Brits flock to digital-only banks

More than half of Brits either have, or are considering, switching to digital-only banks, drawn in by a better user experience and customer service, according to a survey commissioned by data management vendor Relay 42.

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Brits flock to digital-only banks

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Of more than 2000 Brits quizzed, 27% have moved to an online or mobile-only bank already, while 26% are considering the switch.

More than half of these cite a better online experience and functionality, while 29% are drawn by attractive finance rates and fees and 28% by a better quality of service. Meanwhile, just 13% of respondents are not interested in exploring new technologies to help them manage their money.

Julius Abensur, industry head, finance, Relay42, says: "Customers are on the precipice of embracing future technology and new products, which means their existing banks need to keep pace with demands and innovation to ensure customer loyalty and competitiveness."

The survey results chime with a study from P.A.ID Strategies into digital account opening, which finds that challenger banks lead the way.

Marking UK banks on their digital registration, identity verification and account activation processes, the study finds that Staling Bank leads the way, followed by fellow challenger Monzo, with RBS and Barclays the best traditional lenders, and HSBC bottom of the pile. Overall, challenger banks score an average of 9.2 out of 15, compared to seven out of fifteen for high street players.

"We were surprised to see so few traditional banks had made progress towards a 100% digital experience through the mobile channel. Many failed to offer a fast, secure and digital account application and activation process, including verification of the applicant’s identity.

"This means the banks aren’t truly digital, degrading the user experience at first point of contact and increasing the chance of abandonment," says John Devlin, principal at P.A.ID Strategies.

Despite this, another report based on interviews with industry players in Emea finds that bank fears over the threat to their existence from the fintech wave appear to be receding.

While the scale of the challenge facing banks may actually have increased - the research shows an uptick in revenues perceived to be at risk from disruption by new entrants from 27% last year to 31% this year - stronger balance sheets and scale are giving banks renewed confidence in their ability to respond to the challenges of digital finance.

Simon Hardie, director, MagnaCarta Communications, says: "It’s a bit like turning a tanker, and the research provides evidence that enthusiasm for some of the earlier fintech hype is waning as banks focus on the task in hand. In comparison, fintechs are the speedboats - racing for scale and trying to catch up with their banking peers."

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Comments: (11)

Adrian Hausser

Adrian Hausser CEO at PayX International Ltd

Are we really saying 2000 people sample is representative of 65million plus population, that’s 0.00003%

Melvin Haskins

Melvin Haskins Managing Director at Haston International Limited

There are 40,000,000 adults in the UK, of which more than 30,000,000 have a bank account. So Relay42 are telling us that digital only banks have more than 7,500,000 accounts already and a further 7,500,000 are considering switching to a digital only bank. Frankly, I do not believe them.

Bob Lyddon

Bob Lyddon Consultant at Lyddon Consulting Services

"Of more than 2000 Brits quizzed, 27% have moved to an online or mobile-only bank already, while 26% are considering the switch" is a quite different message to "Brits flock to digital-only banks", and is misleading. The respondent may have understood the question as being "are you using online banking?"

Ketharaman Swaminathan

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

"Customers are on the precipice of embracing future technology and new products,..".

Precipice? I hope they don't fall into a deep abyss from the precipice:)

Matthew O'Neill

Matthew O'Neill Industry Managing Director, Financial Services at VMware

I am not so concerned about the sample size as there are always lots of questions about the make up of the sample demographic/geographic.

However, it is clear that the banks are being challenged, and whether these are true 'switchers' or 'explorers' taking an additional account to experience a different service would be interesting to know.

Incumbents and challengers will thrive or fail based on the full service, not just the app or the rates, but the end-to-end service.  Incumbents have the resources to win, but need to transform faster, make this a priority and most importantly work out how to make the consumer feel valued/special.

 

A Finextra member 

I believe what the figures actually say is: 73% of respondents said they hadn't switched, and 74% said they weren't considering it.

You know what they say about statistics - I guess it also applies to surveys...

Ketharaman Swaminathan

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

I read the figures slightly differently: 27% have "switched"; a *further* 26% are "considering a switch"; ergo, "not considering switch" = 100-27-26 = 47% only. IOW, "a majority will switch, if not already switched".

Challenger Banks are VC-funded companies. Anecdotally, at this (nascent) stage of their evolution, customer acquisition is all that matters. Even if most of the customers are only tirekickers, it doesn't matter for its valuation and next round of funding. It's only if / when the valuation froth fizzles out and funding becomes scarce that normal business metrics like revenue and profit will start mattering. That's when we'll really know whether traditional banks start behaving like challenger banks or challenger banks start behaving like traditional banks.

Daoud Fakhri

Daoud Fakhri Retail Banking Analyst at GlobalData

To respond to the query about sample sizes, statistical theory states that the margin of error on a randomly selected sample of 2,000 respondents is +/-2.2%, s this is not an issue.

That said, the survey results are simply not credible. The combined market share for digital-only banks such as Monzo, Starling Bank, Monese, Atom Bank etc. is clearly nowhere near 27% (Monzo, the highest profile new entrant, claims around 500,000 users).

Furthermore, most high street banks report online/mobile penetration of around 55-60%, so there is only a limited pool of customers for digital-only banks. I suspect Bob Lyddon is correct - some respondents may have confused online banking with digital-only banks. We really need to see the actual question wording used in order to reach a firm conclusion on this.

Robin Setty

Robin Setty Partnerships Lead for banking solutions at ACI Worldwide (EMEA) Limited

And how many of those using digital-only banks have also completely terminated their relationships with high street banks?

Mike Foden

Mike Foden Market Analyst at IBM

Having read the article, the press release (https://relay42.com/news/press-release-half-consumers-moving-away-traditional-banking-according-relay42/), and also downloaded a copy of the full report “Creating meaningful Relationships – What customers can expect from their banks” from that link, there would appear to be inconsistencies in language and what the data is saying. 

 

The main issue is the notion of what is meant by “moved” and “switched” and “mobile-only solution” versus “mobile bank”.  The inference from the article / press release is that consumers are moving their accounts (current/checking) to internet / mobile only BANKS (i.e. banks which, by definition, do not have a branch presence). 

 

Within the press release, this is stated as:  “53% of consumers using or willing to move to an online or mobile only bank — 27% have moved already, while 26% are considering the switch”.  However, in the actual research report this is stated as “27% of all respondents told us they had already switched to an online or mobile-only solution for banking”. 

 

It is reasonable to assume about one quarter of consumers define their banking as “internet / mobile only” – it is a very different proposition to suggest that about one quarter have switched to an internet/mobile-only bank. Market share statistics do not support this assertion.

 

On sample size – a random sample of 2000 is more than a sufficient sample to make inferences about population dynamics.

A Finextra member 

I think we all agree that this one wins the "Crap Research on Banking Trends 2017" Award

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