Pandemic accelerates trend towards digital-only finance providers

An increased focus among consumers to engage with online-only banks and apps is narrowing the gap between challengers and traditional high street banks, according to a new study from TransUnion.

Figures revealed that 11% of consumers intend to open an account with an online-only bank or app in the next 12 months, compared to 12% who intend to apply to high street banks.

TransUnion suggested this could indicate the gap is closing when compared to its pre-pandemic research published a year ago, which showed a 3% gap between the two at 10% and 13% respectively.

The study, based on a survey of 2,000 nationally representative adults, also showed that one in 10 consumers have changed their current account since March last year, with 32% of these switching from a traditional bank to an online-only one.

TransUnion director of fintech, Stephen Wishart, commented: “What we’re seeing in the financial landscape isn’t new but the pandemic has accelerated the trend toward digital-only finance providers.

“Consumers cite convenience (67%) and speed and ease of service (65%) as the biggest appeal factors of online-only banks or apps, so these challengers have been able to play to their strengths through lockdowns and social distancing.”

The research also highlighted attractive rates (41%) and being paperless (30%) as appealing factors, with the findings showing that one in 10 customers (10%) have taken out a loan with an online-only bank or app in the last 12 months.

Wishart added: “Looking ahead, our research suggests consumers will be more cautious with credit than last year in some areas, with just 11% planning to take out a mortgage in the next 12 months, compared with 17% pre-pandemic.

“Fewer plan to take secured personal loans too, at 7% now versus 11% at the start of 2020, although the demand for credit cards remains unchanged at 13%, as it was before COVID-19.

“That said, there’s a growing sense of financial optimism, and we’re seeing that one in five consumers (21%) are planning on opening a new savings account which is a really positive indication. This mixed picture is something all banks, whether digital-only or traditional, are having to consider when assessing customers’ needs.”

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