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Study shows UK high street banks falling behind challenger banks

New research from FIS reveals that Britain’s challenger banks are outscoring their High Street counterparts in meeting their needs for digital payments, easy to understand and use products/services, innovative products/services and anywhere/anytime connectivity to their accounts.

TYPE OF BANK INTERACTIONS DURING PAST 30 DAYSThe research also shows the emergence of a new “Super Segment” of higher-income Gen Xers and senior millennials that share GROWING P2P ACCEPTANCEstriking similar banking behaviors and who are increasingly transferring their personal preferences for digital channels into all areas of how they bank and run their businesses.

The findings come from the third annual PACE (Performance Against Customer Expectations) study. The survey of 1,000 British banking customers was conducted in December 2016.

The PACE survey asked consumers to rank the importance of key attributes to their banking experience, and how well their banking providers are meeting those attributes. For the first time, the 2017 study broke down the millennial demographic into younger and senior segments.

Among the finding of the 2017 FIS PACE study:

  • UK banks overall are considered by their customers to be under performing on key requirements including safety, security, fairness, reliability, and transparency, as well as providing financial advice and customised services.
  • However, UK banks have closed the gap in performance with their counterparts in Germany and the United States. The overall PACE index score for UK banks rose six points from 2016 levels and UK banks are now a close second to German and US banks in PACE index scores.
  • About three-quarters of the contacts that UK consumers have with their banking providers are digital in nature.
  • Among millennials, mobile banking has surpassed online banking, branch banking and ATMs as their primary means of conducting banking transactions. Both young and senior millennials are three times as likely to connect with their banks digitally than visit a branch.
  • Bank branches and other in-person services continue to be important to the success of UK financial institutions. Frequent visitors to UK bank branches have more accounts on average with their primary banking provider than consumers who infrequently visit branches, according to the FIS research.
  • Millennials and Gen X consumers struggle to find time to physically visit a bank branch, with nearly a third saying they don’t have time to do so.

The findings come ahead of the introduction of European legislation for Open Banking standards known as Payment Services Directive 2 (PSD2), scheduled for January 2018.

Under PSD2, banks will be required to share bank account information with regulated third party providers and allow them to initiate payments when instructed to do so by the consumer. This industry-wide sharing of banking data is aimed at increasing competition and is likely to be driven by and set universal standards for connectivity options through open application programming interfaces (APIs) due to be published in the Autumn.

The goal of the initiative fits perfectly with PACE respondents’ preferences for increased fairness and transparency, as well as additional customised services.

“This new research shows just how important digital banking is becoming to British banking consumers. Indeed, digital channels are now the primary way consumers connect with their banks. With challenger banks leading the way in the UK in this respect, High Street banks need to catch up quickly or risk losing their future customer base,” explains Bruce Jennings, Strategy Director, EMEA Banking and Payments, FIS.

“Despite this shift to digital, our research shows that the face-to-face element remains critical to the success of today’s banks. With senior millennials and Gen Xers struggling to identify the best personalised investment advice, there is a clear opportunity for banks to develop offerings targeted to the investment needs of this important segment.

And with banks across the country reviewing their physical branch footprint, providing the right digital touchpoints for personalised services is incredibly important for banks to remain relevant to their consumers.”

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