Is the gap narrowing between digital challengers and high street banks?
New research from global insights and information company TransUnion suggests an increased intention among UK consumers to engage with online-only banks or apps, narrowing the gap between these challengers and traditional high street banks.
The figures show 11% of consumers intend to open an account with an online-only bank or app in the next 12 months, versus 12% who intend to apply to high street banks. This could indicate the gap is closing, when compared to our pre-pandemic research published a year ago which showed a 3% gap between the two at 10% and 13% respectively.
One in 10 consumers have changed their current account since March 2020 with nearly a third (32%) of these switching from a traditional bank to an online-only one.
Stephen Wishart, director of fintech for TransUnion in the UK explains: “What we’re seeing in the financial landscape isn’t new but the pandemic has accelerated the trend toward digital-only finance providers. Consumers cite convenience (67%) and speed and ease of service (65%) as the biggest appeal factors of online-only banks or apps, so these challengers have been able to play to their strengths through lockdowns and social distancing.”
Other areas of appeal are attractive rates (41%) and being paperless (30%), with the research showing that one in 10 customers (10%) have taken out a loan with an online-only bank or app in the last 12 months.
Stephen Wishart continues: “Looking ahead, our research suggests consumers will be more cautious with credit than last year in some areas, with just 11% planning to take out a mortgage in the next 12 months, compared with 17% pre-pandemic. Fewer plan to take secured personal loans too, at 7% now versus 11% at the start of 2020, although the demand for credit cards remains unchanged at 13%, as it was before COVID-19.
“That said, there’s a growing sense of financial optimism, as our Consumer Pulse study shows, which has been tracking the impact of the pandemic throughout, and we’re seeing that one in five consumers (21%) are planning on opening a new savings account which is a really positive indication. This mixed picture is something all banks; whether digital-only or traditional, are having to consider when assessing customers’ needs, as there’s a divide that’s becoming more evident. With 82% of those taking mortgage payment holidays saying their arrangements will come to an end within three months, we can expect that polarisation to come into even sharper focus.”