Digital-only banks attract a third of Brits, but are they being used as side accounts?
More than a third (36%) of UK adults currently have a digital-only bank account according to new research from personal finance comparisons site finder.com. This is a significant increase from last year when a quarter of the population (24%) said they owned a digital-only bank account. Only 9% of the population said they had an account when the study was first run in 2019.
Digital bank usage is gaining popularity, but are they largely being used as second accounts?
This year’s research found a quarter (25%) of those who have opened or intend to open a digital-only bank account said that they did (or would do) so because digital-only seemed to be the easiest option when opening an additional account. Almost a quarter (23%) said that they wanted to use this type of account to transfer their money more easily, 1 in 5 (20%) wanted better interest rates and 17% wanted to get cheaper or free transactions abroad.
However, recent data from the Current Account Switch Service (CASS) show that although digital banks are gaining new customers, they are struggling to retain them. In the first half of 2023, digital banks saw a total loss of over 20K accounts via the switching service.
On the other hand, traditional banks had a net-positive number of customers gained in the first half of 2023, with over 26,000 accounts joining via the switching service during this period. There was a correlation with switching offers and the banks that gained customers.
This indicates that consumers could be viewing digital-only banks as additional accounts, used for benefits such as cheap overseas payments or high interest rates, but not for their main account.
Digital banks are struggling to gain the same loyalty from customers as traditional banks hold
The research also showed that digital banks aren’t winning everyone over, with 35% of UK adults claiming they would not consider opening this type of account. A further 16% were unsure about opening a digital-only bank account, claiming they would need more information before considering this option. This means that currently half (51%) of Brits are either unsure or unwilling to open a digital-only bank account.
When asked why they were either unsure or would not consider opening a digital-only bank account, more than half (53%) cited their current bank always having treated them well as one of the reasons behind their reluctance.
A further 37% of these customers said that they prefer having the option to speak to someone in person and use in-branch services, however with many local bank branches facing closure in recent years, this could potentially force the hand of these customers to shift to digital banking.
Another common concern amongst those who were unsure was the risk of payment fraud or cybersecurity breaches with a digital-only bank account, with 1 in 5 (21%) citing this reason. This issue is currently a huge concern amongst British consumers, as recent research from finder.com found that more than 4 out of 5 Brits believe that more needs to be done to tackle the issue of identity fraud in the UK.
To see the research in full visit: https://www.finder.com/uk/digital-banking-statistics
Commenting on the findings, Kate Steere, editor at the personal finance comparison site, finder.com, said: “The rise in digital bank account ownership in the past year shows that digital banks are offering customers what they want. Whether this is better convenience or greater agility when it comes to passing on higher interest rates, they’re making sure they address customer needs. Brand loyalty is still a big factor when it comes to switching, but if digital banks continue to innovate and offer services that beat out the traditional banks, we’ll likely see this trend towards digital banking adoption continue.
“The question is whether they can become consumers’ primary bank, as the CASS figures suggest traditional banks are still getting plenty of customers using them as their primary account. We know that the digital-only banks are desperate to keep growing and become people’s bank of choice, but time will tell if they’re able to do this.”
