Banks find themselves in a very awkward position right now, as they are facing very stiff competition from various sectors and projects. Based on the findings of a recent UK bank study, there is a chance of losing close to 1 in 2 customers to alternative financial services. Even though the report does not mention Bitcoin specifically, the popular digital currency is one of the key drivers of the FinTech revolution.
Banks are Struggling
There is no shortage of banks to choose from in the United Kingdom. Some people might expect a high level of competition among institutions as they are all competing for a market share. Nothing could be further from the truth, however, as it is all but impossible to find the major difference between what banks have to offer.
Consumers in the UK have started to take notice of the lack of innovation plaguing the financial sector. Alternative solutions and services have started to pop up in recent years, in the form of FinTech companies and digital currencies. But there are other contenders as well, such as the so-called challenger banks.
Based on the results of the survey, there are a few main reasons why consumers would be tempted to switch their bank for an alternative solution. As banks have grown quite big, and their customer base has expanded, most consumers feel they are nothing more than an account number for the bank staff and management.
But there is more, as banks are struggling with ease of engagement and customer understanding. Not every consumer has the same needs or desires when using that particular bank, and it is important to make sure everybody feels welcome and taken care of. However, this is not possible with most banks, as they are not all that worried about individual needs.
At the time of the study’s publication, close to 94% of the respondents were using traditional financial services for their current bank account. However, 27% of those are tempted to switch banks, and a lot of people are interesting in alternative financial institutions. Unlike their bank counterparts, alternative financial institutions have a much higher customer satisfaction rating.
Furthermore, the study shows why people are flocking to alternative financial institutions all of a sudden. Most of the respondents feel they provide a faster service and easier ways to interact with staff. Regarding convenience and security, both industries net similar results, although banks are still leading as far as “value for money” is concerned.
Bitcoin & FinTech Provide Alternatives
There are a few sectors which could bring serious competition to traditional finance over the years to come. Most notably are in the FinTech sector, which aims to bring innovation and global services in the financial sector to people all over the world. However, most of these companies still make use of the legacy system used by established players, leading to very little innovation for the time being.
Challenger banks are a major worry for existing financial institutions as well, as these establishments and startups are not encumbered by the legacy system. At the same time, the term “challenger bank” covers a broad range of services, which leads to a high number of banks focusing on particular niche markets.
But the biggest contender could turn out to be Bitcoin and digital currencies. Unlike all of these other financial players, digital currency does not require access to any of the existing infrastructure. In fact, some people would go as far as saying how Bitcoin can bring banking to the unbanked, should they need such services.
Furthermore, Bitcoin puts the end user in full control of their money, a trait the financial sector does not offer right now. With digital currency, there is no need to trust a third party for safekeeping one’s money. People can become their own bank, and carry their bitcoins with them wherever they go.
What are your thoughts on this study? How will the financial sector be affected by all of these alternative financial institutions? Let us know in the comments below!
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