Our specially commissioned survey reveals that the UK banking landscape has changed and that Brits are embracing all things online and app-based. In fact, of the 1,000 people questioned, a total of 60% would consider using a bank with no physical branches, while 40% would consider banking exclusively online.
But while many consumers no longer see bricks and mortar as essential, the reasons for choosing a bank were varied and dependent on demographic as well as the financial product sought. Convenience was a key factor in choosing a bank though respondents were less concerned about the convenience of a physical branch (28% said it was important) than online access (38%). The focus on digital access was even greater for 24% of consumers who said their decision was influenced by having the convenience of an app.
But overall, when it comes to the battle of the banks, the most important factor is trust, with 50% of respondents saying it was the top reason for selecting a provider. And it seems that trust is no longer synonymous with longevity and physical branches. Here’s what our survey revealed:
- 60% would consider a bank with no physical branches.
- 40% would consider banking exclusively online.
- 60% are worried about being a victim of scams online.
- The majority of people feel either very comfortable or comfortable about applying for personal loan and credit services online and more than a third feel the same about applying for a business loan or a bad credit loan online.
- 43%said they’d prefer to have both an online and high street provider because they weren’t completely confident with online banks.
- 40% said they needed a physical bank to deposit cash.
Rise of the faceless provider
Nearly one-third of respondents (32%) said they liked that there was more choice available when it came to new online and app-based banks, while 38% appreciated the ease and efficiency of opening an account. Added value was also important with 32% highlighting the benefits of budgeting tools as well as the ability to ‘round up’ and move money into savings pots.
Our survey also showed that online-only and app-based banks have been gaining consumer trust since their entry. When asked, a sizeable minority (16%) said they trusted them more than a conventional high street bank, while 61% were indifferent saying that they trusted them neither more nor less. The remaining 22.8% were sceptical and said that they trusted online banks less than high street ones.
While 40% of all age groups would be prepared to have a digital bank as their sole provider, this finding was skewed towards the younger age groups. In particular, the 18-24 age group, where the percentage prepared to have only a digital bank increased to 54%. By contrast, the least prepared group to bank exclusively online were the 65+ group, who were more comfortable with a hybrid approach.
Reasons for reticence
Although many are making the shift towards the swathe of faceless banking providers, reticence remains in some camps. One of the biggest concerns is anonymity, with 55% of those we asked struggling with the idea of not knowing who or what was behind an online provider and 60% worried about being victims of scams or hacking. Help and support was another key issue with 59% concerned that they wouldn’t know who they could speak to if things went wrong.
are worried about being victims of scams or hacking.
It seems that personal loan and credit services are the financial products that consumers are most comfortable applying for online. A total of 77% agreed they were either very comfortable or comfortable applying for a credit card online with 41% doing so without hesitation. Our survey participants were also very comfortable or comfortable about arranging an overdraft or overdraft extension online (70%) followed by applications for a personal loan (67%).
However, there is a bit more hesitancy around applying for specialist financial products via a digital application. This included applying for business loans where 42% of people surveyed were very comfortable or comfortable applying for one online, closely followed by bad credit loans at 37%. A reason for this is that specialist products often come with tailored advice, indicating that people value the expertise that typically comes with a face-to-face application, although many still feel confident to apply online, especially if they do their own research beforehand.
The future of banking is hybrid for now
While most of our respondents would be willing to bank digitally in some shape or form, 43% said they’d prefer to have both an online and high street provider because they weren’t completely confident with online banks. Nearly half (49%) of those who answered said they just liked the security of a traditional bank, and despite movements towards a cashless society in recent years, 40% said they needed a physical bank to deposit cash.
said they’d prefer to have both an online and high street provider because they weren’t completely confident with online banks.
This hybrid approach is a good reminder that change may not happen fast. It also shows that traditional banks can’t rely on having a high street presence to stay ahead of the game.
Instead, agile, innovative challenger banks have been designed and built from the ground up to fulfil consumer demand for the digitally savvy next generation. Indeed, of the people who said they trusted online banks more, 48% said it was because these banks understood the modern needs of customers.
Ultimately, both traditional and challenger banks need to ensure they’re listening to what customers want. But crucially, consumers aren’t just demanding flexibility, they’re calling out for banks they can trust with their hard-earned money.
How do I know which bank is right for me?
The breadth of answers our respondents gave shows that when it comes to banking, one size definitely doesn’t fit all.
With that in mind, we’ve put together this list of top tips to help you choose the right bank for you:
- Decide how you want to use your account– do you need access to a local branch? Or will a digital-only service meet your needs?
- Check for FCA and PRA registration– providers that are regulated by the Financial Conduct Authority (FCA) and authorised by the Prudential Regulation Authority (PRA) must follow strict rules. This ensures that they operate in a way that’s safe, fair and effective. It’s worth noting that banks and building societies should be authorised by the PRA and registered with the FCA. This means that if they go bust, you’ll be compensated by the Financial Services Compensation Scheme (FSCS) and be able to recoup up to £85,000.
- Ensure online banks use industry-standard security – if you’re banking online or via an app, security is key. Most banks use multi-factor or biometric authentication, such as fingerprint ID. You should also look out for SSL (secure socket layer) encryption which provides a secure connection to your bank. You can do this by checking the address in the browser which should start ‘https’ (the ‘s’ means it’s secure).
- Assess transparency– your bank should be upfront when it comes to fees and charges. These should be clearly set out, so you understand the consequences of late payments or going beyond your overdraft. Keep an eye out for other fees too, like withdrawing money abroad or getting copies of statements.
- Customer service – it’s always a good idea to check out reviews on established independent review platforms, such as Trustpilot. The government also regularly publishes banking customer satisfaction results which cover overall service and overdraft facilities. The results also now include online banks so you can compare a range of providers; you can find out more at GOV.UK.
- Interest rates – when it comes to selecting a bank, you should make sure you’re happy with the interest rates you’re earning or being charged. For a like-for-like comparison, don’t forget to look at APR on loans and credit cards.
- Market positioning – think about how different banks position themselves, for example, traditional high street banks versus innovative challenger banks. Part of this also means being aware of the image you’re being sold, although most of our survey participants saw through flashy marketing campaigns. Just 5% said they would be swayed by adverts, social media and celebrity ambassadors. You can also check your principles are aligned by looking at their commitment to ESG (environmental, social and governance).
- Compare banking products online –to help you make informed decisions about your money. Compare bank accounts online.
The market research was carried out between 15th June to 21st June 2021 among 1,000 UK adults via an online survey by market research agency 3Gem. The data sample of 1,000 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole.
Image source: Getty Images
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