Lack of trust hindering challenger bank growth – new research


UK growth in so-called ‘challenger’ banks is being held back by a lack of trust, research out this week has shown.

Research by technology firm Fujitsu found that while challenger banks have ‘all the ingredients for success’, the ‘public’s trust in technology is a significant barrier to widespread adoption’.

The findings came from a survey carried out by Fujitsu for its report, Technology and the New Banking Customer. 2000 British consumers were surveyed for the report.

Why don’t customers trust new banks?

77% of those surveyed currently bank with a traditional bank, while 67% say they are more likely to do business with banks that have branches on the high street.

The research found that 40% of people don’t trust challenger banks at all. 54% are concerned about the safety of their data, with 49% admitting that concerns about data security underpin their expectation not to adopt more digital banking services in the future.

Banks are increasingly adopting new technologies like biometrics to support their digital banking projects. This is not a panacea for people’s concerns, though; while 46% say that this technology would make them more likely to use a bank, 24% would see it as a deterrent.

There is also a generational divide when it comes to attitudes towards digital banking. Half of 25-34-year-olds claimed to be excited about mobile banking, but just 20% of those over 55 said the same.

Banks are adopting new technologies – but are they being welcomed?

In our blog of February this year, exploring what the UK’s financial sector looks like today, we noted that ‘Innovative solutions have furthered competition, enabling new entrants to disrupt the financial services sector by competing with incumbent firms’.

And our recent blog examining digital transformation in the finance industry noted that ‘the impact of digital transformation and automation leads to opportunities of faster, cost-effective operations, meeting regulatory deadlines, improved employee and customer experience and remaining competitive’.

With growing numbers of new competitors driving choice and innovation, innovation is something increasing numbers of banks are pursuing.

But as this new survey shows, it’s not all positive news.

Launching the report, Fujitsu’s Ketan Parekh said that while ‘Technology has taken banking by storm…public trust, above all other reasons, is what’s impacting the financial services sector, and holding back challenger banks from becoming mainstream.’

Adopt new technologies in a compliant way

If banks can evidence that their digital transformation projects meet with regulatory requirements, they may have more success in attracting and winning the trust of consumers.

As Fujitsu’s Parekh says:
‘To be successful, traditional and challenger banks need to educate the public about the benefits of new technologies in financial services, and build a relationship based on trust.’

Adopting trustworthy technologies – technologies adopted in line with regulatory requirements – will increase trust, and willingness to invest, in challenger banks.

This close connection between compliance and business success is explored more deeply in our whitepaper, The importance of compliance to brand strategy. You can download a copy of that from our resource library.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

New Call-to-action