UK digital banks add six million customers in six months but average deposit balances drop

Research from consultancy Accenture reveals that digital banks had a total of 19.6m customers at the end of 2019.

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UK digital banks added six million new customers in the second half of 2019, meaning there are now nearly 20m UK digital bank customers, but the average deposit balance dropped by 25 per cent in the period.

Research from consultancy Accenture reveals that digital banks had a total of 19.6m customers at the end of 2019, up from 13m in the first half of last year, according to Accenture’s Digital Banking Tracker.

Digital banks have nearly trebled their customer base in the past year, up from 7.7m customers in 2018 to near 20m in 2019, the research found.

According to Accenture, the 150 per cent growth seen by UK digital banks outstrips growth of two per cent seen by traditional banks.

But the research also found that the 150 per cent growth in the second half was down from 170 per cent in the first half while the average deposit balance dropped by 25 per cent from £350 to £260 per customer.

Accenture's Digital Baking Tracker is published every six months and tracks data of 30 UK banks.

Tom Merry, Managing Director Accenture Strategy, said: “Neobanks continue their march forward, with customers nearly trebling over the past year and on metrics like cost and customer experience, they continue to outperform incumbents.”

“While there is no denying their popularity, mounting evidence suggests that profitability continues to be a challenge. The fall in average deposits points to their current struggle to consistently replace incumbent banks as the primary destination for monthly salaries.”

“It appears that we have two races running concurrently. On the one hand, these newcomers need to prove they can translate customer acquisition into income and capitalise on their clear cost-to-serve advantage.”

“On the other hand, the incumbents must accelerate their move to a new estate to reduce their own cost-to-serve and capitalise on their existing scale. There’s movement in this space but a sense of real momentum has not yet been established.”

Merry added: “Neobanks continue to excite and delight customers and their phenomenal growth shows that their business model has great consumer appeal.”

“These banks are forcing all players to adapt and move forward, which can only be good for customers. But there are still stark challenges that need to be addressed and the current mismatch between sky-high valuations and profitability is becoming increasingly clear.”

“Accepting that there are some examples where successful companies have foregone profit for several years, their current focus on customer acquisition comes at a significant cost. While a buoyant fundraising market has been able to support them so far, this has yet to be tested in tougher conditions.”

 “The elephant in the room for all banks - incumbents, traditional challengers and neobanks - is when and whether - Big Tech will seriously enter the fold. If it does, it will likely shake up the sector in a way that could make the current fight for customers and deposit balances pale into insignificance.”

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Tom Merry

Managing Director