Banking is going through yet another transformation with the myriad of ‘neobanks’, ‘digital banks’, and fintechs that have sprung up from the shadows of outdated and outclassed banking institutions.
As of January 2022, 14 million British adults, or 27%, had opened an account with a digital-only bank. This figure is expected to rise to 19 million by the end of the year, or 36%.
Traditional banks getting left behind
The last ten or so years have seen technology develop at a breath-taking rate – and to many, brick and mortar establishments just haven’t kept up. Subsequently, the entire industry is undergoing a massive digital disruption — with online deposits, mobile apps, and e-bill payments becoming the norm.
According to this survey from Mint, the first reason is convenience — with 30% of those changing banks in the last five years doing as they wanted an all-digital experience. Although traditional banks have online platforms and apps to do most banking activities, they are not fully digital – and some tasks require an in-store visit.
Often, this is easier said than done due to stringent opening hours and queues – let alone the store closures that have become commonplace throughout Europe. As with most industries, the pandemic significantly impacted this trend – pushing more people away from in-store experiences and towards fully digital interactions.
A second primary reason is the features available on fully digital banking apps. From immediate money transfers to accurate, programable budgeting, neobanks lead the way in creating real-time, innovative features: no more pending balance and no more exchange delays.
Thirdly, exchange fees are where digital banks differ the most from now-archaic traditional banks. Whether that’s foreign exchange fees, overdrawn, or using certain ATMs — Americans spent $11.6B in bank fees during the pandemic. Whereas most digital banks offer free everyday banking services – meaning no monthly maintenance fee, no minimum deposits, and free peer-to-peer money transfers.
Although digital banks have taken the lead in convenience and user-friendly, fully-digital experiences — high street banks will not give up their dominant role in consumer finance so easily. High street banks continue to look to the latest technologies such as artificial intelligence and machine learning to remain competitive in the customer service space, therefore, customer satisfaction. Let’s see if they can keep up with the digital transformation driving change in the banking sector.