Digital only banks attract scepticism from UK consumers

Posted by Tom Blandford in Banking on 19 October 2016 - Tom is a Credit Analyst at checkmyfile

Earlier this year, Atom became the first UK bank to operate solely through a mobile app. Based in Durham, it has only 30 staff and unlike much larger banks it has no branches or call centres – communication is conducted with its customers securely through a mobile app.

Since their launch, a number of other providers have joined the fray offering similar services for consumers operating through mobile apps or via web browsers.

Verdict Financial, a financial services insight firm, has released their latest report on the subject of digital banks in which they state that UK consumers have not taken to the idea of digital banking. Only 61% of consumers surveyed were even aware of the existence of digital banks and 20% had used an online financial services service in the last year.

The report suggests that digital-only banks do not offer any significant benefits that could draw customers away from mainstream banks and will likely continue to suffer from a slow take-up. Surprisingly, younger consumers are even more dependent on the use of branches than older customers. Since its inception, Digital-banking has pushed hard to attract this younger audience so it is likely that the absence of branches is a significant deterrent to many potential customers.

Verdict’s principle analyst, Daoud Fakhri, says, “The new generation of mobile-only banks will have its work cut out to achieve a viable scale. Only a small minority of consumers strongly agree that these providers will offer better service, rates, or security than they receive from their existing banks, and well over half would prefer to avoid banks that lack a track record or do not have a high street presence.

“Consumers’ primary criteria when selecting banks include whether the organisations have an established reputation and conveniently located branches. This plays right into the hands of traditional banks and leaves the challengers at a disadvantage.”

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