Digital banks’ share of primary banking relationships fell in 2024, a survey has found, as traditional high street banks ramped up incentives and fine-tuned their tech offering to attract and retain customers.
Neobanks accounted for 5% of primary banking relationships in the UK in 2024, down from 6% in 2023, according to a survey of 4,000 adults commissioned by financial services insights business RFI — the first time the survey has recorded a year-on-year fall.
The proportion of Brits who had used at least one digital-only banking provider stood at 50% in 2024, a rise of only one percentage point compared to the previous year, a marked slowdown compared to the 14% rise recorded between 2021 and 2022.
Being offered an incentive to switch was the most common reason customers switched accounts, the survey found, while access to better rewards and poor customer service experiences were also frequently cited.
“Amidst fierce competition, banks have ramped up their efforts to win over consumers. These attractive rewards are reshaping the landscape of consumer loyalty and engagement,” said Hubert Petka, Group Director at RFI Global.
“Banks remain resilient as they increase their agility and consumers continue to use their cards, alongside cards from neobanks, to meet their day to day needs. Nonetheless, neobanks are poised to grow in the years to come and could really threaten the dominance of the incumbent players over the next decade.”
Digital banks’ performance in debit cards showed stronger signs of gaining ground from high street banks, with RFI’s research finding that consumers holding their main debit card with a neobank rose from 1% at the end of 2020 to 9% at the end of 2024, while the share of market for the Big Six banks decreased from 85% to 71% over the same period. Digital bank customers also spend 20% more than consumers with a main debit card from a Big Six bank.
Fintechs like Monzo, Revolut and Starling were used by as many as 77% of Gen Z customers, compared to only 42% of Gen X. However, there are signs an increasing number of affluent customers are turning to digital banks, with 28% of ‘mass affluent’ customers having an active relationship with a neobank.
In terms of app user experience, the so-called ‘Big 6’ High Street banks — Barclays, Santander, HSBC, Lloyds, NatWest and TSB — were found to outperform neobanks in areas like account aggregation, reliability and functionality, while neobanks were found to have the edge in ease of use, design and the availability of budgeting tools.
The post Digital banks’ market share slipped in 2024 as high street banks fought back appeared first on UKTN.
