Rapid shift to digital banking in Canada during COVID-19 accelerating erosion in consumer trust, Accenture report finds
December 7, 2020
Banks must earn consumer trust if they hope to provide lucrative advisory services as a cornerstone of their growth strategies
TORONTO; Dec. 7, 2020 – The replacement of in-person branch interactions with impersonal digital transactions through online and mobile channels during the COVID-19 pandemic in Canada has accelerated the ongoing erosion of consumer trust in banks, according to a new report from Accenture (NYSE: ACN).
Accenture’s 2020 Global Banking Consumer Study, based on a survey of more than 47,000 consumers globally and more than 2,000 consumers in Canada, builds on two similar reports from 2019 and 2017. The latest report reveals that without a strong emotional connection with their bank, customers are more likely to view banking services as a commodity, with price being the ultimate competitive differentiator. Specifically, more than one-third (41 per cent) of Canadians ranked value for money as a top three factor, making it the most important factor when dealing with a bank, an increase of eight percentage points from two years ago.
The report notes that while banks have long been encouraging consumers to use digital channels for transactional banking activity, there was no way to predict how aggressively that trend would accelerate as a result of COVID-19. While banks often view broader digital adoption as a way to lower costs and provide services 24/7, the rapid pivot to existing and hastily launched digital services has all but removed the vital human element from banking, further eroding consumer trust. For instance, one-third (34 per cent) of surveyed Canadian consumers trust banks "a lot" to look after their long-term financial well-being, compared with 47 per cent two years ago.
"Customer trust is more important than ever, and the recent swing to digital makes it hard for banks to nurture the relationships they have been so focused on building," said Robert Vokes, who leads Accenture’s financial services practice in Canada. "The COVID-19 pandemic has led to a huge increase in digital engagement, which is positive but has some drawbacks. On one side, digital acceptance has allowed banks to meet customers’ needs in an efficient way despite the challenges of the pandemic, and it has also accelerated banks’ digital strategies. On the other side, it has forced banks, in some cases, to launch solutions that do the trick functionally but are lacking in the human touch. To maintain strong customer connections, banks will need to reimagine the digital experience to make interactions more personal and relevant."
When asked how much Canadians trust their bank to look after their data, less than half (44 per cent) said "a lot," a 13 percentage-point drop from just two years ago. Yet while overall trust might be eroding, the report found that nearly seven in 10 (69 per cent) Canadians believe that when providing advice, their bank has their best interest in mind "always" or "most of the time," and 71 per cent believe that the advice is smart, personalized and well-informed.
These factors likely contribute to why nearly one-quarter (22 per cent) of Canadians believe that banks are in the best position to provide them with products and services outside of their core areas of expertise, compared with only 14 per cent, 10 per cent, and 9 per cent of respondents who said the same for tech providers, social media companies and neobanks, respectively.
Permanent behavioural shift or pandemic-inspired fad?
The report suggests that banks need to evaluate how consumer behaviour has been affected by the pandemic and determine which behaviour changes are permanent – noting, for instance, the growing popularity of video calls. Prior to COVID-19, only 11 per cent of Canadians had spoken to a bank advisor via video call, but more than four in 10 (44 per cent) said they would be willing to do so when branches reopen, and 29 per cent said they would prefer video calls to face-to-face meetings.
Banks also need to understand how different channels affect consumer trust. For instance, when receiving advice on products and offerings, only one-third (33 per cent) of Canadians said they would trust a human advisor "a lot" delivering advice over a video call, compared with 47 per cent and 58 per cent who said they would trust a human advisor "a lot" delivering advice by phone or in person in a branch, respectively.
"When creating digital tools, banks need to consider how consumer behaviour is changing and ensure that interactions are still relevant and personalized, with the option to connect with a human advisor when it makes sense," Vokes said. "Balancing human and machine interactions is crucial so that banking customers feel fully taken care of, as well as to enable bank employees to offer the right advice and services. In combination, these efforts will help banks foster trusting and loyal relationships with clients, resulting in unmatched benefits for both."
Evolution of switching
The report found that bank-switching behaviours, once a real-time indicator of increased competition or unhappy customers, have changed over the past two years. Primary account switching activity has decreased significantly, with just 3.8 per cent of consumers saying they switched their primary bank account in the past 12 months, compared with 6.7 per cent two years ago.
Noting that these low numbers can be attributed to the natural slump in neobank adoption after the initial surge, coupled with incumbent banks improving their digital capabilities, the report suggests they could also provide a false sense of security for incumbents. Measuring switching has become more complex as consumers supplement their primary bank account with additional accounts that serve specific purposes – resulting in multi-banked customers. In Canada, 17 per cent of consumers opened a new bank account in the past 12 months, compared to 14 per cent two years ago.
"Switching has gone from a hard ‘cutting of the cord’ to a more dangerous slow-drip erosion of share of wallet," said Alan McIntyre, who leads Accenture’s Banking industry group globally. "This shows that the consumer/bank relationship is becoming even more fragmented, as consumers can quickly and easily open and place their money across various accounts to achieve specific financial goals or simply hedge their bets. The acceleration to digital has helped many traditional banks close the technology innovation gap with neobanks. Better digital offerings combined with the trusted stability of established banks may see the scales tipping to traditional banks as the preferred primary account for consumers."
Accenture surveyed 47,810 respondents across 27 countries: Australia, Belgium, Brazil, Canada, China (including Hong Kong), Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Malaysia, Mexico, the Netherlands, Norway, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, United Arab Emirates, the United Kingdom and the United States. Respondents were required to have a bank account and covered multiple generations and income levels. The survey was conducted online during July and August 2020.
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