Digital-only banks losing their appeal

Digital-only banks are losing their appeal as people around the world - from India to Canada to the UK - place their faith in traditional lenders, according to data from RFi Group.

The mobile banking revolution has seen a host of new entrants in places like the UK emerge, to great fanfare, hoping to take on high street veterans. This week app-only newcomers Starling Bank and Monzo took the top spots in Smart Money People's 'Best British Bank' awards.

But, while digital usage in banking continues to grow, people are moving more towards the mobile and online channels of traditional players, rather than the app-only challengers.

RFi Group questioned more than 1000 consumers in each of 10 different countries, finding that global appetite for digital-only providers fell from 74% in the first half of last year to 63% in the second half. Appetite for a digital-only main bank has also dropped, from 50% to 44%.

In the UK, where the likes of Monzo, Starling and Atom have sprouted up, willingness to bank with a digital-only provider fell from 78% in H1 2017 to 54% in H2. In Canada, RFi found a drop from 65% to 44%.

Charles Green, CEO, RFi Group, says: "According to the research, digital is a pull factor as opposed to a push factor for consumers when it comes to banking, with a positive customer experience driving increased engagement, yet a bad experience not in fact driving customers away."

Another advantage that traditional banks have is their perceived reliability when it comes to private data. Banks are the most trusted organisations - across industry - when it comes to holding and maintaining privacy and security of personal information globally.

And, this trust is increasing, from 31% globally in H1 to 42% in H2, while trust in technology companies has hardly increased and trust in new technology companies has declined. 49% of consumers trust that their bank can ‘keep my money safe’, while the trust in technology companies is significantly lower, standing at 27%.

The proportion of consumers logging in at least once per week to digital banking has grown from 58% to 68% in 2017, while daily the daily usage is also on the rise, increasing from 24% to 34% of respondents.

Channels

Retail banking Security Start ups

Keywords

Mobile & online banking

Comments: (5)

Brian Richardson - WIZZIT - Johannesburg 05 March, 2018, 18:46

1 like Is it digital only banks that are losing their appeal or the fact that many of them do not offer lending as per the traditional bank model. I would think that a digital only bank is growing in appeal for transactional functionality and even savings. If we are saying that banks = lending, then the headline and supporting research is probably correct.

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A Finextra member 05 March, 2018, 22:00

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Interesting conclussions but I wonder what the sample age groups were and who funded such an expensive multi country survey? Guys the genie is out of the bottle and try as hard as you like Digital Only is here to stay and will continue to fragment the staus quo!

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A Finextra member 06 March, 2018, 08:20

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Banks without a single branch office but with mobile, web and IVR presence have been toiling in Sweden for twentyfive years with little success. people tend to stick to the traditional providers with brand, branches, IVR, web and mobile app presence. The price people pay for daily bank services is so low that most poeople do not care if you get at most a 20 Euro annual price reduction on current account, debit card, credit card, bill payments etc. in the digital-only bank and for that give away the possibility of walking into a branch and sort out an issue. With deposits and mortgage loans people are more price sensitive but the digital only players normally cannot compete on mortgage rates and deposit specialists that normally have consumer credit as their main business beat the digital banks as well.

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A Finextra member 06 March, 2018, 10:47

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Only around 100 people per country, not sure the sample size is enough to draw such conclusions. Traditional banks are upping their game by adding digital channels, there is room for both models in the UK.

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A Finextra member 07 March, 2018, 17:39

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This is purely a snapshot. Next year it will change again and as the. The new generation will want digital only and they will want a mortgage approval immediately, a loan approval immediately. It is what they have come to expect. I can see the suspicion that Fintechs might not hold my data securely but once there is some super app out there that uses PSD2/Open Banking APIs to offer a real added value service that is when we will see the demise of traditional Banks.