Brits warming to digital-only banks

Three quarters of Brits would be willing to choose a digital-only bank for a financial product, yet only one in 10 would prefer to use a digital-only bank over a traditional High Street bank, according to MoneySuperMarket research.

The comparison website surveyed 1,021 UK homeowners during February, finding that 37 per cent did not trust these new banks enough to allow them to share their financial data with other providers under the new Open Banking rules.

The study defined a digital-only bank as one that predominantly focuses on a mobile app experience and has no physical branches. Those that Brits are most aware of include Atom (19 per cent having heard of the bank), Monzo (10 per cent), Loot (8 per cent), Revolut (7 per cent) and Starling (7 per cent).

Being built from day one as app-based banks has enabled the inclusion of things like real-time spending notifications, 24/7 in-app support and the ability to instantly freeze/unfreeze a card. The research showed these are increasingly important features, with over half considering a bank’s digital services to be a major factor when opening an account - rising to 71 per cent of those aged between 25-34.

However, many may not be ready for digital-only banks, as they still prefer to visit their branch rather than use an app for the majority of common banking services, in addition to concerns about sharing data.

Sally Francis-Miles, money expert at MoneySuperMarket, commented that new technology and data sharing are big concerns when it comes to finance, meaning consumers are still reluctant to open digital-only accounts unless they offer an incentive, stand-out product, or a level of convenience that they’re not getting from their traditional bank.

“While this means traditional banks are still dominant for now, digital-only banks are constantly asking how they can make life easier for customers, what quirks they can add and how they can innovate their products and services to make banking more intuitive,” she continued, adding that big players like HSBC and RBS are already attempting to replicate some of the successes of the digital-only banks with improved apps and new platforms.

Markos Zachariadis, associate professor of information systems and management at Warwick Business School, explained that in the digital age, the emphasis is on user experience, which is something these digital-only banks are specialists in.

“Their ability to scale up their offerings at a much quicker pace than traditional banks, integrating external services and upping platforms in a modular style, means that they’re able to stay one step ahead,” he concluded.

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