GlobalData Plc

New generation of digital banks will struggle to gain a large audience

Around the world, and especially in the UK, a new breed of banks is entering the market, hoping to disrupt the dominance of traditional providers.

These challengers are for the most part purely digital propositions, and promise a superior experience for users. However, consumer research by GlobalData reveals that customer acquisition will be a real challenge for these providers.

GlobalData’s 2016 Retail Banking Insight Survey found that only 14% of global consumers are very willing to use a digital-only bank, and that this proportion is even lower in many developed markets, including the UK (11%).

This reinforces other survey findings, in particular that consumers are most influenced by reputation and branch location when choosing a bank. These behavioral factors tend to work to the advantage of well-known, established providers.

However, 42% of global account holders chose their bank on the strength of its reputation for innovation. New providers can respond by stressing their points of differentiation. For example, some banks are creating marketplaces through which their customers can access the best financial products from other providers; others are tailoring their services to underserved segments, such as new migrants and lower income consumers; and some are delivering data-driven contextual advice and insight to their users.

Not all new entrants will become viable enterprises, but those that offer compelling benefits for consumers will improve their chances of success.

More information on new banking entrants van be found in our report New Entrants: Mapping the Landscape (May 2016).

By Daoud Fakhri, Prinicipal Retail Banking Analyst

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