Trust in UK banks hits eight-year high after ‘slow road to recovery’

Ellie Duncan
06 Nov 2023

Trust in the UK’s banking sector is at its highest point in eight years, with challenger banks Monzo and Starling the most trusted by consumers, according to Fairer Finance.

On average, 80% of respondents “strongly agreed” or “agreed” that they trusted their provider across current accounts, credit cards, mortgages, personal loans and savings accounts, up from 65% in 2015, according to the Fairer Finance Trust in Banking Index, which polled 10,000 consumers.

In August 2023, Starling and Monzo had close to 60% of customers strongly agreeing that they trust them, while established high street banks HSBC, TSB and RBS had around 30% of customers giving this response.

Consumers cited Starling Bank and Monzo’s app and website as a key reason for being happy with them, at 75% and 65% respectively, versus an industry average of 51%.

Another reason cited by consumers was “helping them budget”, at 24% and 39% respectively, versus a 15% industry average.

James Daley, managing director of Fairer Finance, said: “Trust in the banking sector has been on a slow road to recovery over the last 15 years. Mis-selling scandals and the credit crunch drove trust in the sector to all-time lows in the early part of the millennium.

“But better regulation and a more competitive sector has seen a steady improvement in recent years.”

He added that the introduction of Consumer Duty means those companies at the bottom of the trust tables, including NatWest, “need to urgently up their game”.

The percentage of NatWest customers saying they don’t trust NatWest rose from 3.76% to 5.27% between February and August 2023, with some of that likely to be a result of the debanking scandal that resulted in the departure of longstanding chief executive officer Alison Rose earlier this year.

The banking group now has more distrusting customers than average (4.23%), Fairer Finance reported.

The top reasons given by NatWest customers for being unhappy were poor customer service (47%), a lack of local branches (47%) and poor rewards and benefits (43%).

The index showed that levels of trust in mortgage providers has declined over the course of 2023, with Fairer Finance concluding it is likely a result of the recent rises in mortgage rates, arrears and the cost of borrowing.

Daley said that “sky high” mortgage rates and rising repossessions are beginning to have a negative impact on customer perceptions of the sector.

“There’s also a widening split between perceptions of the new batch of challenger banks and the established high street brands, meaning the big five will need to continue to work harder to stop losing market share,” he added.

“Nationwide, the UK’s largest building society, is the only brand to be bucking this trend – with its customer trust scores well ahead of any other brand with a high street presence.”