Challenger banks gain the lion share of bank accounts market in UK

These are the latest findings from Travelex Currency Solutions in its new report The Race to Re-bundle the Bank. Consumers are effectively ‘unbundling’ their traditional bank into disparate services from multiple alternative providers.

However, consumers – especially millennials – have become frustrated with managing numerous accounts, and are looking to their incumbent bank to consolidate them into a single marketplace.

The average number of money-related accounts held by consumers has increased over the last 10 years. The number of fintech providers used has increased by over 50%, with e-wallets (80%) and international money transfer accounts (29%) showing the biggest gains. In contrast, traditional banks have only seen an increase of 11%.

Younger consumers in particular have more diverse financial lives. Nearly a quarter of respondents under 36 have three fintech accounts or more.

The reason for opening additional accounts is driven by a specific financial need. The primary needs that lead people to stray are budgeting, bill payment and specific services like money transfer. Interestingly, only 11% cite the user experience as a reason to look beyond their current provider.

When selecting a particular provider, consumer focus shifts to “cheaper, better, faster”. In this context, the leading factors are the rate/cost of services offered (31%), the speed of service (29%) – which jumps to 40% for 18-25 year olds - and the user experience (23%).

Traditional banks have been unbundled and disintermediated by alternative providers. This has led to ‘finance fatigue’ as consumers struggle to manage multiple accounts. Now they are looking to their bank for a solution.

42% of consumers expressed frustration at their lack of ability to manage multiple accounts from one place and, of those, 55% said they had considered closing accounts because of it. When asked who they wanted to provide a marketplace service that consolidates accounts and providers into a single dashboard, almost 60% said their incumbent bank.

Interestingly, re-bundling accounts would drive consumers to use an even wider range of providers. 59% of consumers would be more likely to use other money-related accounts if they could manage them from a single interface.