Top Factors of Customer Experience: Traditional Banks vs Neobanks
Category Analysis – Banking
Region : USA
The global open banking growth rate is expected to reach $19.14 billion in 2022 and is projected to grow to $48.13 billion in 2026 at a CAGR of 25.9%. And, the global digital banking platform and services market is expected to reach $26.1 billion by 2027, from $10.57 billion in 2020, at a CAGR of 13.8%.
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The analysis is based on customer reviews and conversations online in the segment. The analysis results presented are completely unbiased and not based on any subjective judgment. The source data used for the analysis are user conversations available publicly online like public forums and social media.
Total number of customer conversations analyzed
Executive Summary -Top Factors Driving Customer Experience In The Traditional Banks and Neobanks
What factors are driving banking customers to choose a neobank vs a traditional bank?
This industry has undergone seismic shifts in the last couple of years. Financial institutions have switched to virtual platforms, and this industry has undergone a significant customer experience transformation. With the introduction of smartphones and mobile applications, more people are opting to bank on their phones and purchase financial items through digital platforms, lessening their reliance on visiting a branch or brick-and-mortar location.
Many traditional banks started to present their online or virtual version through apps and software platforms for making the customers’ lives even easier, while the new customer experience trends of neobanks have made a great impact on the new generation’s banking experience and practices.
It is interesting to know that there is a generation of people who have trusted the same financial institution for a long time and like to visit the nearest branch to do transactions with the help of humans. After the digital transformation, there is this new generation of people who did not even visit a bank or ATM and prefer self service since they get all financial services via their smartphones. And there are a group of people who depend on both types of banks!
There are a number of reasons for the different categories of people to go for a specific type of bank. To know what set both banks apart from each other in terms of customer experience, Clootrack analyzed customer reviews of both banks and gathered very deep and interesting insights. Let us check detailed insights on customer experience in banking.
What Are The Customer Experience Drivers of NeoBanks and Traditional Banks?
Convenience and App Performance are the most critical drivers of customer experience in banking industry, both traditional and neobanks, as per customer reviews.
When comparing both banks, it is interesting to know that traditional bank customers prefer Convenience 30% higher than App Performance while neobank customers prefer App Performance 25% more than Convenience.
Customer expectations from traditional banks are more convenient to initiate their banking financial services more effortlessly. With neobanks, customers feel more convenient since they can get basic financial services in simple clicks without driving to the nearest branch, filling up the forms, and waiting in a long queue. They expect the same from traditional banks.
Regarding banking customer experience in neobanks/digital banks, customers expect more improved app performance. Customers are already getting banking financial services through apps in digital banking, but they still want the process smoother and more accessible.
Apart from Convenience and App Performance, traditional bank customers prefer seamless Mobile Banking experience and Cheque deposit facilities, while neobank customers prefer Quick Response Time and Effortless Transactions. Initiating improvements on the customer service team will help here.
Why is Convenience the Main Driver For Banking Customers?
When we scrutinize the sub-aspects of Convenience, all we can see is ‘easiness’ in banking transactions and activities. The more customers feel easy and effortless to get their financial services there by their life, the more they will get closer and more loyal to a bank.
“It makes my life easier because it is so easy to use and has so many options, like how to send money, deposit a check, look at my balance and my transaction history!” says a customer.
Customers want to make all banking experience and transactions, including deposits, bill payments, and app experience, more accessible to make their daily life easier.
A banking customer says, “It was nice to be able to deposit a check from home at midnight and not have to fill out a deposit slip, drive to the bank branch, and sit in the drive-thru line just to deposit a check.”
For neobanks that solely work virtually, customers expect more advanced features and easy navigation to access the right options quickly.
Check customer verbatim -
“Absolutely loving it, they're amazing and making everything easier around you. I'm so happy joining and will be sending many of my friends and family's on there way”
“Excellent features that make tracking, searching and saving easy, such as, instant notifications when your card is used, ability to search very easily your history, shared split bills, automatic “pots”, “round-up” savings and automated spending reports. Highly recommend”
Overall, both banks should try their best to incorporate more advanced options and improve the existing features to enhance the convenience of customers’ banking transactions.
The Impact of App Experience on the Overall Banking Experience
The above graph on banking customer experience indicates that customers consider App Performance as one of the priority factors, not just an add-on that contributes to the overall customer experience.
Today, traditional banks also have online and digital app versions since many customers prefer using them rather than walking to the branch. Traditional bank customers expect more advanced features, a smooth interface with proper navigation, good design, and user-friendliness in apps.
Check customer feedback -
“Very helpful app and efficient. It is easier for me to check my bills, transfer money for saving, and cash in checks that I can easily sign and then dispose since I don’t typically have much time coming home from work to make it to the bank.” says a customer.
Neobanks are already working in the cloud and have proven that it is the most convenient bank for today’s busy lives. Even though neobanks are backed by digital technology, customers still expect more from their app performance. They want faster, easier, and more secure financial services through apps. And they want cool features and a simple and intuitive app interface.
Also, customers want to take control of their money even though these banks work virtually and their money is in the cloud. For example, in a banking customer journey, if the customer immediately intends to close their account, they should be able to do that. Restricting them or making it complicated through apps will contribute to negative customer impressions.
Top Positive Factors: Neobanks vs Traditional Banks
Convenience, App Performance, Response Time, Transactions, Card Services, Extra Charges and Fees, and Payment are the main themes that contribute higher positive customer experience in the customer journey of neobank customers.
Cheques, Cash Deposits, Call Support, Software Updates, and Security is the main themes contributing positive reviews to traditional banks.
Traditional banks need to focus on improving the customer experience by focusing on the Convenience of customers in banking since it has a neck-to-neck competition with neobanks. Also, traditional banks need to improve the App Performance, Response Time, Transactions, Card Services, and cutting off Extra Charges since neobanks lead in these themes. And focusing on the customer service area is also much required.
Neobanks need to improve their Call Support, Software Updates, Security, Cash Deposit, and Cheque services.
Growth in Positive Customer Experience in Traditional and Neobanks
The traditional banks have shown significant growth in top aspects - Convenience, Transactions, Cash Deposit, Response Time, and Account Types in the second half (H2 - Sept 21 to Apr 22).
Response Time is one of the top customer experience category drivers in neobanks, and the traditional bank has boosted the efficiency around this to keep customers close to traditional banks. Also, a whopping improvement in the top customer experience driver - Convenience, is worth mentioning.
Neobanks intellectually focused on Card Services, Payments, and Extra Charges and Fees, which are the significant concerns of traditional bank customers, to get more customer attention towards them. In addition to that, they have shown improvement in Cheques and Cash Withdrawals.
Sub Aspects Showing Increase in Positivity
In traditional banks, customers are more satisfied with easy navigation, easy deposits, overall seamless performance, quick response and processing, direct deposits and easy withdrawals, etc.
In digital banking, customers are more impressed with the credit card services, credit increases, seamless bill pay, quick payments, fewer fees, easy withdrawals, etc.
Both banks should understand what their customers are missing in their services and make customer experience improvement around them to bridge the gap between their customer expectations and improve customer experience they offer.
Major Concerns From Customers of Neobanks and Traditional Banks
The main concerns of traditional bank customers are around card services and additional fees they charge from customers. Also, there are concerns about payment-related issues, different account types, and security.
Check a customer feedback -
“i was locked out of my account, could not use des prepaid card and never informed of the fraud until i discovered it myself.”
“this is the most over- charging over bank in history ripping off the elderly on their monthly social security checks i guess the lawsuit wasn't enough charging these fee's $35 for 1.00”
The main issues that neobank customers reported are account closures, fraud, security, and refund. Complexity in the closing accounts is the issue reported by many customers.
Both banks’ customers have issues with account types and security.
Traditional banks need to improve card services and cut off additional fees, while neobanks need to work around building trust in customers. Overall, even if more customers are leaning towards neobanks; they did not lose their faith in traditional banks.
Deeper Analysis of Negative Customer Experiences
Traditional bank customers face more issues around Card Services in their customer journey. They find it hard to know the card balance, increase credits, issue new cards, learn card information, and get the cards delivered.
Neobank customers found more difficulties around Account Closures. They get messages about closing their accounts, deleting accounts, and locking accounts. They even find it hard to access their accounts.
Both banks should work hard on their respective sub-themes and banking services that negatively affect overall customer experience.
Growth in Negative Customer Experience in Traditional and Neobanks
Software updates are frustrating traditional bank customers in the second half. Traditional banks must invest their time in communicating new software updates and version releases to their customers and educating them to utilize the software effectively.
Another constant concern of traditional bank customers is extra fees and charges. This remains as a static concern of customers since the banks charge too many fees like late payment fees, overdraft fees, service fees, and maintenance fees. Banks need to cut off unnecessary fees from customers to improve their customer experience and trust in the bank.
Response time is the major negative customer experience contributing factor of neobanks. It showed a considerable increase in negative customer experience in the second half. They must take proper actions to reduce customer waiting, payment processing, and transaction times.
Reasons For Higher Negative Customer Experience
In traditional banks, customers are complaining about higher overdraft fees and other charges, new app versions, updated apps, and easy assistance over calls. While, in neobanks, customers are concerned about slow responses and transactions.
Top 3 Takeaways for Banking Industry
1. Convenience and App Performance
Customers will rely on a bank for their day-to-day and important financial services if and only if the bank is the convenient choice. Also, a banking app should be fast, safe and secure since it deals with customers’ money. Customers will like self service with the implementation of technology like artificial intelligence assistance and smooth and convenient transactions at their fingertips. Higher convenience leads to top-notch customer experience in this industry.
2. Concerns are around standard parts of the transactions
“Do simple, better.” That is the basic point of customer experience in banking. Customers trust financial institutions that make their basic banking transactions seamless and fast. So, banks need to help customers to do self service, deposit, transfer and withdraw their money with simple clicks.
3. Security and Trust are important
When it comes to customer experience in banking, security and trust are among the most critical factors that lead customers to continue to be a customer of a bank. With increased convenience, flawless and consistent transactions, and quick responses, banks can gather trust from customers.
Both banks are not replacing each other. They are both required by customers for various reasons. For example, even though customers use a neobank for quick transactions, they drive to the nearest traditional bank for a complex loan, mortgage transactions, and other important financial services. That is their trust in traditional banking even though they can’t live without the neobank app on their smartphone.
Moreover, increased trust converts to increased customer loyalty in any bank.
The banking industry has witnessed a drastic customer experience transformation in the past few years. Convenience and App Performance are the top priority of customers of both traditional and neobanks. Traditional bank customers expect more convenience, easy deposit, easy account access, and bill payment facilities while neobank customers want even more improved app performance and reduced response time. Customers can even do self service with neobanks, hence the level of customers' expectations of convenience will be higher on traditional banks.
Traditional banks need to focus on improving the card services and reducing the additional fees they charge from customers since neobanks have already taken initiatives to improve that part of banking. At the same time, neobanks need to work more on customer service, i.e., responding to customers as soon as possible when customers reach them.
Taking initiatives to improve these areas will help financial institutions deliver superior customer experience and boost customer loyalty.
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