Why are so few people using App-only banking?
Just over one in ten people (12%) have dropped traditional banking in favour of a single digital bank, according to the website Finder on the 15th of May.
Given the stiff competition posed by new digital banking start-ups; the services and benefits they offer; and, the relative sluggishness of traditional banks to keep up with technological trends, why are so few people using App-only banking?
The revolution in the way we are able to bank and the explosion of new Fintech companies was made possible by the launch of open banking in January 2018, explained the Business Telegraph.
With enthusiastic support from the government, open banking introduced ways for customers to allow banks access to all their financial information and to share it securely with Fintech companies, challenger banks, and credit reference agencies so they can access potentially more attractive financial products in a more open market.
Nevertheless, at the beginning of this year, only one in four people in the UK had even heard of open banking.
The use of digital banking Apps
Even though only 12% of people have switched all of their banking to online Apps, that is not to say there has been little take-up.
In addition to that 12% who have already switched all their banking needs to new online-only accounts, a further 63% indicated in the Finder survey that they intended to make such a switch in the future – leaving the remaining 37% staying with traditional high street bank accounts.
Currently, the majority of banking App users have accounts mainly for everyday spending, travel and to keep tabs on their personal budget, rather than using the accounts for major receipts such as their salary or mortgage and other direct debits, which continue to be made through traditional channels.
As a result, about half of all App-only bank account holders have £1,000 or less in their accounts and around a third have £100 or less in them. The average account balance is just £3,214.
Nevertheless, said the Money Saving Expert more than a year ago, four in every ten Britons are now regularly using mobile banking Apps.
But the number of users – even if they have not switched entirely to App-only banking – is certainly growing fast.
These are contributing to the explosion of Fintech start-ups in the UK. In an article on the 2nd of August, Tech World identified more than 70 Fintech start-ups in the UK that have so far joined the so-called “unicorns” of Fintech companies valued at more than £1 billion.
Among those unicorns is one of the biggest UK challenger banks, Monzo with its App-only banking, which already counts more than two million customers – and a further 200,000 signing up every month. It is launching its services in the United States, according to an article in Tech Crunch on the 13th of June.
Another leading member of the UK’s club of Fintech unicorns is the App-only banking service Revolut, which claims 4.5 million customers worldwide, with 1.6 million of them in the UK alone, according to a report by the BBC on the 2nd of April.
All of which brings us back to the question of the apparent resistance by many in Britain to completely switch to App-only banking.
One of those reasons is likely to be the inertia displayed by many people when it comes to something as basic as banking. The story in the Business Telegraph made particular mention of this inertia and the very low rate in the UK of people switching banks. Indeed, you are more likely to get divorced than to change your high street bank account, said the article.
The faith in traditional methods of banking is also one of the reasons why the majority of users are currently using their App-only accounts for relatively small, everyday transactions or as a “piggybank” for ad hoc savings.
Another core reason may be a fairly widespread concern about the security offered by what are still, in many cases, relatively innovative technologies. It may be a well-founded concern, according to an article that appeared in the Guardian newspaper.
In August, for example, Monzo had to advise nearly half a million of its customers to change their pin numbers after it was discovered that as many as 110 of its own engineers had unauthorised access to those details because of a glitch in the way in which they had been stored.
Customer pin numbers had been stored in the “wrong” part of Monzo’s hardware systems for at least six months, the company admitted. But it insisted that none of the private data had found its way outside of the bank and that there was no evidence of the “mis-stored” data being abused or compromised by those who had erroneously been allowed unauthorised access.
The data used in this article is accurate at the time of writing.