Consumers prioritize personalized, seamless experiences when it comes to financial services

Our Connected Customer, Quantifying the Customer Experience study is an annual survey conducted to assess consumer shopping, payment and banking preferences when interacting with brands and businesses both online and in-stores. In this report, we highlight several key fintech and payments findings from the survey.

The Take

Despite inflationary pressures and macroeconomic challenges, consumers are eager to access financial services from fintechs and banks that can deliver personalized experiences and expedient transactions. Our research shows that digital experiences in financial services are driving conversions and payment and banking preferences. Fintechs are providing strong financial experiences that resonate with consumers, particularly younger consumers, while banks stand to benefit from investing in digital technologies and partnerships.

Summary of Findings

Real-time payments show potential at the point of sale. Nearly one in three consumers (32%) say the ability to make a real-time payment directly from their bank account would have a high impact on their likelihood of completing a purchase with a business. This rises to 37% of millennials. Our survey shows real-time payments have a higher impact on conversions than mobile point of sale, and even the ability to pay in installments or finance a purchase. Merchants have a strong opportunity to couple their loyalty programs with real-time payments, passing on interchange savings in the form of increased rewards back to consumers to incentivize use.

Younger generations are quicker to abandon purchases if their preferred payment methods are not offered. Presenting consumers with the right payment method is a conversion factor we see year over year.

One in three consumers (33%) say they have abandoned an online purchase in the past six months because the retailer did not offer their preferred payment method.

This jumps to 54% of Gen Z and 44% of millennials. Similarly, 42% of Gen Z and 32% of millennials have abandoned a purchase with a merchant outside the US in the past six months due to their preferred payment method not being offered, compared with 20% of consumers overall.

False declines siphon revenue from merchants and card issuers. Nearly one-third (30%) of consumers have abandoned a purchase in the past six months because their transaction was falsely declined. In 27% of these instances, consumers end up retrying the purchase with a different payment method, resulting in lost interchange revenue for the card issuer. In 37% of instances, consumers either abandon the purchase altogether or make it with a different business. This sends a signal for merchants and card issuers to work together, such as by sharing fraud screening data prior to authorization.

“Buy now, pay later” adoption remains strong. Younger consumers remain the largest BNPL adopters — 50% of Gen Z and 46% of millennials have used BNPL to make a purchase in the past six months, compared with 31% of consumers overall. Consumers are primarily using BNPL to purchase clothing and accessories (41% of BNPL users make purchases in this category, up from 37% in 2022), followed by electronics and appliances (37%). Gen Z still shows the most difficulty in making repayments, but shows slight improvement year over year: 16% of Gen Z respondents say they are rarely or never on time with their payments, compared with 20% in 2022.

Younger consumers are turning to fintechs for their financial needs. While banks remain trusted financial service providers, fintechs (financial technology companies) are gaining traction. Of consumers overall, 30% (rising to 46% of Gen Z and millennials) plan to address more or significantly more of their financial needs through fintechs in the next 12 months instead of through their primary bank. More than half (58%) of consumers say they will use fintechs about the same amount as they have been, and only 12% say they will use them less. Fintechs (20%) are also consumers’ top BNPL provider of choice.

Banks have a hill to climb to match the experiences of fintechs. Nearly half (49%) of consumers that use fintech apps indicate that the fintech provider they use most often delivers a better digital experience than their primary bank (just 7% say it is worse). The same story holds true when it comes to personalization, with 40% stating that fintechs are outpacing their bank, and just 9% indicating their bank outmatches fintechs in this area. This creates an impetus for financial institutions to prioritize investments in digital experience technologies to ensure they are keeping pace with the evolution of the market.

Debit cards again outrank credit in terms of consumer preference. For the second year in a row, respondents express a preference for using available funds for payment as opposed to relying on debt.

Three in five consumers (60%) use debit as their primary payment card, while 35% prefer credit (5% do not have payments cards).

The Greatest Generation/Silent Generation is the sole group in which the majority prefer credit (61%). Strong debit preference is a signal for merchants to consider PIN debit routing strategies to optimize their cost of acceptance.

Digital-First Drives Customer Experience Technology Adoption

Want insights on fintech trends delivered to your inbox? Join the 451 Alliance.

Want insights on consumer tech trends delivered to your inbox? Join the 451 Alliance.