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Digital-only banks attract a third of Brits, but are they being used as side accounts?

  • 36% of Brits currently have a digital-only bank account
  • 17% of those who have, or would, open a digital-only account did so for cheaper foreign transactions
  • Over a third (35%) of Brits would not consider opening an account with a digital-only bank, up from 32% in 2023

30, January, 2024, LONDON

More than a third (36%) of UK adults currently have a digital-only bank account according to new research from personal finance comparisons site finder.com. This is a significant increase from last year when a quarter of the population (24%) said they owned a digital-only bank account. Only 9% of the population said they had an account when the study was first run in 2019.

Digital bank usage is gaining popularity, but are they largely being used as second accounts?

This year’s research found a quarter (25%) of those who have opened or intend to open a digital-only bank account said that they did (or would do) so because digital-only seemed to be the easiest option when opening an additional account. Almost a quarter (23%) said that they wanted to use this type of account to transfer their money more easily, 1 in 5 (20%) wanted better interest rates and 17% wanted to get cheaper or free transactions abroad.

However, recent reports from the Current Account Switch Service (CASS) show that although digital banks are gaining new customers, they are struggling to retain them. In the first half of 2023, digital banks saw a total loss of over 20K accounts via the switching service.

On the other hand, traditional banks had a net-positive number of customers gained in the first half of 2023, with an additional 26,877 accounts joining via the switching service during this period. There was a correlation with switching offers and the banks that gained customers.

This indicates that consumers could be viewing digital-only banks as additional accounts, used for benefits such as cheap overseas payments or high interest rates, but not for their main account.

Digital banks are struggling to gain the same loyalty from customers as traditional banks hold

The research also showed that digital banks aren’t winning everyone over, with 35% of UK adults claiming they would not consider opening this type of account. A further 16% were unsure about opening a digital-only bank account, claiming they would need more information before considering this option. This means that currently half (51%) of Brits are either unsure or unwilling to open a digital-only bank account.

When asked why they were either unsure or would not consider opening a digital-only bank account, more than half (53%) cited their current bank always having treated them well as one of the reasons behind their reluctance.

A further 37% of these customers said that they prefer having the option to speak to someone in person and use in-branch services, however with many local bank branches facing closure in recent years, this could potentially force the hand of these customers to shift to digital banking.

Another common concern amongst those who were unsure was the risk of payment fraud or cybersecurity breaches with a digital-only bank account, with 1 in 5 (21%) citing this reason. This issue is currently a huge concern amongst British consumers, as recent research from finder.com found that more than 4 out of 5 Brits believe that more needs to be done to tackle the issue of identity fraud in the UK.

To see the research in full visit: https://www.finder.com/uk/digital-banking-statistics

Commenting on the findings, Kate Steere, editor at the personal finance comparison site, finder.com, said:

“The rise in digital bank account ownership in the past year shows that digital banks are offering customers what they want. Whether this is better convenience or greater agility when it comes to passing on higher interest rates, they’re making sure they address customer needs. Brand loyalty is still a big factor when it comes to switching, but if digital banks continue to innovate and offer services that beat out the traditional banks, we’ll likely see this trend towards digital banking adoption continue.

“The question is whether they can become consumers’ primary bank, as the CASS figures suggest traditional banks are still getting plenty of customers using them as their primary account. We know that the digital-only banks are desperate to keep growing and become people’s bank of choice, but time will tell if they’re able to do this.”

Methodology:

Finder commissioned Censuswide on 21/12/2023 to carry out a nationally representative survey of adults aged 18+. A total of 2,000 people were questioned throughout Great Britain, with representative quotas for gender, age and region

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Disclaimer

The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com's review pages for the current correct values.

About finder.com

finder.com is a personal finance website, which helps consumers compare products online so they can make better informed decisions. Consumers can visit the website to compare utilities, mortgages, credit cards, insurance products, shopping voucher codes, and so much more before choosing the option that best suits their needs.

Best of all, finder.com is completely free to use. We’re not a bank or insurer, nor are we owned by one, and we are not a product issuer or a credit provider. We’re not affiliated with any one institution or outlet, so it’s genuine advice from a team of experts who care about helping you find better.

finder.com launched in the UK in February 2017 and is privately owned and self-funded by two Australian entrepreneurs – Fred Schebesta and Frank Restuccia – who successfully grew finder.com.au to be Australia's most visited personal finance website (Source: Experian Hitwise).

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