If traditional banks want to stay relevant, they must capitalising on their biggest asset: TRUST
More than one in five UK consumers, and one in three millennial Brits, say their primary banking relationship is with one of the host of challengers to have emerged over the last decade, according to a report from AT Kearney.
Having remained largely unchallenged for a century, since the 2008 crash, Britain's high street banks have been facing up to competition from a slew of tech-savvy upstarts, including Monzo, Starling, Atom, Revolut, Tide, Monese.. and the list goes on and on! (soon full list will be available here).
Of those surveyed, one in five customers — and one in three millennials — already considers their primary account to be with a challenger bank, while one in eight consumers say they prefer to use challenger banks for shopping online.
Asked why they switch to challengers:
a) 39% cite the ease of use,
b) 36% the ease of opening an account
c) 28% the bank's attractive use of technology.
And I fully agree with above statements. However, customers mostly use challenger bank accounts for everyday expenditure such as going out, shopping or travel, but overwhelmingly choose to use traditional lenders when it comes to important financial transactions such as bills, salaries and mortgage and rent.
Have to admit, that me personally, use HSBC for salary, however I use Revolut for every day spendings and travel (besides US, where I use CITI and just switched to Amex).
The good news (for challengers not banks) is this could be changing (the survey suggests). Some 40% of challenger bank customers say they would consider taking out a loan with their provider, and 49% are willing to consider using them as a mortgage provider. Well, if the offer will be good, why not. End of the day, what is the difference between Challenger Bank and Traditional Bank - fo me is just the thing that with Challenger I have everything in my phone and it is much more user friendly. Which also means, that traditional banks should be able to catch up and improve the user experience, provide more advanced mobile services rather easily.
Data from the firm's Retail Banking Radar shows that neobanks’ customer bases across Europe have grown by over 15 million since 2011 (where almost half of it belongs to Revolut), compared to a decrease in two million customers for retail banks.
The estimations are that up to 85 million Europeans will be customers of these banking models by 2023 according to the study - which equates to around 20% of the population over 14 years old.
So what will happen? Will challenger banks replace the traditional banks entirely or maybe traditional banks will simply became challenger banks? We saw to some extend that scenario in Poland, with mBank. Traditional bank who is more advanced, more modern, more innovative that all the challengers together (IMHO)! However, the challenge here is also about expansion. That is why you probably didn't hear about them (mBank is available in PL, CZ, SK).
Any thoughts, please share your thoughts or contact me if you want to talk.