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South Africans trust alternative financial services

Sep 29 2016 13:56
Lameez Omarjee

Johannesburg – Consumers are increasingly open to alternative banking and have the same high levels of trust for traditional banks as for alternative financial service providers, according to the EY 2016 Global Consumer Banking Survey.

Speaking at a press briefing at the EY offices in Sandton on Thursday, global markets development and insights leader Steven Lewis explained that the survey looked to understand consumers’ perspectives on banking, and how banks can respond to remain relevant.

The study surveyed 55 000 consumers globally, 1 500 of them from South Africa. Of the 32 markets covered, EY selected a representative sample based on the country’s demographics, income and education levels. About 40% of 55 000 consumers surveyed globally reported decreased dependence on traditional banks.

“Banks can strengthen their relevance by rebuilding and redefining trust,” said Lewis. This is the extent to which consumers trust banks to deliver advice and the best solutions, besides just keeping their money safe, he explained.

In South Africa, trust in primary financial service providers at 50% is higher than the global average of 40%. Consumers also have higher trust for alternative financial providers than the global average. “Customers are open to having relationships with internet-only banks and new providers,” said Lewis.

South African consumers' trust in non-traditional banking service providers is an opportunity for new entrants.

This presents opportunities for new providers, but is also a warning for traditional banks which need to build on their existing trust levels. Currently consumers trust banks to provide basic services such as keeping their money safe, protecting financial information and protecting them against fraud. However, traditional banks can grow in their ability to provide transparency on rates and fees and unbiased advice and solutions rather than product pushing, the survey found.

“Customers want banks to offer the best solutions to them, even if it means that the solution will not be profitable to banks,” said Lewis.

AUDIO: What makes consumers trust financial service providers

Improving customer engagement

Consumers are using online and mobile banking more today than they did a year ago. Among the reasons include the rise of contactless payments and peer to peer payment options. There has been a slight decline in South African consumers using ATMs compared to a year ago, said Lewis.

Globally people have moved on to using mobile banking without needing to go into branches. In South Africa, however, consumers value going to branches to speak to someone rather than using online channels when it comes to advice.

“Bank branches are not dead and they will not be dead for some time,” said Lewis. Instead, they will transform from a transaction centre to a place where consumers go for advice, education and to engage with a bank on what is the best solution for particular requirements, he explained.

Fintech is not a replacement for bricks and mortar banks, but a tool that can supplement traditional banking, said Marius van den Berg, banking and capital markets sector leader at EY.

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