I wrote recently about the increasingly crowded space of challenger banking with several recent players being launched, and how consolidation and collaboration in the challenger banking space is inevitable. A lot of our findings come from looking at the space from the view of the consumers – from challenger bank users who think challenger banks are the answer to their prayers, to traditional bank consumers who believe nothing can make them switch their long-held bank accounts.
In our primary research, we spoke to UK consumers across the spectrum, but mostly targeting existing challenger bank users. We wanted to have a perfectly random sample, so we stood around in railway stations, university campuses, street markets and office estates asking them stories about their challenger bank experience. We also shared a survey online to validate some of our findings in a quantitative manner, and that constituted around 30% of total responses.
The largest group of challenger bank users we found were male and aged 25-34
56% of the people who told us they were challenger bank users were aged between 25 and 34. 61% of our respondents with challenger bank accounts were male as well. The so-called largest target demographic of challenger banks, the 18-25 age group, constituted 17%, which was less than the 35-44 age group. We found that customers across age groups embraced challenger banking – it was clearly not a millennial-only phenomenon.
However, we found that a deep desire to have an app or digital channel to access a bank account was highest for 18-25-year-olds, and pretty much decreasing with age (yes, ageing seems to embrace status quo).
Most people take challenger bank accounts to “try them out”
This was one of our more interesting finds, in that 74%+ respondents said the primary reason they took a challenger bank account was for trying it out. They also chose reasons such as ease of use when travelling, better rates or specific offers (mostly from students), easier sign-up process, and recommendations from friends or colleagues.
These numbers make sense in the early days of challenger banks; the primary reason is expected to be existing banking users using the new apps to see what they’re missing out on. It’s also interesting to see that their experiences with challenger banks have been phenomenal – we heard several stories of how these apps have changed the lives of the consumers, from being able to now offer pocket money to their children via a child account, and track spend, to using the app as a way to manage bills and save money. Challenger banking apps were truly changing customers’ lives.
However, we’ll have to wait a year and do the survey again to see if these customers have actually stuck on, or whether the perceived higher customer experience they experienced has remained so with regular usage.
Some people refused to even try a challenger bank, due to their lack of branches
Among non-challenger-bank users, 60% of respondents said they had never heard of challenger banks (not just the term, but the individual bank brands as well). We then tried to find out why those who were aware were not yet using a challenger bank.
A third of our respondents said they still wanted “the option” to use a branch. They were not necessarily regular branch users, but they still liked to know that the option was there in case they ever had an issue and needed to talk to someone or share documents. Trust and a limited choice of products and services also came up as major answers.
We then asked them what a challenger bank can do differently to bring them onboard. 63% of non-challenger-bank users said they would consider switching if the process of moving accounts was easier. 50% wanted irresistible offers and 15% wanted the bank to be in existence for at least five years before they would switch. (Challenger banks have their work cut out with some of our respondents.)
All demographics are embracing new digital customer service channels, including chatbots and social media payments
Contrary to popular belief, 82% of our respondents said they didn’t care if they talked to a chatbot or a human being for customer service. They were also happy to pay their friends and family over social media such as Twitter and Facebook. 100% of respondents liked using apps, with far fewer people enjoying using branches, websites and phones for customer service.
I presented these findings (with a lot more insights) at Money2020 Europe – the slides can be found below …
This study was done as a learning exercise for us to understand challenger bank users’ experiences in person. If any reader has access to better data (especially from the challenger banks themselves), please write in!
Disclaimer: The primary survey was done only for UK-based consumers. Our sample size is too small to constitute conclusive proof (approximately 400+ in-person surveys and 100+ online surveys), but the results are quite indicative of the UK challenger banking market.
I would like to thank the Burnmark interns who stood around in public places for weeks collecting this information, and the Burnmark research team who went through hundreds of customer stories and converted them to meaningful data and insights. It was no small feat!
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Main image: Julia Tim, Shutterstock.com