The banking industry has been shifting its focus more and more to online banking and banking apps over recent years, moving away from face-to-face banking as the British high street continues to dwindle and physical bank branches become less and less common. However, can this growth towards online banking continue? And is this really what the consumer wants?
In our latest report, we analysed the official recommendation scores of 10 of the most popular banking providers in the Ipsos independent service quality survey, specifically focusing on the results for online banking and banking apps. We found that the proportion of customers who would recommend their online and mobile banking apps to friends and family has consistently declined over the last four years. In fact, on average, the percentage of customers likely to recommend the top online and mobile banking services has fallen by an average of 5% between August 2020 and February 2024.
Our investigation into this topic also revealed that half of Brits are more wary of using online banking and banking apps now than they were 4 years ago. When analysing the most common reasons for this shrinking confidence, our research found that concerns about online fraud were top of the list. More than a third of UK adults (35%) cited this reason for becoming more wary of online banking and banking apps.
Online fraud is on the rise, could it threaten the progress of online banking?
Online fraud has been rising significantly in recent years. According to the UK Finance’s latest Annual Fraud Report, a case of fraud was reported every two minutes last year. The number of Authorised Push Payment (APP) scams, where people are tricked into sending money directly from their accounts to scam artists, rose by 12% in 2023, with total losses amounting to £459.7million. The report from UK Finance also revealed that 76% of these APP fraud cases started online.
This rise in online crime is creating a significant lack of trust between customers and their banks and holds the potential to become a big blocker to progress in the online banking sector moving forward. These days, banks are keen to offer more personalised services through their online platforms to gain an edge over their competitors, and using their customer’s personal information is the key to unlocking this personalisation. However, it’s clear customers are becoming increasingly wary of sharing their data.
In fact, our study found that more than 1 in 10 (12%) Brits said they had become more concerned about using online banks and banking apps because they believe too much of their personal information is being collected on these platforms. In addition, just under 1 in 10 (9%) said that they don’t trust online banks and banking apps to store their personal information safely.
We also found a clear generational divide when it came to this issue. Interestingly it was the younger generations who are far more concerned about the collection of their personal information than their older counterparts. The results showed that just over 1 in 5 (21%) of those in gen Z (aged between 18-23) said that collection of their personal information was a reason why they had become more wary of online banks and banking apps over the last 4 years. Millennials (aged between 24-42) were not far behind, with 19% of those in this generation saying they have become more wary of online banking due to the collection of their personal information by these platforms. This was closely followed by 10% of those in gen X (aged between 43-54).
On the other end of the spectrum, those aged 55+ were far less concerned by this issue. Only 5% of baby boomers (aged between 55-73) and 3% of the silent generation (aged 74+) cited the collection of their personal information by these platforms as a problem that would make them more wary of online and mobile banking.
These findings suggest that there could be trouble ahead for online banking platforms. In theory, these younger generations should be their target audience, and if they can’t convince them that their data will be safe in the hands of their bank, this could create significant problems. It’s clear that banking providers have some work to do in order to gain the trust of their customers, and this is something that will need to be prioritised if they want to avoid customers voting with their feet and going elsewhere.
Will personalised banking help?
Experts who contributed to our research paper looking at how UK banks are tackling personalisation believe that banks who offer bespoke services and improve their customers’ experience will ultimately win out.
Delivering a delightful customer experience and providing a more personalised service – which previously came naturally when customers interacted with local branch staff – could lead to more of a relationship and greater levels of trust.
How this is delivered will be key though. Banks will need to reach customers at key points in their financial journey with the “right offer”. AI and technology can facilitate this to a certain extent, but companies will need to remember the person in personalised. While AI provides opportunities, banking providers will still need to make sure they’re listening to what their customers actually want.
