In a survey of 2,000 UK adults carried out in March 2016, over half (57%) said they were frustrated by their high street bank due to unfair bank charges, branch closures and IT failures.

As well as expressing their irritation, many indicated a willingness to consider alternative providers of payments services. A quarter said they would rather trust a technology company with e-money transactions than a bank.

This represents a sizeable shift in public attitudes and openness towards more innovative means of payment. One could even pose the question: is there a future for high street banks?


Scott Dawson

Erosion of trust and customer experience

To explore the future of high street banks, we must first understand the current perceptions of these institutions in the mind of the consumer. By far, one of the biggest areas of concern is trust.

Historically, banks have been seen as synonymous with trust, with phrases like “you can bank on it” marking their dependability in popular consciousness. Yet, since the banking crisis, the authority and solidity of banks have been cast in doubt. And this, coupled with scandals, such as PPI and Libor rate fixing, have eroded trust and undermined the public reputation of banks.

Alongside this erosion of trust, there is also growing frustration with particular aspects of banking services. Topping the list is unfair bank charges, with nearly a quarter of people (24%) citing this as their biggest source of aggravation. In addition, 18% said branch closures caused inconvenience and a further 18% found IT failures, such as being unable to access an online account or have wages transferred on time, disruptive.

The biggest frustrations with high street banks according to a poll of 2,000 UK adults:

  1. Unfair bank charges (24%)
  2. Branch closures (18%)
  3. IT failures (18%)
  4. Delays in my balance updating (16%)
  5. Mistakes (13%)
  6. Scandals (12%)
  7. Security breaches (12%)
  8. Lack of opportunity to talk face-to-face (12%)
  9. Lack of opportunity to talk over the phone (9%)

The introduction of online banking and automated account management terminals have made services more convenient and accessible. And yet, the report has shown that these advancements in technology have actually contributed to the demise of the physical ‘high street’ bank.

Trust between organisations and their customers is reinforced through regular engagement, with each contact opportunity helping to strengthen the relationship and forge a better connection. Now, however, the days of having a one-to-one relationship with your local bank manager are long gone. In fact, 53% of bank customers say they haven’t seen a member of the staff from their bank in the past year and 83% do so less than every six months. With the frequency of face-to-face interaction between banks and their customers declining, the opportunities to make more of a personal connection are fast becoming few and far between.


Slow on the uptake

While digital has become an all-encompassing part of our daily lives, more traditional industries, like banking, have been slow to adopt new technologies in comparison toother sectors, like retail and media. This lack of innovation, and the evermore antiquated processes, haven’t gone unnoticed by customers – especially the younger generations.

In our always-on, networked economy it’s astonishing that it can still take up to four days for a cheque to clear or up to six ‘working days’, and for a cost of up to £30, to send money to a different country.Today, more than ever, people expect efficiency and immediacyso what we need now is a more customer-centric approach to financial services.


An emerging alternative

The digital economy is growing while customer frustration with high street banks is at an all-time high. Against this backdrop, e-money is emerging and rising in popularity as the alternative to an increasingly out-of-date banking system fraught with inefficiencies.

In the past two years, the number of e-money service providers has doubled and people are seeing them as a viable alternative.

Almost a third (28%) of respondents aged under 35 said they would trust a technology company like Google or Apple with e-money transactions. This figure was even higher for under-24s, with 32% saying they’d place their trust in these organisations.

While this apparent receptiveness is a shift for the sector, when you understand the benefits of e-money providers, it’s easy to see why. And while e-money can’t tackle all the customer frustrations the survey highlighted, consumers no longer see banks as the only way to take care of their financial needs. This is opening doors to other businesses and brands that can provide financial services through a technology-led approach.


Time and money

Fees and charges, for example, are the number one frustration of customers. And yet, these are considered one of the key areas where forward-thinking organisations are developing alternative services.

For instance, companies such as offer international transaction services around 70-80% cheaper than traditional banks that usually complete within one working day. By comparison, most high street banks typically charge £15-£30 for a service that takes 4-6 working days.

We’re now in a society in which we have become accustomed to services being delivered at minimal cost, or often free of charge. This is a stark contrast with the seemingly expensive and slow services on offer by most banks.


A not so current account

‘Current’ accounts are a further cause of frustration for customers, with around a third of respondents wishing they could have a more accurate picture of their actual balance.Whether it’s cheques that take up to four days to clear, or direct debits and card payments that are not immediately subtracted from your balance, this lack of clarity is a real headache – particularly for those on limited budgets for whom every penny counts.

Recognising the daily challenge this uncertainty can cause, banking-lite accounts are another option, giving more certainty and flexibility to customers.

PrePay Solutions, for example, is a banking-lite provider that is experiencing exponential growth asan alternative to traditional current accounts. Handling €5bn of transactions in 2014, the company offers a prepaid account that gives real-time transaction information, a more detailed spending analysis to help budgeting and better rates when travelling aboard.

Similarly, Raphaels Bank has partnered with Payment Card Technologies to launch the Change Account, a product that includes multiple purse features, mobile-based account management and faster online payments.

Almost a third (28%) of respondents aged under 35 said they would trust a technology company like Google or Apple with e-money transactions. This figure was even higher for under-24s, with 32% saying they’d place their trust in these organisations


A new generation of banking

Immediacy and speed are becoming an increasingly important differentiator for the consumer and this is of particular value to younger customers. Unfortunately for traditional banks,this audience group is the one segment of the population where trust levels are at their lowest. In fact, half of the 18-24 year olds polled stated they wouldn’t have faith in their bank in handling their transactions.

There are a number of non-financial organisations that have recognised there is an opportunity in filling the void with this millennial audience. Through the provision of e-money services, these organisations can build further loyalty to their brand adding new and useful benefits.

Starbucks, for example, has launched an app that allows customers to load money directly onto it to pay for their purchases, collecting reward points as they spend. It also provides regular deals, news and member discounts, and even lets the customer order and pay for coffee in advance – collecting it when they’re ready.


Looking to the future

So, to answer the question: is there a future for the high street bank? Yes, there is, but innovation is vital.

In having an historical monopoly on the market, high street banks have rested on their proverbial laurels. With the backing of regulators, who are championing a more vibrant money market by simplifying the e-money operator application process, customers are becoming increasingly open to alternatives.

When it comes to the smooth running of the market for financial services, banks are essential. However, e-money service providers are challenging the industry with new services for the niche and mass market. Although these fledgling businesses may seem insignificant to these global institutions, if the past 15 years have taught us anything, it’s that organisations that lose relevance and relationships with their customers are soon superseded.

While traditional financial institutions are too integral to the economy to go in the way of high street stalwart as travel agents, banks would do well to heed the warning signs. It’s imperative banks ensure they’re delivering services that more closely meet the needs of their current and future customers.


Scott Dawson is commercial director at Neopay, a leading e-money and payment regulatory specialist