Pandemic May Be Narrowing Gap Between Digital Challengers and High Street Banks

New research from global insights and information company TransUnion suggests an increased intention among UK consumers to engage with online-only banks or apps, narrowing the gap between these challengers and traditional high street banks.

The figures show 11% of consumers intend to open an account with an online-only bank or app in the next 12 months, versus 12% who intend to apply to high street banks. This could indicate the gap is closing, when compared to our pre-pandemic research published a year agoi which showed a 3% gap between the two at 10% and 13% respectively.

One in 10 consumers have changed their current account since March 2020 with nearly a third (32%) of these switching from a traditional bank to an online-only one.

Stephen Wishart, director of fintech for TransUnion in the UK explains: “What we’re seeing in the financial landscape isn’t new but the pandemic has accelerated the trend toward digital-only finance providers. Consumers cite convenience (67%) and speed and ease of service (65%) as the biggest appeal factors of online-only banks or apps, so these challengers have been able to play to their strengths through lockdowns and social distancing.”

Other areas of appeal are attractive rates (41%) and being paperless (30%), with the research showing that one in 10 customers (10%) have taken out a loan with an online-only bank or app in the last 12 months.

Stephen Wishart continues: “Looking ahead, our research suggests consumers will be more cautious with credit than last year in some areas, with just 11% planning to take out a mortgage in the next 12 months, compared with 17% pre-pandemic. Fewer plan to take secured personal loans too, at 7% now versus 11% at the start of 2020, although the demand for credit cards remains unchanged at 13%, as it was before COVID-19.

“That said, there’s a growing sense of financial optimism, as our Consumer Pulse study showsii, which has been tracking the impact of the pandemic throughout, and we’re seeing that one in five consumers (21%) are planning on opening a new savings account which is a really positive indication. This mixed picture is something all banks; whether digital-only or traditional, are having to consider when assessing customers’ needs, as there’s a divide that’s becoming more evident. With 82% of those taking mortgage payment holidays saying their arrangements will come to an end within three months, we can expect that polarisation to come into even sharper focus.”

Find out more about TransUnion’s Affordability Solutions which can help lenders make informed risk assessments, and Consumer Engagement tools to empower customers to take control of their financial standing.



Unless otherwise stated, figures relate to survey of 2,000 nationally representative adults (18+) carried out on behalf of TransUnion in March 2021

i TransUnion’s Consumer Credit 2020 white paper. Research incorporated a nationally-representative survey of UK consumers conducted on behalf of TransUnion in November 2019, with 2,000 consumers aged 18 and over.

ii Based on research conducted 5 – 9 March 2021 with 1,100 UK consumers on behalf of TransUnion.