For the first time since the financial crisis, the banking sector is showing signs of putting the financial well-being of customers at the heart of its products according to the new industry-wide Ratings Report by the Fairbanking Foundation. The charity has been responsible for reviewing and rating products on how well they promote financial well-being for almost a decade.
The report has found evidence that fintech innovators have set a new standard in focussing on customer control and experience in their products, and that the industry has reached a tipping point in this regard, with large banks now also beginning to follow suit. After previous reports by the Foundation identified alarmingly low levels of customer focus, over the last three years, it has recorded an increase of 57% in its ratings of current and savings accounts; products which now include more features that put customers in control of their money.
Overall, fintech challengers U Account, Squirrel and Osper achieved the best ratings in 3 of the 8 product categories analysed in the report. However, established banks also ranked highly through introducing new fintech features to their products, such as current accounts from Clydesdale and Barclays.
The boom in tech disruption has shown bigger financial institutions the opportunities to be seized through increasing customer control of finances. Features such as spending and savings trackers, balance reminders and critical-level alerts, are all increasingly being embraced across the sector:
- Almost all current accounts analysed now alert customers when the balance is near the overdraft limit
- Almost half of analysed savings accounts now let customers set their individual savings goals
- 45% of analysed current accounts can tag expenditure according to different categories such as eating out, petrol or groceries
- Customers can set their own budgets for different categories with more than a third of analysed accounts
Despite the many improvements, progress amongst credit card issuers has slowed in the last three years, due in part to the fact that many providers are not embracing the technology available as readily as the rest of the industry:
- A third of analysed credit cards don’t send a reminder that customers are near their credit limit
- Only 10% of analysed credit cards have a function that easily shows how long it will take someone to pay off their debts
- Only one credit card analysed allows customers to set a budget for different categories of spending
New products analysed for the first time by the Fairbanking Foundation included student current accounts, children’s savings accounts and mortgages. The Fairbanking Foundation found that there are serious pitfalls in many of these products, especially when it comes to overdrafts that banks offer students and the mortgages available to first time buyers.
The report finds that the sector is also still missing a big chance to raise a new generation of financially-sound customers, as many children’s savings accounts do not make the most of the extensive technology available on the market to support features that encourage saving habits and planning from a young age.
Antony Elliott, Chief Executive of the Fairbanking Foundation commented:
“The evidence shows a dramatic shift in the way that providers, large and small, are focussing on the financial well-being of their customers. In 2008, banking could have been compared to a cocktail bar, pushing drinks at customers who’d already had enough. Since then, fintech has managed to bring many in the sector around to focus on the needs of customers.
“It’s time now for all providers to join the party and use the momentum behind this positive change for the good of their customers. In the meantime, the Fairbanking Mark will continue to guide people to those financial products that are best designed to actively help their financial control and, ultimately, their well-being.”