How can online-only banks win over cautious consumers?
The direction of travel for banking is clear – we’re moving away from highstreets and onto smartphones.
But tech should not outpace consumer confidence, and lessons on how to do that can be drawn from the payments industry.
This week Which? reported that a third of UK bank branches have closed in the last five years. Digital banks have an opportunity, and perhaps an obligation, to step into that void.
But the reality is that, despite the global adoption of technology in other areas, 42 per cent of Brits told us that they would not even consider using a digital-only bank. A quarter of us already do, but only one in 10 are confident enough to use a digital-only bank as their main account.
Older generations were most cautious, with 60 percent of over-55s saying that they wouldn’t use a digital-only bank at all, but the challenge isn’t just generational. Even in London, the UK’s fintech capital, 38 per cent said that they would not use a digital-only bank.
Meanwhile, two thirds of us no longer primarily use cash for our daily purchases, such is the success of contactless. Payment providers collaborate when bringing something new to the market, so consumer buy-in happens faster. Digital banks could do worse than replicating that approach, and pulling together to advertise and demonstrate the benefits of brick-free banking.
Numerous customer experience surveys tell us that those who try digital banking find it much easier than traditional methods, and yet there is still a national sense of unease about converting to digital-only. In my opinion, one of the main reasons why people don’t even dip their toe into the world of digital banking is because they expect it will be complicated, fiddly, or they base their perceptions on their past experiences of less-sophisticated tech offerings.
So, why don’t digital banks make it their priority to work together to make the UK more confident in their technology? It would go a long way towards helping a lot to people feel open to trying digital banking.
The other challenge is likely to be perceptions around cyber security. My colleagues in KPMG’s cyber team found that, globally, Brits were least impressed and most sceptical when it comes to new technologies.
Their research looked at global attitudes to things like virtual personal assistants, smart home devices, and self-driving cars. They found that only 29 per cent of Brits considered virtual personal assistants to be “cool”, compared to the global average of 42 per cent. Meanwhile, 17 per cent of Brits thought the technology was “creepy”, compared to 10 per cent of respondents globally. This caution will be especially apparent in the world of finance where people need assurance that their money and personal data is safe.
This raises a really difficult challenge for new online-only banks, but again the answer lies in raising the nation’s digital understanding and confidence – as well as having first-class cyber security of course.
I appreciate that this is no small task. But the UK’s switch from cash to contactless is proof that consumers are very open to fintech that makes their lives easier when they understand and feel familiar with it.
Digital-only banks are entering a fiercely competitive market, and they have to appreciate that their real rivals are not other online-only banks, but the big traditional players with a high street presence.
If they want to start winning serious market share, they have to reassure the public that apps are every bit as secure and easy to deal with as a person in a building.
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