Primary financial institutions (FIs) hold a valuable competitive edge over banking challengers in terms of consumer trust, per Insider Intelligence’s second annual Banking Digital Trust study, which surveyed 2,412 US digital banking users in Q1 2021. The largest proportion (48.0%) of respondents cited their primary FI as the company they’d trust most to provide them with financial services—up from 42.5% last year, when now-second-place PayPal reigned as the most-trusted provider.
US banks’ strong pandemic response efforts over the past year likely boosted respondents’ trust in their primary providers. Banks seized a major opportunity to rehabilitate their industry’s image in a time of crisis, adopting measures like increasing overdraft limits and suspending property foreclosures. Customers have rewarded this flexibility with goodwill: Well over half (63%) of US customers said they felt “completely supported” by their banks during the pandemic, per an April 2021 J.D. Power study.
For banks to cement this favorable customer sentiment and bolster their bottom lines going forward, the value of digital trust cannot be overstated. Per our exclusive survey data, digital trust—the confidence that consumers place in their banks’ digital channels—correlates with higher levels of customer satisfaction, engagement, and brand loyalty. For instance, 38.8% of respondents with higher-than-average levels of digital trust said they would open their next account with their current bank, versus just 21.3% of respondents with lower-than-average trust levels. What’s more, 42.7% of higher-trust respondents have direct deposit set up with their bank, versus 33.0% of lower-trust respondents.
Now is not the time for banks to rest on their laurels—they’ll have to increasingly compete with newer rivals on key dimensions of digital trust. Incumbents are squaring off against digitally savvy rivals like neobanks, fintechs, and Big Techs on the digital user experience and customer acquisition fronts, while an influx of new digital users during the pandemic has increased the threat of cybercrime and associated PR fallout. As such, banks will face intensifying competition from neobanks, fintechs, and Big Techs on digital trust dimensions including security, data privacy, and the breadth and reliability of digital features in a radically digitized post-pandemic world.