An appetite for new ideas: Challenger banks gain market share on both sides of the Channel

At the end of 2018 on behalf of us, CENSUSWIDE asked bank customers in the United Kingdom whether they considered mobile-only or mobile-first banks as a realistic alternative to established banks and what advantages the new challenger banks offered. The results from Germany and Switzerland have been available since spring 2019; they point in the same direction.

Like hairline cracks barely visible to the naked eye, major changes sometimes start out in ways that are hard to notice. For example, at first glance it is perhaps not that remarkable to learn that 44% of bank customers in the UK say they have opened a new account in the last five years. And as mobile banking apps are well designed for user engagement, this undoubtedly leads to a rapid drop-off in dependence and loyalty on traditional banks; even if customers do not actually close their old account, this could still pose a threat to incumbent banks. When a customer manages their day-to-day financial affairs – including mobile payments – using a challenger bank, each increase in familiarity and reliance makes the previous current account provider become less relevant. In addition, the new competitors are gaining valuable knowledge and insights from the transactions running through their software.

It’s hard to think of any parts of our day-to-day lives that are not touched by digital technology;  smartphones have become the go-to device for most of us as we go about our day. As a result, banks that do not offer at least a basic set of services via mobile devices risk losing out in the market. After all, customers are fickle, they want a great customer experience and so they will look elsewhere.

 

Attractive mobile banking applications

At more than 60%, the proportion of UK customers wishing to open a new account in the next three years is pretty high. In Germany and Switzerland, 68.7% of the 1,500 or so customers surveyed would welcome improved and more convenient mobile banking. Over 35% consider giving a mobile-only bank a chance in the next twelve months. In the UK, 60% would respond positively if banks offered new features currently being pioneered by challengers, such as blocking a lost credit card via a smartphone or trading cryptocurrencies.

 

In Germany and Switzerland, personalised and individually-tailored functions are reason enough for 58.1% to download and install a new app. As many as 46% of UK respondents would welcome personalised functions that suit their preferences and lifestyle. Personalisation is almost a must for the youngest customers: 70% of Generation Z consumers are motivated by this factor in considering a banking app.

 

While innovative banking app features are rated highly, UK customers appreciate simplicity even more. Using words like “easily”, “effortlessly”, and “on the fly”, respondents frequently pointed out ease of use as the most important benefit of using a challenger bank. One participant put it in a nutshell: “It’s incredibly simple, there’s no hassle”.

What customers appreciate about the challenger´s offering*

*multiple choice

The challengers are coming – and score with open banking

Almost a quarter of bank customers in Germany and Switzerland who already have an account with a challenger bank appreciate a fast account opening process. However, they are even more enthusiastic about open banking (29.3%), which promises future features such as a holistic overview of accounts and expenses from several different providers, all managed in one app.

Nearly 40% of all respondents are aware of at least one market-leading challenger bank. Of those who know the new players, over a third (35.2%) have a business relationship with them. Around one in seven (14%) of UK respondents are customers of a challenger bank. Generation Z already accounts for more than a quarter.

The new mobile-only banks are here to stay and are challenging the banking establishment. We therefore strongly recommend that institutions take a closer look at challenger banks to understand the design and functionality innovations that are setting new expectations for consumers throughout the market. The survey results show that customers want this. In addition to the aforementioned 30% of challenger bank customers who appreciate access to all accounts via a single application, the 45.3% vote for the most important mobile banking service in Germany and Switzerland was clear: a holistic overview of all accounts and expenses.

Would you like to know more? Download the UK, Germany and Switzerland results today!

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