With new entrants joining the banking world, individuals have more choice, and there is increased competition for the sector. However, for new entrants, encouraging people to switch to them from the established providers will be no easy task.
Our recent research found that 70 per cent of UK adults still ‘trust’ a traditional bank or a building society most to meet their banking needs, compared to a new entrant. And perception of financial stability appears to be a key reason.
When asked what the most important factor is for choosing a bank for their main current account, one in five (20 per cent) people said that it must be financially secure. The second most important factor driving choice was that the bank had a trusted or
established name (17 per cent). This is particularly the case with the older generation, with only one in ten saying they would consider a new brand such as a major supermarket or new challenger bank. The younger generation (18 to 34) are a little more open
to the idea - 16 per cent.
An interesting perception, considering that newer banking brands do of course have secure financial backing. In fact, they are often backed by reputable enterprises and corporates, and are well known for providing a high level of customer service.
In spite of sentiment, nearly one in four (24 per cent) believe new entrants introduce much needed competition into the sector. In fact, they expect to find differentiation in a new challenger brand from that of a traditional bank. However, the reality
is that the majority actually don’t find the level of contrast they expected.
So, while there are some who are waiting for the ‘Amazon’ of finance to emerge from a challenger brand, at present there is still a long way to go before true differentiation is achieved and a leader emerges.
We’ve already seen a plethora of changes to the way we bank in recent years – for example, contactless payment, mobile banking and the ability to switch providers in seven days. So what’s next?
While we are seeing payments becoming more cashless, we’re unlikely to become a truly cashless society just yet. Technology has meant that there is little need to actually a visit a branch, but it’s likely that branches will still be around for at least
the next 20 to 30 years.
People do still want a personal point for advice. Half of UK adults themselves expect physical branches to still exist - bar some changes to suit the experience of the customer of course.
Luckily, banks don’t need to do anything too drastic just yet – as almost two thirds (64%) think banking services currently provided by high street banks will still meet their banking needs as far ahead as 2020. After that, we’ll have to wait and see.