- In France, 89% of respondents have a payment account with high street banks such as BNP Paribas and Societe Generale, versus less than 26% with any other provider.
- Neobanks and PSPs pose the greatest threat to traditional institutions, offering the biggest overlap in services (24%).
- In Europe, neobank users are expected to rise to 83.57 million in 2023 (up from 59.54 million in 2022), and to 124.28 million by 2027.
At last year’s Sopra Banking Summit, Natalie Michel, Executive Vice President of Strategy at Galitt, and Nicolas Miart, Executive Director of Consulting at Galitt, gave a detailed overview of trends in the payments industry. Below, we focus on payment players and consumers’ trust levels.
“Banks still pave the way in every geography in terms of payment account ownership,” revealed Galitt’s 2022 PayObserver Pan European consumer study. They have more customers and significant relationships than any other player in the payments arena, such as neobanks, digital banks, and big tech behemoths.
However, fintechs and other online providers are making headway, creating the “ultimate link between great tech and customer service”. To stay competitive, traditional banks should collaborate with trusted partners to enhance the digital experience and services they offer, or invest internally to improve their offering.
What’s The PayObserver?
Aiming to shed light on payment services, The PayObserver explores consumer behaviors in France, the UK, Germany, Italy, and Belgium. The survey is based on an online questionnaire spanning three age groups: the younger market (18 to 25), the mass market (26 to 50), and the older market (51 to 65).
This year, participants were asked about payment providers. Below, we focus on payment players.
In France, the Galitt survey shows that 89% of respondents have a payment account with high street banks such as BNP Paribas and Societe Generale, versus less than 26% with any other provider:
- Online digital banks like Boursorama and Orange: 25%
- Neobanks / payment service providers (PSPs) like Bankin’ and Starling: 11%
- Retailers like Carrefour Banque & Assurance: 7%
- Big tech players like Samsung Pay: 10%
Here, 80% of respondents use a high street bank such as Deutsche and Sparkasse, and less than 37% make the most of challengers:
- Online digital banks like ING and DKB: 36%
- Neobanks / PSPs like Klarna and bunq: 35%
- Retailers like department stores: #N/A
- Big tech providers like Amazon Pay: 12%
Over in the UK, 93% use high street banks like Natwest and HSBC, compared to less than 33% across the competition:
- Online digital banks like Atom and First Direct: 15%
- Neobanks / PSPs like PayPal and Monzo 32%
- Retailers like Tesco Bank: 9%
- Big tech giants like Google Pay: 18%
Here, 92% have an account with a traditional high street bank like Belfius and KBC, against less than 28% elsewhere:
- Online digital banks like Keytrade and Triodos: 26%
- Neobanks / PSPs like Aionand Payconiq: 27%
- Retailers like Edenred: 18%
- Big tech companies like Apple Pay: 11%
In Italy, 74% of those surveyed bank with high street offerings like UniCredit and Intesa, versus less than 55% with challengers:
- Online digital banks like buddybank and Fineco: 35%
- Neobanks / PSPs like N26 and Revolut: 54%
- Retailers like Conad: 7%
- Big tech businesses like Google Pay: 25%
Challengers are making inroads
Despite the enduring popularity of high street institutions, fintechs and other digital offerings are making progress – particularly in Italy, as the above statistics indicate, where 54% hold an account with neobanks or PSPs. Furthermore, 69% of respondents actually use those accounts – the highest figure across non-traditional entrants.
Additionally, new payment providers are more popular with the younger generation (18-25) – an indication of how things are heading in the future.
That being said, usage for other payment players remains low, with just 15% of UK consumers using their online digital bank, 12% of French respondents using their neobank, and a mere 4% making the most of their retailer in Germany.
Meanwhile, high street bank usage is at least 96% across the board, rising to 99% in the UK and France. With that in mind, it’s easy to conclude that traditional banks face no danger from tech-savvy competitors.
Customized portfolio of providers
But that’s not an accurate sentiment, because consumers are adding to their range of payment providers, replacing the one-stop-shop approach. Indeed, Belgians use an average of 1.75 categories of payment players, with the UK coming in at 1.67 and Germany at 1.66. Unsurprisingly, Italians diversify their portfolios the most, with a figure of 1.95, meaning each person uses almost two categories of payment actors.
Overall, neobanks and PSPs pose the greatest threat to traditional institutions, offering the biggest overlap in services (24%).
Utilizing a selection of providers reflects people’s desire for a more personal experience that suits their specific and changing needs. However, it’s primarily the younger and middle demographics that are open to diversifying, due to situations they encounter throughout those years, such as real estate purchases and becoming parents.
Banks’ competitive advantage
Trust is a major factor that prevents a more meaningful challenge to the high street banking status quo. People have high levels of confidence in traditional financial services providers like BNP and HSBC, stemming from a variety of factors.
- 53% feel they can speak to a person if they have a payment issue.
- 49% feel more protected against cyber attacks.
- 46% agree their money is more secure in traditional bricks and mortar banks.
- 43% are confident these banks will still be there in 20 years.
- 42% trust them with the safety of their personal data.
Conversely, there’s less trust in alternative payment providers. Just 18% of neobank / PSP account holders believe their money is secure, and only 17% think they’ll still have an account there in two decades. A mere 12% of big tech customers feel they can talk to someone if they have a problem, and just 11% of individuals who use retailers feel protected against cybercrime. Across the board, trust levels don’t go above 30% for any player.
Legacy banks should use the trust factor and people’s tendency to return to established financial institutions (FIs) for complex financial needs to cultivate loyalty. Alongside that, a tech-forward, best-in-class customer experience is essential. There are several options to consider:
- Simplifying and streamlining mobile apps and digital interfaces
- Making it easier to solve problems without human interaction
- Quicker and more streamlined onboarding processes
- Partnering with credible partners to extend product suites
EU banks and payments
Traditional banks are still competitive compared to new industry entrants. But challengers are making inroads, particularly neobanks and PSPs in countries like Italy. In Europe, neobank users are expected to rise to 83.57 million in 2023 (up from 59.54 million in 2022), and to 124.28 million by 2027. For FIs to maintain or indeed propel their lead, capitalizing on trust and focusing on the all-important customer experience are crucial.