Competition from challenger banks is being welcomed by the majority of adults in the UK.
Customer dissatisfaction with the mainstream banking industry has helped to create a booming fintech industry, with the UK being seen as a world leader in the market.
The majority of UK adults (77%) say that greater competition from challenger banks should be encouraged. The areas that the public would like to see differentiation is in providing better customer service (49%), and with greater transparency (39%).
With one in three feel that new entrants should be more committed to supporting local businesses, the research from Triodos bank suggest that these are areas in which customers are most feeling let down in by the mainstream banking industry.
The financial industry has become increasingly disrupted by challenger banks such as Mondo, Atom and Tandem. The new mobile and digital banks have turned to technology in order to break into an industry that has been forced to change due to regulatory and social demands.
Financial regulators in the UK such as the Financial Conduct Authority have been proactive in its support for fintech companies, in addition to lending a helping hand to established players to help them innovate.
Recently the FCA opened its sandbox to encourage innovation in the financial services sector by providing an area in which both fintechs and established players can experiment without fear of punishment.
Mainstream banks have increasingly looked at adopting technology as a way to improve services for their customers.
Banks such as HSBC, Barclays and the Royal Bank of Scotland are increasingly investing in technologies such as biometrics, robo-advisers and artificial intelligence as ways of staying up to date with customer demands for simplified interactions with their banks.
Further forced innovation is likely to be in the pipeline for the big four high street banks this week as the Competitions and Markets Authority is due to reveal recommendations for retail banking.
The CMA is expected to unveil measures that help people to understand bank charges and switch current accounts.
Some challenger banks have called for the CMA to split up the big four lenders – Lloyds, HSBC, Barclays and RBS, in addition to pushing for a stop to the advertising of current accounts as free when many involve hidden costs.
According to Money Facts, a site that tracks banking products, more than 90% of current accounts charge some kind of fee.
As distrust of the mainstream lenders has grown over the past few years, a more transparent approach to banking is being demanded by both customers and challenger banks; the CMA report will have to decide how far it goes in forcing transparency.
One way that the CMA will push for greater transparency is by recommending that the big four banks fund a price comparison services that covers fees and charges around current accounts, in addition to suggesting a cap on overdraft fees.
Fintechs are also likely to be asked to produce ideas that will help to speed-up and simplify switching between current accounts.
This would theoretically make it easier for customers to switch away from the big four, reducing the 77% share of active current accounts that they hold in the UK.
