UK public not ready for challenger banks as concerns around security halts technology adoption

Challenger banks have all the ingredients for success, but public’s trust in technology is a significant barrier to widespread adoption, according to Fujitsu’s ‘Technology and the New Banking Customer’ report. The study, which spans the UK, Germany, Spain, Republic of Ireland and the Nordics, found that two-fifths (40%) of the British public don’t trust challenger banks at all and 77% admit to only banking with a traditional bank. The reticence to take advantage of new solutions and services on the markets makes the UK one of the most conservative countries in Europe when it comes to banking habits.

In turn, this reserved attitude could halt technology adoption for financial services institutions who are faced with the fact that more than half (54%) of the British public is worried technology will put their data at risk. A staggering 49% admit these concerns are a key reason they are not planning to adopt more digital banking services in the future.

Despite these concerns, customers still prefer speed over security as over a quarter (26%) prioritise speedier transactions and transfers. This means that the speed at which challenger banks deliver services helps attract and retain customers, as a third (33%) said they enjoy how quickly challengers provide them with information on their finances.

Looking at how Brits bank, access to reliable digital services is also a high priority for almost half (47%) of consumers, however the ability to walk in to a bank branch is still important. In fact, two-thirds (67%) of consumers are more likely to do business with a bank if it has a high street branch. Over the next few years, the majority (63%) of consumers expect technology to play a bigger role in how they pay for things, however the public still prefers the human touch, as 60% would rather deal with a human when resolving issues with a bank.

“Technology has taken banking by storm. The research shows that public trust, above all other reasons, is what’s impacting the financial services sector, and holding back challenger banks from becoming mainstream. Whilst banking with a challenger is now seen as a ‘nice to have’, with more people enjoying the speed and convenience of digital banking, challenger banks need to find a way to convince people that they are trustworthy enough to handle their monthly incomes and other major financial transactions. What we are finding is that many customers still want the security of a physical branch, and although speed is important, human interaction has not yet been replaced by the convenience of technology,” says Ketan Parekh, Head of Financial and Insurance Services, Fujitsu.

The financial services landscape in the UK is also marked by a generational divide in attitudes towards digital banking: half (50%) of 25-34-year olds are excited about mobile banking compared with only 20% of those over the age of 55. Despite this divide, the potential of technology to change they way people bank is an exciting prospect for over a third (37%) of consumers. Technology adoption has also the power to attract or deter customers from banking with certain organisations. For instance, the public is more likely to bank with a provider who is using 5G (42%) and near-field communication (44%), whilst cryptocurrencies (30%) and Artificial Intelligence (30%) would make them less likely to open a bank account with the organisation. The implementation of biometrics divided the public the most, as 46% of customers said the technology would make them more likely to use a bank while 24% said it would make them less likely to.

“These contrasting opinions towards banking and banking habits elevate the need for banks to balance their call to innovate and ability to cater towards various needs and expectations,” continued Parekh. “Digital banking cannot be implemented overnight and it will take longer for some customers to make the best use of it, while some may always want to the security of a physical bank. Ultimately, the desire for branch banking highlights an advantage that the traditional institutions have over challenger banks, as they are able to cater to the needs of everyone.”

“While bank branches still have a place in the financial lives of Brits, there is certainly an appetite among consumers for technology and enhanced experiences. But for banks to be confident in adopting technology that will benefit their customers, they should be honest and ethical in their operations. Ultimately, to innovate, both traditional and challenger banks need the blessing of the public, and this is what unites them. To be successful, traditional and challenger banks need to educate the public about the benefits of new technologies in financial services, and build a relationship based on trust.”

Author: Yash Hirani

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