Consumers wary of depositing large sums with challenger banks

A study by comparison site Finder has revealed that almost half of customers who have digital-only bank accounts don’t keep significant sums in their accounts.

Smartphone challenger banks such as Monzo and Starling are gaining customers at a fast rate. Figures from the Current Account Switch Service found that the two banks gained almost 10,000 new customers between them in the last quarter of 2018, a hefty increase from the 4,500 seen in the previous quarter.

However, while customers continue to flock to the challenger banks, they’re less keen to’put their money where their move is. “According to a survey of 2,000 people by Finder, 47% of digital-only customers keep less than £1,000 in their digital accounts, while three in 10 have less than £100 deposited.”

This corresponds with figures from Monzo’s most recent accounts from July 2018, which show that four in five of the bank’s customers did not deposit their salaries with it, while the average deposit was less than £150.

Data from the Finder survey also found that 38% of digital-only customers planned on keeping their traditional bank account as their main account for the immediate future. However, three in five of those surveyed indicated that they were planning to deposit their salaries into a challenger bank and use it as their main account at some point in the future.

Challenger banks are popular with customers as they offer flexibility. Many customers use them to deposit spending money, in order to take advantage of features including rounding up change and instant notifications. New customers also often open accounts before holidays, in order to take advantage of better exchange rates and fee-free ATM withdrawals.

Jon Ostler, Finder’s Chief Executive, said that the results of the survey showed that it’s “clear fintech challengers have a way to go in convincing customers they are a safe, long-term option for their money.”

He added: “Technology has enabled digital-only banks and personal finance apps to offer some amazing features like spending analytics, automatically investing your spare change and safety features such as being able to instantly freeze and unfreeze your card. However, our research shows that consumers are still hesitant about putting significant amounts of money in these accounts and making them their primary ones.”