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Digital-only banks beginning to lose their appeal, warns report

Tom Belger | 14:18 Monday 12th March 2018

Interest in banks with digital-only offerings is beginning to wane, while trust as a commodity for banks is increasing, according to new research .

RFi Group's latest half-yearly Global Digital Banking Report for H2 2017 found that although global digital usage in banking was growing – H2 2017: 68% of consumers used digital channels vs H1 2017: 58% – consumers were moving towards the digital channels of traditional players, rather than digital-only challengers.

Research also revealed that the global appetite for digital-only providers fell from 74% in H1 last year to 63% in H2.

The appetite for a digital-only main bank also dropped, from 50% to 44%.

“The findings suggest that traditional banks which continue to 'up their game' in engaging consumers digitally will likely be the ones to benefit in the near future,” said Charles Green, CEO at RFi Group.

“Consumers are becoming more sophisticated when it comes to digital banking, their needs will continue to change and while this happens, we are seeing them lean towards a model that provides channel choice, which includes both the traditional and more recent offerings.”

In the UK, consumers' comfort level with a digital-only provider dropped significantly during the last six months of 2017, falling from 78% being 'comfortable with digital-only providers' in H1 to 54% in H2.

The report cited that an advantage that traditional banks currently had was their perceived reliability when it came to private data.

Trust in banks holding and maintaining privacy and security of personal information increased from 31% globally in H1 to 42% in H2, while trust in technology companies hardly increased.

Charles added: “This is critical for Open Banking, which means that the initiative could be an opportunity for banks to effectively own the ecosystem, as opposed to levelling the playing field as regulators had potentially intended.”

However, the report also found that the proportion of consumers that used digital banking on a daily basis was on the rise, increasing from 24% to 34% globally.

Meanwhile, digitally engaged consumers hold on average 3.9 unique banking products, compared with 3.5 for less digitally engaged consumers.

“According to the research, digital is a pull factor as opposed to a push factor for consumers when it comes to banking, with a positive customer experience driving increased engagement, yet a bad experience [is] not in fact driving customers away,” added Charles.

“Not having the latest technological offerings is not going to cause severe damage to financial institutions just yet, but the gap is closing.”

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