UK consumers now have a plethora of banking options as digital only banks continue to challenge the dominance of incumbents.
Challengers have focused on building a platform that focuses solely on a consumers’ digital experience. They’re offering value-added products and personalised services to help customers manage their finances more efficiently.
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Still, most incumbents don’t feel threatened by these digital only banks, citing an absence of a full suite of banking products and an inability to turn a profit.
Research commissioned by Contis indicates that 25% of consumers believe that high-street banks will be dead in five years. A further 40% of millennials believe that time is already up for incumbents.
These challenger banks are fighting back against the high street banks with a fresh approach to win over customers.
Extra choice, tailored products, flexible opening hours and no-exchange rates are just some of tools that the challengers are using.
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By GlobalDataCEO of Contis, Flavia Alzetta, stated:
“Contis believes the way forward for traditional banks is increasingly in partnership with nimble fintechs who are not constrained by legacy technology, systems, infrastructure or culture.
“Open banking has enabled new customer-centric businesses to develop new features and technology, powered by APIs for quick legacy-free integration.”
Incumbents versus challengers: trust still lies with traditional banks
Challenger banks are very popular but they lack the reach and trust that incumbents still own.
The research revealed that high-street banks still have a legacy of trust. Around 60% of consumers state that they have a high level of trust in traditional banks. In addition, only 30% trust challenger banks.
It is fair to say that digital-only platforms are changing the way consumers bank; 22% of consumers would like to manage money entirely digitally. Furthermore, around 31% of those researched want to use digital payment methods for as much as they can.
The research also highlighted that 50% of consumers have considered switching current accounts. However, current account switching rates continue to drop. Between 1 April 2018 and 31 March 2019, 921,065 customers switched current accounts in the UK. In comparison, in the whole of 2018, there were 929,070 switches.
Alzetta continued: “There is a legacy of trust for established high street banks, but our research shows that time is running out. Established banks need to quickly embrace the innovations pioneered by challenger banks who are fast changing the expectations of consumers. The winners will be the companies who listen to customers and deliver choice.”
