Younger generations and the rapid growth of FinTech companies are forcing traditional financial institutions (TradFi) to adapt to evolving market conditions to retain their customers, 75% of whom are ready to abandon their services.
According to a PYMNTS Intelligence report, more than 75% of consumers expressed a willingness to ditch their banks in favor of non-bank payment apps. This is especially prominent among Gen Z, with 36% of young people aged 18 to 24 already switching to innovative payment solutions, leaving services of traditional financial institutions.
In addition, 67% of Baby Boomers (aged 60+) are willing to abandon their banks if offered better alternatives. Top reasons include:
- high fees;
- poor financial terms, including high interest rates on savings and deposit accounts;
- slow speed of payment processing;
- lack of tech upgrades.
The report notes that four out of ten customers are dissatisfied with the current speed of payment processing by TradFi institutions. For example, 45% of payments take up to seven days to process, while only 5.3% are processed in approximately a minute.
To improve customer loyalty, TradFi institutions are being forced to integrate new digital solutions into their existing tech stacks. Analysts estimate that upgrading outdated payment systems in the U.S. could cost banks $57 billion by 2028. PYMNTS Intelligence analysts suggest that adopting composite banking could be a solution to keep traditional financial institutions competitive. API-based modular composite banking architecture will allow TradFi institutions to integrate innovative services and offerings, such as instant payments and advanced fraud protection systems, saving significant costs on modernization without disrupting existing infrastructure.
A recent survey showed that most payment systems are also in need of substantial technology upgrades, slowing down business growth.
