Strong bank brands limit successful market entrants
Reg van Steen
Senior Client Director
The upswing of neobanks like Monzo, Revolut, Alipay, WeChat, Nubank, N26, and the likes are widely considered to be a revolution in retail banking around the world. This view is underscored by unparalleled growth numbers that make traditional retail banks look pale.
Downloading a neobank app, however, is quite different from actually using it, let alone making it into one’s primary bank. A recent Kantar study covering ten countries on three continents proved that these neobanks are particularly strong in Brazil, China, and India, where they have established an equal footing with traditional banks. Why do they succeed there? It’s because they tap into the vast number of consumers there that were previously unbanked and underbanked. The impact of neobanks is way less strong so far in developed markets. And why is that? Because consumers in these markets either do not see a strong benefit, or decide to cherry-pick the specific service they want from their neobank (such as free ATM use when abroad), while keeping their traditional bank for most other business.
In the Netherlands, the situation is not that different: challenger banks like Knab, Bunq, or N26 barely put a dent in the retail market. Branding is of the essence here. As in other markets around the world, we see that in general neobanks are liked more than that they are trusted by their own customers. Yes, you read that right: the likability of such banks is bigger than their trustability. Undoubtedly the gap is even bigger when it comes to non-customers judging neobanks versus traditional banks.
All this is important because trust is essential when it comes to banking. This notable difference in customer attitudes may explain why traditional banks in the Netherlands are not yet experiencing any major impact from neobanks in the retail market (similar to the experience of major banks in the UK, France, Germany, Spain, Singapore, and the U.S., as the global Kantar study has pointed out).
Another complication is, can we really consider traditional banks as “traditional” these days? Definitely not. A bank like ING, for instance, is at the forefront of digital retail banking (and not just in the Netherlands). Or how about ABN AMRO, which landed the very popular P2P payment app Tikkie? To rub it in: one might argue that the concept of this app was not new – far from it because it was already introduced by challenger bank Bunq. But ABN AMRO, not the least by applying the strength of its endorser brand, clearly succeeded in challenging the challenger bank on this P2P terrain.
Another example of the importance of branding is shown in our 2019 CX+ report, which offered strong evidence for the “halo effect” that can happen when brands generate positive emotions in their customers. This enables a strong brand promise to outweigh customer experience. We see this effect with Triodos, which ranked highest in perceptions of empowered employees, even though they have no branches and most customers rarely interact with a Triodos employee. This result is all about Triodos being seen as “doing good” in the world and creating the perception that employees are empowered.
A strong brand is imperative for banks in the Netherlands, as it is everywhere. Dutch banks understand that clearly and act accordingly by continuously building their brands. As long as they hold on to this strategy, it will be very hard to beat them, as a successful market entry requires a huge investment in branding and communication.