Tag Archive for: Challenger Bank

(London, UK): In a short time, challenger banks have won cardholders over with their unique mobile-only banking model, differentiated from High Street offerings by touting foreign exchange features, budgeting tools, spend analytics and easy cheque splitting. But consumers aren’t breaking up with High Street just yet. According to new research published by Auriemma Group, challenger banks are being used as a complement to, not a replacement for, traditional banking products.

Currently, 13% of credit cardholders have a mobile-only current account with Monzo, Revolut and/or Starling. And 44% of credit cardholders without a mobile-only current account could be persuaded to switch to one. This small, but notable figure shows curiosity in the mobile-only banking model.

“Challenger banks market themselves as innovators in the payments space,” says Jaclyn Holmes, Director of Research at Auriemma Group. “From graphic cues like bright-coloured and vertical cards to their digitally focused approach, these banks are trying to visually and experientially differentiate themselves from their High Street counterparts.”

These benefits and differentiators alone, however, are not enough to instill full confidence in challenger banks. Nearly all (96%) of those who had a current account with a traditional bank prior to opening one with a mobile-only provider say that they have kept their traditional account open.

There are several factors likely at play in this decision. Many who are uninterested in challenger banks express satisfaction in their current offerings (58%), prefer banks with physical locations (42%) or don’t know enough about them (28%).

In effect, challenger banks are charged with informing the consumer about who they are and what makes them better. While some focus on the strength of their digital offerings to make this point, others have taken innovative steps to address the perceived need for in-person service.

Starling Bank, for example, partnered with the postal service to offer cash deposits in a physical location for its account holders. This partnership offers a consistent physical footprint (i.e., the post office) for the bank as traditional bank branches continue to close across the UK.

While offering a physical location for some banking activities is one solution, other mobile-only providers focus squarely on self-service options. These are especially important for younger cardholders, who, according to Auriemma’s research, are less likely to see branches as a critical component of the banking relationship.

“Although the absence of a branch footprint is currently an obstacle for challenger banks, its importance may wane as the industry becomes more digital,” says Holmes. “As the industry shifts, we can expect consumers to become more comfortable with mobile-centric banking solutions.”

Challenger banks cultivated enthusiasm around innovative tools and features, many of which currently exist in the High Street digital experience. It appears even basic tools could be enough to keep these cardholders from looking elsewhere. Many of those who find tools important most often cite bread-and-butter functionalities that are already a part of online banking—spend alerts, reports, and automatic transfers.

“Challenger banks are bringing digital tools to the forefront of the customer experience, but consumers will continue looking to legacy providers for everyday banking needs,” says Holmes. “High Street Banks have given little reason to look elsewhere, and although challengers have their merits, it’s unlikely that cardholders will transition their entire banking relationship to them in the near term.”

Survey Methodology

This Auriemma Group study was conducted online within the UK by an independent field service provider on behalf of Auriemma in November 2019, among 855 adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.

(London, UK):  Consumers are well-intentioned when building their budget, but even a nominal unplanned expense could leave UK cardholders financially constrained. Many can’t afford the miscalculation—on average they have £20 for daily discretionary purchases and 23% need to put their total income towards outgoings.

Consumers often navigate these financial hurdles on their own. While automation is transforming the banking industry, budgeting remains a very manual process for many cardholders. Auriemma Research’s latest issue of Cardbeat UK confirms that new technology may make budgeting easier for savvy consumers, with challenger banks Monzo and Starling leading the way.

In mid-2018, Monzo and Starling launched tools aimed at giving customers increased control over their spending behaviour. Several months later, Barclays followed, becoming the first high street bank to allow debit cardholders to block payments within specific retailer categories (others may adopt the technology in the future).

The move was aimed at protecting vulnerable consumers by providing them controls to disallow transmission of funds in select areas like gambling services, premium phone lines, pubs and more. The technology even offers a self-activated barrier to purchases in spend categories the consumer deems problematic, stopping them from overindulging at the casino, bar or local eatery. But this technology could evolve to assist in budgeting, helping consumers set spend limits or alerts by merchant category.

Cardholders desire these types of card controls, according to Auriemma’s Cardbeat UK report. Over one-quarter of credit cardholders want the ability to freeze/unfreeze a lost credit card, 22% want to choose which transaction types (e.g., in-store, online) are permitted and 10% want to set spend limits. Currently, 38% say that their issuer offers the freeze feature, 23% say they can choose which merchant categories are permitted and 32% can set spend limits.

“These features are still new, but tools that promote more thoughtful decision-making could help build loyalty with the institution that offers them,” says Jaclyn Holmes, Director of Auriemma Research. “Although card freeze traditionally isn’t used as a budgeting tool, it functions in a similar way to the other card controls and could raise awareness and comfort with this type of technology moving forward.”

Card controls are currently being used to protect against fraud and spend derived from addiction, but future developments could place an emphasis on budgeting.  The study also found that 60% of cardholders are open to credit card alerts, which could be utilised to inform cardholders when they are approaching their spend limit in a category, or send a warning alert once they’ve reached a pre-defined proportion of their allocated spend.

“Challenger banks tend to set the bar in terms of innovation,” says Holmes. “Over the last couple years, we saw high street banks introduce the ability to freeze their cards following Metro Bank’s example in 2014. Barclays is already putting more control in their cardholder’s hands, and we expect others will also build upon the technology and features that deliver more control to cardholders.”

Survey Methodology

The Auriemma Research study was conducted online within the UK by an independent field service provider on behalf of Auriemma from March-April 2019, among 800 adult credit cardholders. The number of interviews completed on a monthly basis is sufficient to allow for statistical significance testing between sub-groups at the 95% confidence level ± 5%, unless otherwise noted. The purpose of the research was not disclosed nor did the respondents know the criteria for qualification.

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognised experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximise their performance. Auriemma serves the consumer financial services ecosystem from our offices in London and New York City. For more information, visit us at www.auriemma.group or call Jaclyn Holmes at +44 (0) 207 629 0075.

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