Study: Traditional Banks are still not Embracing Digital, despite Consumer Demand

A new report released today by P.A.ID Strategies, reveals that traditional banks in the UK are losing ground to challenger banks when it comes to providing digital banking. The report, which scores the digital bank account opening process for 10 banks, found that the majority still require consumers to go through manual processes like visiting the branch rather than using digital identity technology to onboard applicants.

The report, UK Bank Accounts: A Survey of True Digital Capabilities in Customer On-boarding, assesses, compares and scores the registration, identity verification and account activation process of traditional and challenger UK banks. P.A.ID Strategies reviewed Barclays, HSBC, Lloyds Banking Group and RBS (including NatWest) as well as challengers Atom Bank, Monzo, Revolut, Starling Bank and Virgin Money.

Mobile-first bank Starling scored highest, leading the way on its identity verification and account activation process, while HSBC scored the lowest. RBS is the only incumbent bank allowing applications to submit proof of identity electronically, but not via smartphone or tablet.

We were surprised to see so few traditional banks had made progress towards a 100% digital experience through the mobile channel. Many failed to offer a fast, secure and digital account application and activation process, including verification of the applicant’s identity. This means the banks aren’t truly digital, degrading the user experience at first point of contact and increasing the chance of abandonment,” said John Devlin, author of the report and Principal at P.A.ID Strategies.

Bank Application duration score Digital ID validation method score Time before account can be used score Total Score
Starling Bank 4 5 4 13
Monzo 3 4 4 11
Royal Bank of Scotland 3 4 3 10
Barclays 4 2 3 9
Atom Bank 4 2 2 8
Revolut 3 3 2 8
Virgin Money 3 1 2 6
Lloyds Banking Group 4 0 1 5
HSBC 2 0 2 4
Challengers – Mean 3.4 3.0 2.8 9.2
Incumbents – Mean 3.3 1.5 2.3 7.0

Key findings:

  • Challenger banks lead: Challenger banks have an average score of 9.2 out of 15, versus traditional banks which scored only 7
  • Top scorers: Two of the challenger banks, Monzo and Starling scored highest thanks to their 100% mobile-first digital account application taking 9 minutes 50 seconds, and 9 minutes 40 seconds respectively
  • Challengers using traditional processes: Virgin Money requires customers to visit the branch to open an account, hindering its position as a digital disruptor
  • Identity credentials: Barclays and HSBC didn’t require any formal ID to be submitted, instead prompting applicants for Equifax credit history or details of existing accounts

The report distinguishes between the account application and account activation time, to determine how quickly a new applicant could begin transacting once signed up. Archaic processes such as awaiting documents in the post and delays in sending cards and PINs also caused banks such as Barclays to score lower than competitors – with customers receiving four different PINs over five days.

Compliance with AML and KYC regulations for current accounts places restrictions on banks when onboarding customers. The report discovered that the majority of banks have failed to use digital identity services including biometrics that exist to enable mobile onboarding and that satisfy these regulations.

John added, “Any customer will prefer taking a selfie and snapping a photo of an ID credential using their mobile, over a manual process that means taking documentation to a branch. The banks who are succeeding are offering identity capture and biometrics that allow customers to verify their identity remotely. Banks that don’t adapt now risk new customers abandoning the application process altogether in favour of a challenger bank using this technology. Furthermore, manual onboarding is costly, inefficient and prone to errors increasingly the scope for fraud.

With banks now facing high fines if they fall foul of fraud, the time is now to embrace a mobile-first digital approach to reduce risk and remove risk from the user experience,” concluded John.

Each of the banks were assigned a score against account application (duration of process and number of steps to complete), ID verification (primary mean of verifying the applicant’s identity) and account activation and UX (lead time for the account to be opened and transactional and overall user experience), and were ranked by their total score.

The scorecard can be viewed here.

The full report is available for download here.

Author: Dylan Jones

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