The appetite for cost-efficient fintechs and neobanks appears to be growing, with a new report revealing that more than two out of three customers would switch to a specialist fintech from a bank if they were offered lower fees and had at least commensurate levels of safety.
The recent survey by Money Transfer Comparison (MTC), an online global comparison service for money transfer platforms, presented respondents with a range of financial services products (including home loans or savings or term deposit accounts) that they would be willing to shift from their current bank to a specialist fintech.
Two out of three (67 per cent) customers surveyed indicated they would switch at least one of these services to a fintech competitor – though, rather starkly, at least one-third appeared reluctant to move any product to a fintech.
Of the individuals willing to switch, around one-third said they would consider moving their home loan (36 per cent), credit cards (34 per cent), savings accounts or term deposits (32 per cent) to a fintech.
A slightly fewer number of individuals would be willing to shift their personal or car loan (29 per cent) or international money transfers (25 per cent) to a non-traditional financial services company. Those surveyed, however, appeared less keen to move to a fintech for share trading or budgeting services, with fewer than two in five (19 per cent) stating they would outsource either service.
Despite a small majority (53 per cent) of those surveyed believing their banking institutions, for the most part, have kept pace with the digital innovations being pumped out by tech-forward fintechs, a not insignificant number believe that non-traditional players are ahead of the game.
Some 15 per cent of respondents believe that not one of the banks they patronise has kept pace with fintechs’ digital innovation capabilities.
Curiously, older cohorts, those 55 years and over (20 per cent), rather than Gen Ys and Zs (9 per cent) were more likely to report that fintechs are outpacing banks’ in digital innovation.
However, perhaps somewhat less surprisingly, a higher proportion of younger respondents declared their willingness to move away from their banks for at least one financial service: 74 per cent of under-55s indicated this, compared with 51 per cent of over-55s.
With consumers faced with increasing cost of living pressures, excessive fees appeared to be a major driver of the turn away from traditional banking services. More than half (59 per cent) of those surveyed reported that bank fees are too high for the services they use or the penalties they incur. Just 15 per cent disagreed with this assessment.
“When comparing traditional banking fees with the fees that competing fintech services provide, the level of dissatisfaction from the public is clear,” said Alon Rajic, founder and managing director of Money Transfer Comparison.
“Associated fees for services offered by both banks and fintech services can differ greatly.”
For instance, while annual credit card fees from major banks can run into hundreds of dollars, with annual interest rates of almost 20 per cent, MTC reports, many non-banks offer fee-free cards with interest down to 12 per cent.
MTC added: “Interest rates on loans from banks are also significantly higher than alternative lenders – Commonwealth Bank can offer an up to 19.50 per cent fixed interest rate on car loans, while Loans.com.au, an alternative lender, offers a standard 6.69 per cent fixed rate on its car loan offering.”
MTC’s survey of 1,002 Australians gauged their level of satisfaction with traditional banks against alternative fintech services, including online money transfer platforms, ApplePay, digital credit cards, buy now pay later (BNPL) services, expanse tracking, and cashback and rewards programs.