Deconstructing the rise of fintechs

Trendy. Innovative. Exciting. Those aren’t the words usually used to describe traditional financial institutions. Yet those same institutions are finding that’s exactly what their customers are expecting from their financial experiences. Just as small retailers are expected to deliver experiences on par with Amazon or Target, banks are being held to those same standards. The historically conservative industry is ripe for disruption.

Even though the virality has recently waned, the share of bank executives who view fintechs as major competitors has remained steady at 47%, according to a Financial Brand survey. 

To better understand consumer sentiment toward fintechs, UserTesting’s 50-person study examined consumer preferences and habits. The study asked consumers why they choose to do business with a fintech, what the company does that traditional financial institutions don’t, and how loyal they are to that company.

Why consumers choose fintechs over traditional financial institutions

UserTesting’s study revealed that consumers were drawn to fintechs for a variety of reasons. Among them, we found three key benefits fintechs offered over traditional financial institutions. 

1. Specific products and services
2. Trusted recommendation
3. Ease of use

1. Specific products and services

The most common reason consumers chose their fintech company, which accounted for 41% of responses, was because they offered a product or service that consumers couldn’t find elsewhere. 

“A lot of major traditional card issuers require millions and millions of dollars in revenue before they issue a true corporate card, where Brex helped me get a corporate card based on my account balance. There were no fees and they have good promotions, too.”  — Brex customer

This highlights an important distinction between traditional and emerging financial services models. Fintech companies have the advantage of not being burdened by an organization’s legacy technology or traditions. As a result, they’re able to adapt to create products and services that may not fit into the frameworks—or philosophies—of more traditional organizations. Or, as Amazon’s CEO, Jeff Bezos is often quoted, “Your margin is my opportunity.” 

Fintechs are pouncing on the opportunity to serve new customers in the margins that traditional financial institutions had mostly ignored and have created new personas and market opportunities as a result.

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2. Trusted recommendation

Another common reason why consumers chose a specific fintech company to do business with, which made up 29% of responses, was that they were referred by a friend, family member, or another trusted source, such as a respected publication or blog.

“I just heard that Robinhood was very investor friendly, very easy to use, and that’s why I chose to sign up for Robinhood.” 

—Robinhood customer

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3. Ease of use

Ease of use was the third most common reason consumers chose a fintech company, representing 17% of responses. Consumers noted that a more seamless experience, both with the technology and the process itself, was a key differentiator. 

Consumers also noted stellar customer service, a good rewards program, and the convenience of an online experience as key benefits fintechs offered over traditional institutions. 

In some instances, consumers couldn’t really articulate a specific feature or reason why they chose to do business with a fintech company. Some talked about the emotions that they evoked, which led to their ultimate conversion.

“There was a really quick qualification process. It was refreshing because it wasn’t an elongated process and it didn’t feel like I was wrapped up in a 4 or 5-year loan repayment.” 

—Kabbage customer

“I can’t really place my finger on what it was. It [SoFi] just made me feel more confident, and that’s why I ended up going with it.” 

—SoFi customer

It [Robinhood] made me feel like I wouldn’t have to be so scared to make trades or actually buy stocks. I wouldn’t have to make a certain amount of money to make a trade worth it.” 

—Robinhood customer

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Superior digital experiences entice customers

Customer empathy, better products, and superior digital experiences draw consumers away from traditional financial institutions. 

When asked what fintech companies do that traditional financial services institutions don’t do, 64% of the responses were related to better or differentiated products and features, such as lower fees, higher annual percentage rates (APY), higher spending limits, and increased transparency. Many talked about the high interest rates, fees, and requirements that come with doing business with a traditional bank.

"You get tired of the traditional banks, because they charge you high interest rates.” 

- Brex customer

Consumers also talked about the stronger digital experiences that fintech companies provide as compared to traditional banks. Twenty-one percent of responses were related to a better digital experience, such as a simpler design, an easier application process, ease of resolving issues through the website or app vs. calling customer service, and the ability to do everything online.

Consumers also perceived that fintechs cared more about them and understood them more than traditional financial institutions. 

“Traditional banks are all about keeping the money for themselves. Brex cares about the client.” 

- Brex customer

“They just understand what a small business owner is going through.” 

- Kabbage customer

Customer experience influences loyalty

When asked to rate their loyalty to their fintech companies, the customers in our study gave somewhat mixed signals.

On average, consumers rated their loyalty as a 3.8 out of 5, with 5 being very loyal and 1 not at all loyal.

As they talked through their reasoning, it was clear that some consumers were very loyal to the company they were doing business with and others were not. Those who were loyal pointed to favorable experiences with the brand and said things like, 

“I only do business for my business with Brex. Because they helped us when we needed it most, I’m very loyal.” 

- Brex customer

“I kept pushing my partner to use Ally, and they did finally and they’ve been enjoying it. I mention it to my friends, I mention it to family. I would say I’m pretty loyal because Ally has been nothing but good to me.” 

- Ally customer

Those who weren’t as loyal noted that while they were happy with their experience, they were always on the lookout for better opportunities.

Human insight is the key to financial services customer loyalty

When it comes to their finances, consumers have high expectations— and constantly-changing needs. 

On the surface, it may seem that fintech companies are on the verge of fully disrupting traditional financial institutions, but don’t count on that just yet. As our findings highlighted, consumer loyalty, when it comes to finances, is driven by a number of factors, none of which are set in stone. 

Trendy or not, having the right product at the right price at the right time is crucial to earning customer loyalty. Financial services companies—traditional or otherwise—need to continually empathize and understand the ever-changing needs of today’s sophisticated consumer.

Consumer loyalty for financial products can be fleeting, but companies that incorporate fast human insight into every stage of the development process will continue to earn loyalty and business from consumers.

Study methodology

Using the UserTesting Human Insight Platform, Janelle Estes, Chief Insights Office at UserTesting, conducted five individual consumer preference studies targeting 10 real-world customers from each of the following fintech companies: SoFi, Robinhood, Kabbage, Brex, and Ally. 

She asked them to provide either written or verbal responses to a series of five questions related to their overall interest, satisfaction, and loyalty to the brand. The research findings provide clarity into what consumers like and dislike most about doing business with the respective company.