Why do UK consumers love neobanks?

Neobanks have enjoyed a significant uptick in customers and usage since the pandemic – but much more growth is on the cards. 

Our research finds 45% of UK consumers are considering opening a new digital bank account in the next six months (check out our survey of 1,000 working age Brits, in partnership with The Banker). 

Gen Z (aged 18-25) are the demographic most likely to be eyeing up challenger banks like Monzo, Starling and Revolut; 59% say they are ‘potentially’ or ‘seriously’ considering a new account.

Meanwhile, 47% of Millennials (aged 26-40), 43% of Gen X (aged 41-55) and 32% of Boomers (aged 56-65) say the same.

What’s the draw of digital-only?

We asked those who have an account with a neobank or are thinking about getting one in the future, what the attraction is. 

The single biggest draw is the easy access these digital services provide; 54% of respondents said they wanted to sign up because the accounts were easy to use. Surprisingly, the demographic most likely to say this was the Boomers (62%), indicating that these providers have worked hard at their user experience (UX). 

Another significant benefit of challenger banks is that they’re often faster and cheaper – especially when it comes to making transfers (36% of people are attracted by this).

The third largest draw is how easy it is to sign up with a digital bank (30%). Millennials, in particular, appreciate this (37%). 

Gen Z, meanwhile, over-index for choosing neobanks because they help them with budgeting (36%) and are good for travelling abroad (30%).

How the pandemic has accelerated neobank adoption 

According to our data, almost one quarter (23%) of UK consumers now use digital-only banks. And 37% of these people signed up since March 2020, showing the impact the pandemic has had on the sector. 

The older demographics are the most likely to have been pushed to adopt a digital bank account by coronavirus; 46% of Boomers with a digital-only account signed up during the pandemic, as did 44% of Gen X. 

The younger demographics are more likely to have already been using neobanks, with the biggest user base seen among Millennials (31% have a digital-only account).

But it’s not just customer numbers that have increased in the last 18 months, overall usage of neobanks has too. We found that 41% of people who use neobanks have increased their usage during the pandemic. 

Winning over the remainers

Only 9% of the people we surveyed said they’d never consider opening a digital-only bank account. It’s not very many, which shows how well challenger banks have done at promoting their advantages, but what is it that’s stopping these remainers?

Quite simply, they’re happy with their current provider (55%) and they like having a branch to go to (41%). When we consider that Boomers are almost three times as likely to be disinterested in digital banks than Gen Z (19% of Boomers wouldn’t consider using a neobank), we can better understand these priorities. 

This generation are much more embedded with traditional providers and may have multiple accounts, cards, loans and mortgages with the Big Four. They’re more likely to be familiar with their local branch – and might even know the bank manager by name – so it figures they’d be more attached. 

For neobanks that want to go after this hard-to-win segment, our data indicates that focusing on building trust might help. Looking at the perception of Boomers, in particular, 31% worry that digital-only banks might collapse and 22% believe high street banks are better regulated. 

Concerns around the security of personal data also prevent 25% of these consumers from using neobanks, while 31% state they simply don’t trust them.

What the insight shows, though, is that most people do see the benefits of digital-only banks and that the stronghold of the Big Four continues to weaken. Even older consumers have been converted to neobanks, having been forced to try an alternative by the pandemic. Using social proof from these types of users could go a long way to convincing others to give challenger banks a chance.

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