One in 10 new accounts opened with challengers

More than one in 10 new bank accounts opened are with digital banks, as 2019 marked a “tipping point” for the growth of UK FinTechs.

A report from Vocalink, a Mastercard company, showed a steady rise in the popularity of digital-only banks, with around one in three (30 per cent) of consumers aged 25 to 44 considering opening an account with an app-based challenger.

Competition in banking is being driven by the rapid growth of new entrants, with digital banks accounting for 13 per cent of all new bank accounts opened in the last six months.

In a sign of the growing maturity of FinTechs, a quarter (24 per cent) of these are being opened to be used as main current accounts, with salary payments being directed into these accounts, while the remainder are being used as a secondary account.

A total of 40 per cent of respondents said they are using multiple accounts to manage their money, with this increasingly to nearly half (48 per cent) among respondents aged 25 to 34.

Of these secondary current accounts, three per cent are with digital banks, although this doubled for the 16 to 34 age group (six per cent) and increases to eight per cent among those living in London.

While mainstream banks are clearly still retaining the vast majority of their customers, the research also showed a five per cent drop in new accounts in 2019, compared to 2018.

When looking at the typical customer of a digital-only bank, the average age is slightly younger (31 years vs 48 years) and they are more likely to live in an urban area (66 per cent vs 56 per cent). They are also over twice as likely to use mobile payments (68 per cent vs 30 per cent) and tend to have a higher household income (£46,000 vs £33,000).

According to the report, the two main factors that may be behind the increasing popularity of the new digital banks are improved functionality of apps and being able to use the card abroad for free.

Gregor Dobbie, chief executive of Vocalink, said: “While at present the rise in digital-only banks might be most common in urban areas and among younger generations, we expect to see this trend occurring more widely among other demographics in years to come.

“Many are choosing digital-only banks for the improved technology and lack of charges abroad, and it will be interesting to see how the traditional players respond to these new customer expectations,” he concluded.

    Share Story:

Recent Stories

New Business Frontiers
FStech’s Mark Evans discusses the future of financial services with Liu Jianning of Huawei, covering the limitations that current thinking can impose, how financial institutions can embrace technology to be both agile and resilient, and making space for the organisation to focus on the job of creating innovative business models and on delivering business value for their customers.

The Future of Intelligent Finance
FStech Group Editor Mark Evans sits down with Jason Cao, President of Global Financial Services Business Unit, Enterprise BG at Huawei ahead of its Intelligent Finance Summit which was held on 3rd and 4th of June in Shanghai. This Q&A delves into key trends in digital transformation of the financial services industry as well as a look at how data, robotic infrastructure, intelligent storage and innovative technologies are shaping the future for FSIs.

Cracking down on fraud
In this webinar a panel of expert speakers explored the ways in which high-volume PSPs and FinTechs are preventing fraud while providing a seamless customer experience.