A survey outlines how big a threat to UK high street banks are the 25 million customers who use banking apps.
Digital banks such as Monzo, Revolut, N26 and Starling Bank have amassed millions of customers in the UK and across Europe over the last three or four years. Monzo and Revolut report five million accounts between them in the UK alone.
A recent report looks at who these customers are, and what services they use.
Mobile banking to overtake high street visits
Mobile banking is set to be more popular than heading down to a high street bank branch within two years, according to a new report, highlighting how technology is changing the way Brits bank.
In 2021, the number of customers regularly using their smartphones to access financial services will overtake those visiting their local branch, according to data by consultancy Caci.
Seventy-one percent of customers are expected to use mobile apps for banking by 2024. Over the same period, the number of customers who bank in branches is expected to decline to 55 per cent.
Currently, 25 million customers use banking apps, meaning that half the country’s current account holders manage their finances on the move.
Each day there are more than five million mobile log-ins – a number almost four times higher than five years ago. And already there are more customers using mobile banking apps than there are using traditional internet banking, said the report called The Growth of Digital Banking 2019.
What’s driving mobile banking?
Convenience, accessibility and functionality were cited as three driving influences, according to the survey. It cites added functions in banking apps, such as the arrival of cheque imaging is popular with customers. Also, UK smartphone ownership is now at 68 per cent, providing a strong platform for growth.
The death of the high street bank is exaggerated . . . or is it?
Around 65 per cent of Brits regularly use bank branches currently, and the report adds bank closures is running at a “modest” 1 per cent to 1.5 per cent a year. This means that in five years time more than half of customers will still be visiting branches. Customers are now “demanding different transactions and experiences from different channels that they use,” says the survey.
However, other bodies chart a much steeper decline of the high street bank - dominated by the big five, HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland and Santander UK - at a much steeper rate.
Over the last two years, 1,842 bank branches have shut down, a 20% fall, according to Retail Banker International. While the average bank branch received 104 visits in 2017, a 26% fall compared to five years ago, said banking lobby group UK Finance.
Who uses mobile banking?
The report looks at savers using financial apps, which is where profits are to be found for digital banks.
Currently, most app-only banks are loss-making, and a large part of their problem is that most account holders do not use the service as their primary account for salary payments or savings, instead preferring to occasionally take advantage of cheaper foreign exchange rates or more competitive ATM withdrawals abroad.
However, a solid savings and lending base of customers is the basic foundation of all retail banks.
Not surprisingly, young “early adopters” and young family groups, at around 35 or under, are the largest mobile savings group, according to the report.
However, the “second wave of digital adoption” is now occurring among richer over-50s, where the report forecasts there will be “the strongest growth over the next five years”.
The report adds “this generation is becoming more and more comfortable with technology”, adding they are “most likely to hold high-value savings products”.
However, the report adds that a third group of sizeable savers, it calls the ‘Low Income Elderly’, are “likely to remain adrift of the digital revolution”. It adds this group prefers to use branches and the telephone. It says: “Although some will migrate, the majority will never turn to digital, and in fact, a large portion are constrained by legacy passbook and postal accounts.”
The report adds: “It is important that banks and building societies don’t leave this group of customers behind”.