding of Irish customer preferences and their increasingly changing behaviors and the key trends in changing sentiments toward new and emerging competitors.

The results highlight that traditional banks in Ireland are under threat; their relevance and trust with consumers is waning. Consumers are searching for alternative service models and experiences and yet still express a need for some of the traditional bank experiences. Irish banks need to evolve their understanding of and approach to consumer relationships.

The survey revealed four critical areas where banks must focus their investments and efforts to restore their central place in the lives of consumers. Over the next few months, I will address each of these key factors in more detail with in-depth articles on what this means for Irish banks.

  • Enhancing customer relevance – the search for a better provider
  • The digital paradox – loss of financial knowledge and understanding
  • Rethinking distribution – the defender role of the branch
  • The maturing of CX – reimagining customer experience
  • PSD2 – evolution or revolution
In Ireland consumer behaviour continues to change

Findings from the Irish market show that consumer expectations are shifting and their views on the role of the branch continue to change. While Ireland has one of the highest online and mobile adoption rates, only 17% of Irish consumers feel both comfortable understanding financial products and using digital channels while 40% of consumers are neither financially nor digitally savvy.

The survey highlights that there is an increased risk of switching and lack of loyalty in the Irish market; 42% say that they wouldn’t hesitate to change provider if they found one with a better online or digital offering compared to a European average of 32%

The advent of the Payment Service Directive (PSD2) , which all EU member states must implement by January 2018 will accelerate these trends. PSD2 will erode the link with traditional banks and enable customers to use new providers to manage their payments accounts and services, giving them far greater choice in how they manage their finances. This key industry shift will be a catalyst for consumers and banks alike to evolve their relationships and services.

Some points to ponder:
  •  47% of Irish consumers don’t trust a bank that doesn’t have any branches at all
  • 59% or two out of three people say that while they are happy to research products and transact online, they need to be able to visit a branch or talk to someone over the phone at key times in their lives
  • 42% say that they wouldn’t hesitate to change provider if they found one with a better online or digital offering compared to a European average of 32%
  • 45% say that one of the hardest things about having accounts across different banks is getting a consolidated view of their finances
Key global findings include:
  • 40% of customers expressed decreased dependence in their bank as their primary financial services provider and have used non-bank providers for financial services in the last 12 months
  • 20% of customers who have not yet used non-bank providers plan to in the near future

For more information on the survey’s global findings, download the executive summary below.

I welcome any feedback and will be arranging debriefs on the survey results with interested Irish participants. Please feel free to contact me with any thoughts or questions you may have.

 

Colin Ryan

Partner, Performance Improvement
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