Are UK High Street Banks Struggling To Keep Up?

UK high street banks are failing to adequately serve their individual and corporate clients, sacrificing both their customers and their market position, according to new research.

High street banks have been at the center of the digital transformation storm since the emergence of digital competitors, but it shows banks are losing touch with what their personal and business customers really want. New evidence has come to light.

A new analysis of the market appears to indicate that high street banks are beginning to lose competition from digital banking alternatives, largely due to their inability to adequately meet customer needs.

Banks cut back on lending

In times of economic stress, the latest Iwaka Small Business Professionals Index points out that the reduction in bank lending is a major factor in the bank’s downfall.

Declining bank lending willingness to lend is clearly clashing with growing demand for recapitalization from the UK’s 5.5 million SMEs.

Financing experts believe the current macroeconomic pressures are hurting small businesses worse than the pandemic.

84% of brokers report being concerned about their small business clients’ ability to weather rising energy prices, with more than half saying a potential recession is worse for small businesses than the pandemic I think it will be

82% of SME finance brokers involved in the development of the latest index agree that big banks are less willing to fund SMEs. Similarly, brokers reported that financial providers rejected more client applications in December compared to the previous month, with almost half experiencing this.

Colin Goldstein, Commercial Growth Director, iwoca

Talking about the widening gap in SME financing, Colin GoldsteinWith forecasts that the impact of current macroeconomic pressures will be more severe for small businesses than the pandemic, Iwoca’s Commercial Growth Director explains: As our data shows, traditional banks do not offer this. “

“Alternative lenders are proving once again how important they are to protecting small businesses from this financial shock,” adds Goldstein.

The Beginning of a Great Departure from the Bank of the Boulevard

As the latest data from the personal finance comparison site, finder.comthe number of digital-only account holders in the UK is increasing, taking market share from existing accounts each year.

of Survey on Digital Banking Adoption A quarter of the UK now have a digital-only bank account, and another 5.3 million people, or about 10% of the population, are expected to open their first digital-only bank account within the next year. I was.

Another 4.8 million people will take similar steps within the next five years. This means that by 2028, her 22.7 million people, about 43% of the total UK population, will have digital-only bank accounts.

By comparison, research found that just 9% of the population had digital-only accounts in 2019, and that number has tripled since then.

make the switch

Large traditional banks have historically held strong user bases among older generations. Older generations have typically maintained their trust in high street incumbents, in contrast to Gen Z and millennials maintaining a special stance on digital-only banks. until now.

As the numbers show, consumers are steadily moving to digital banking alternatives, to the detriment of high-street competitors.

The reason for this is thought to be the lack of regional bank branches. His 16% of UK adults said this, with 8.5 million account holders making the switch.

High Street Banks

A survey of the so-called “Silent Generation” over the age of 74 reveals that 53% cite the impact of physical bank branch closures on their decision to go digital .

In fact, the number of silent generations with online-only accounts has grown from 7% recorded in last year’s survey to 13% today.

Fifteen percent of so-called “baby boomers” aged 55 to 73 are making the switch for the same reasons, followed by 22% and 9% of Gen X and Gen Z respectively.

Convenience is key

A survey asked participants why they opened or are planning to open a digital-only bank account, and the majority of responses, 64%, related to convenience.

22% said it was the ‘easiest option’ when opening a new bank account, and a further 21% did so ‘to make it easier to transfer money’. Another 21% confirmed that using a digital-only bank is “generally more convenient.”

Additionally, one-fifth switched to access better rates. 18% wanted free international trading, and 12% wanted the ability to trade stocks and cryptocurrencies in a digital-only bank account.

Loyalty to traditional banks remains a key retention factor

Of those who claimed they needed more information before considering opening a digital-only bank or had no intention of opening one in the near future, a significant 50% said their current bank would always do them well. State the fact that you are dealing with was the main reason why it was not switched.

34% prefer to have the option to speak to someone directly. This helps explain why the lack of physical bank branches in rural areas is such a popular reason for individuals to switch to neobanks.

Similarly, 24% do not trust digital-only banks. This is the main reason to keep an account with your existing bank. Other reasons that continue to be mentioned in the survey include difficulties migrating account information to digital-only accounts and further problems opening new accounts.

their secret trick

“This year, we can really see the impact of the closure of the Boulevard branch on the banking market, especially on older generations,” commented Kate Andersonwhich reflects the company’s latest research findings.

“The fact that a significant proportion of the Silent Generation has opened neobank accounts due to physical branch closures may ultimately turn the tide when it comes to older generations avoiding digital-only banking. suggesting that,” continues Anderson.

“It is clear that digital-only banks are doing everything they can to appeal to these demographics, including making the process of owning a digital account easier than ever.”

Digital banking has many advantages, but Anderson believes that the value Brits place on being able to talk to someone face-to-face is a major factor preventing them from switching to digital-only accounts. I’m here.

“The fact that so many people claim they don’t trust digital-only banks is also a major issue that these neobanks will need to address in 2023 if they want to continue making progress in the market.” she concludes.

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