Research has revealed that 13% of British people are planning to move their current account to a digital-only alternative and a third of people expect there to be more digital-only accounts in the UK than traditional accounts within five years.
But a mix of digital and traditional services is preferred by many customers, with face-to-face interactions and in-branch services still highly valued.
In a survey of 2,000 people, carried out by Intelligent Environments, 60% of Brits said digital banking services are very important to them. Digital-only is too different for many, with 52% disliking being unable to speak to someone in person if they have a problem and 44% not wanting to switch because in-branch services are important to them.
These findings support the idea of new banks that harness the latest technology for customer services and have traditional services. The combination of new competition, traditional banks offering genuine differentiation, a government-backed account comparison tool, and knowledge of the seven-day switching service among consumers could stimulate an acceleration of account switching.
The arrival of new banks, some of which are digital only, looks set to bring real competition to the retail banking sector. In 2013 the Payments Council introduced a system that enables consumers to change current account providers in seven days, rather than the 30 it took previously. This system will be more useful once consumers have good reason to change accounts. Currently, there is said to be little point changing current account suppliers because there is little difference in what they offer, but new banks are changing this.
Read more about competition in retail banking
- Read about six IT companies that are shaking up retail banking.
- Computer Weekly looks at six challenger banks and their use of IT to differentiate.
- There is a rising clamour across the world for the big banks to be broken up and the technology industry is key to providing an alternative.
In March, Gocompare.com launched a current account comparison site, which uses Midata to give consumers access to their electronic data and help them make informed decisions about which service providers to use. This can be used by the Gocompare comparison site to match people with a current account that suits them.
David Webber, managing director of Intelligent Environments, said digital-only banks are in a strong position to cause major disruption to traditional providers.
“Our research shows that people believe these new providers will offer superior online and mobile services,” he said. “When taken together with the lower operating and efficiency costs naturally incurred by not having any branches, digital-only banks will be in a very competitive position indeed.”
However, digital-only banks will not eliminate traditional branches because many customers still like the personal touch, with in-branch services highly valued and others voicing concerns about not interacting with a customer service representative should they have a problem.
“Traditional providers now have a fantastic opportunity to improve their digital and mobile services, and to focus on providing a superior in-branch experience for customers,” said Webber.
The research found that 14% of Brits would trust a digital-only bank more than a traditional bank and 16% believe digital-only banks will have fewer security problems than their traditional counterparts.