Global analytics software provider FICO today released new research examining consumers’ shifting financial behavior and priorities. While the vast majority of US consumers (86 per cent) are satisfied with their banks, they are increasingly open to working with new providers, including fintech companies and other non-bank providers, to address critical unmet financial needs.
The research, conducted by Cornerstone Advisors and Nonfiction Research, asked US consumers what they considered crucial to their financial future and explored the types of products and services they were interested in to secure that future.
“Consumers’ expectations for banks are constrained by the products they have traditionally offered,” said Anna Hamilton, VP of portfolio marketing for customer development at FICO. “While consumers continue to express positive sentiment towards their banks, our research has revealed a vast set of urgent financial needs that a majority of banks are currently not solving for.”
The research found US consumers are beginning to address these unmet needs by turning to non-bank financial services providers as opposed to traditional banks or credit unions. One-third of consumers have at least one account with or engage in financial services activity with a fintech company, large technology company, merchant, or other non-bank provider. That percentage jumps to 47 for millennials.
“Shadow banking providers are siphoning a growing amount of business away from traditional providers, often in ways that are difficult to detect,” said Ron Shevlin, managing director of Fintech Research at Cornerstone Advisors. “For example, a quarter of a trillion dollars—$252 billion—in payments volume is now happening outside of banks’ payment products.”
A key factor driving this migration to non-traditional financial services is consumers’ growing uncertainty over their monthly finances. More than two-thirds of consumers (68 per cent) experience high-stress about money every single month, while 53 per cent say they aren’t on track financially.
As a result, fintechs like Chime and Petal, who offer specialized services to help consumers with their financial futures, have been growing in popularity. Almost a third of millennials (31 per cent), a quarter of Gen Xers (27 per cent), and one in five Gen Zers (19 per cent) express strong interest in these services.
The research also found almost half of the respondents (45 per cent) would pay a monthly subscription – akin to Netflix or Spotify – for unlimited access to new products and services, including:
- 29 per cent – would pay for a service to help negotiate money situations on their behalf.
- 27 per cent – would pay for a self-driving budgeting and investing service.
- 27 per cent – would pay for access to “Can I afford it?” advice on big spending decisions.
- 25 per cent – would pay for expert advice on how to ask for/earn more at their current job.
- 21 per cent – would pay for weekly emails that help them deal with status anxiety, social media, and the temptation to compare themselves to others
Half of consumers would prefer to pay their current bank for these services, but they are willing to look elsewhere if necessary, with 70 per cent of consumers saying they would be “likely” or “very likely” to open an account at a competing provider if that provider offered these products and services.
“Most consumers would prefer to get these services from their current bank, but they’re not going to wait around,” added Mr. Hamilton. “There is an increased demand from consumers for new financial services. For financial service providers, it will be critical to broaden their product offerings to help meet consumers’ financial needs and aspirations in the years to come.”
