Traditional banks are the flavour of the month when it comes to digital banking, new research has revealed, which means startups have their work cut out to win consumers
The rise of challenger banks has applied pressure to traditional banks in recent years, at least where businesses have been concerned. Adding colour to an otherwise grey market, startups like Tide and Atom Bank have promised to meet the needs of people that longstanding financial institutions can’t. But despite their business appeal it seems more must be done to charm consumers, a new survey reveals.
The bi-annual global digital banking report from RFi Group, the financial-services researcher, reveals the amount of consumers globally using digital channels grew from 58% in the first six months of 2017 to 68% in the second half of the year. However, those online-loving consumers are said to be turning their backs on digital-only banks as the global appeal fell from 74% to 63% over the same period. And it would seem that challengers in the UK have an even tougher audience to win over – 78% were comfortable with the digital-only approach to finances in H1, which declined sharply to 54% in H2.
As is the case for many business transactions and choosing who to deal with, trust is a major factor. In the midst of hacks, cybersecurity breaches and the upcoming General Data Protection Regulation, traditional banks are viewed as more reliable when it comes to personal data. In fact, 49% of consumers globally feel their bank can keep their money safe compared to just 27% for digital challengers.
Commenting on the research, Charles Green, CEO of RFi Group, said: “The findings suggest that traditional banks which continue to up their game in engaging consumers digitally will likely be the ones to benefit in the near future. Consumers are becoming more sophisticated when it comes to digital banking, their needs will continue to change and while this happens we are seeing them lean towards a model that provides channel choice which includes both the traditional, and more recent offerings.”
While it may be discouraging for fintech entrepreneurs to see trust in their services decline, the research still provides an important lesson: startups may be able to win the hearts of consumers again if they can actively demonstrate a dedication to data security.