Written by, Marija Petkova
Updated August, 3, 2022
The days of waiting in line at the bank are long gone because now, with the help of smartphones and the internet, you can do your banking online with just a few clicks.
Adopted by over a quarter of the population, internet banking is growing fast in the UK. Investments in digital-only banks are reaching millions of pounds, and expansion to other markets is increasing rapidly.
What else do you need to know about this sector to enjoy the benefits? Take a look at our list of the most relevant digital banking statistics from the UK and see how you can use this trend to your advantage.
According to the latest stats, 27% of UK adults have an account with a digital-only bank. This represents an impressive 16% growth from January 2020 and a threefold increase compared to January 2019.
According to Statista, the total value of digital payments should reach over £210 million this year. Total value is further projected to grow at an annual rate of 12.79%, putting the expected amount at £340 million by 2025. These figures are not surprising at all, seeing as how e-commerce penetration in the UK has reached an impressive 87% in 2020 alone.
46% of Gen Z have already opened a digital bank account, 2020 digital banking stats indicate. However, it’s expected that in the next five years, Millenials will be the generation with the highest number of online bank accounts, as 28% of them plan to get this kind of account in the near future.
A closer look at digital banking user demographics reveals that 25% of men already have a digital-only account as opposed to 20% of women. What’s more, men are more likely to give new trends in UK banking a try — 24% of British men are planning to open an account with a digital-only bank in the next five years compared to just 19% of women.
76% of UK citizens used online banking in 2020. With the growth of internet use, online banking has been on the rise in the last decade. Specifically, the percentage of online banking users has gone up from 30% in 2007 to 63% in just ten years.
The number of online banking customers has increased among individuals in the UK as well as businesses. More and more companies are willing to accept these payment methods, resulting in a steady increase over the past few years. In 2019 alone, four out of ten B2B payments were carried out via remote banking (Faster Payments Service or other methods).
(The Office for National Statistics)
According to official online banking usage statistics in the UK, younger generations are more likely to use the services of online banks. Thus, 90% of Gen Z and 90% of 25 to 34-year-olds banked online in 2020 compared to 69% of the 55-64 age group and just 49% of those aged 65 and over.
An equal percentage (76%) of men and women used online banking last year, ONS records show.
While the value of online transactions reached nearly 22 billion, the total volume of online card transactions stood at 270 million. Compared to December 2019, this is an annual increase of 8%, i.e. the number of online card transactions stood at 249 million two years ago.
There are various authentication methods when it comes to internet banking. However, 69% of UK citizens say that they log in to their online accounts with just a username and a password. In addition, 17% log in with a chipTan, 14% with a Token, and 12% with a pushTan.
So, when did online banking start in the British Isles? The answer is back in June 1997 when the Royal Bank of Scotland launched the first internet banking service in the UK.
(UK Finance) (Business Insider)
According to UK Finance, 50% of adults in the UK used mobile banking. However, stats from the UK Mobile Banking Competitive Edge Study reveals that as many as 68% of respondents in the survey said they used these services the same year. Out of them, 86% saw mobile as their main banking channel, while 62% would even go as far as changing banks if they are not satisfied with the mobile experience.
Chosen by 61% of respondents, Apple Pay is the most popular mobile payment brand in the UK, a 2020 Statista survey on UK mobile banking reports. 32% chose Google Pay as the mobile payment service they used in the past year, whereas 12% went with Samsung Pay.
While Apple Pay, Google Pay or Samsung Pay continue to be used by UK adults throughout 2020, PayPal has seen a decline ever since February 2017, with the number of monthly active users of the app going down to a record low of 2.05 million in April last year.
Although mobile banking is on the rise, many UK retailers still don’t offer mobile payment methods such as Google Pay or Apple Pay to their customers. In fact, only 8% of multichannel retailers provided that kind of payment method in 2019.
As many as 83% of SMEs in the UK use mobile banking, and almost all of them turn to the internet to meet the banking needs of their businesses. Considering that SMEs account for 99% of all British companies, this is not a market online banks can’t afford to ignore.
As many as 5.7 million UK adults are planning on getting an account with a digital-only bank in 2021, a figure that is expected to increase by nearly 10 million by 2026.
What is holding the nation back? According to 65% of those who do not plan to go digital, it’s the treatment they get from their current bank. Another reason is the importance of face-to-face interaction with a member of staff, cited by 51% of customers.
(Statista) (FinTech Magazine)
FinTech companies, which include branchless banking and innovative technological banking solutions, are top-rated in the UK. In fact, 2019 UK online banking facts and figures put the adoption rate of these companies at 71%, much higher than the global average of 64%.
What’s more, as a result of coronavirus restrictions, the use of financial apps and mobile banking went up by 72% across Europe.
Most UK citizens, or 45% of them, to be precise, think that online banks are just as credible as traditional banks, while only a mere 5% don’t trust online banks. Interestingly, the highest level of trust in digital banks came from people that live in London.
(The Fintech Times)
Judging by posts on social media by customers, overall consumer feelings towards the banking industry fell, with trust in digital-only banks going down three times faster than that in high street establishments.
Thanks to mobile banking growth, it’s estimated that by 2024, 71% of customers will use mobile apps for their banking needs, whereas the number of customers who visit branches is expected to go down to 55%. The exponential growth of online banking combined with the pressure of cutting costs has forced the UK’s biggest banks to shut down many of their branch offices — in 30 years, two-thirds of branches have been closed down.
(The Fintech Times)
Despite the growing popularity of digital banks, these startups have a long way to go before they can catch up to high street banks. 2020 research from Curve indicates that customers tend to use cards from traditional banks more than those issued by challenger banks—83% vs 17% of the time.
Not only that but cards from neobanks are used for smaller purchases, digital banking trends indicate. Thus the average spend on the Curve platform for a traditional bank card is £32.67 compared to just £20.37 for challenger banks.
Investments into neobanks have grown since 2014, both in the number of deals and money raised. Thus, the quarterly value of announced funding jumped from £4.3 million to £521.5 million between the first quarter of 2015 and Q1 2020. The number of deals also increased during the same time period, from three to seven.
From the 24 announced fundraisings in 2020, the majority went into the three top challenger banks on the UK market. While Monzo raised £60 million and Starling Bank £100 million, the lion’s share of these investments went to Revolut, which got an incredible £445.4 million— its biggest fundraising to date.
After the latest cash investment, led by Fidelity Investments, Starling Bank is now valued at £1.1 billion.
Starling Bank is also one of the rare banks to finish 2020 with a profit, generating £800,000 in October and net income of over £1.5 million a month since then.
(Open Banking UK)
Open banking, i.e. a system that allows access and control of transactions, consumer banking, and other financial data through third-party apps, is one of the latest trends set to reshape the banking industry. That’s why 84% of FinTech companies are planning to invest in open banking products and services. What’s more, this sector could generate up to £7.2 billion in revenue by 2022.
Almost half of banking executives considered blockchain and artificial intelligence as the biggest influence on banking in 2020. Blockchain tech is used to streamline the process and cut costs, while AI technology is employed to ease user experience, identification and authentication of bank accounts.
The majority, or 41%, of respondents in a 2020 survey cite convenience on banks and apps as the main reason for turning to digital banking use in the UK.
Customers also value the rates offered by digital-only banks. In fact, 39% mentioned this as their top priority when opening a bank account. The third most popular reason for trying digital banking, mentioned by 28% of Brits, are the low transaction fees that come with digital-only bank cards usage outside of the UK.
(The Fintech Times)
Over half of customers expressed negative feelings about their app-only bak. Savings rates were cited as the biggest drawback (21%), followed by app issues (15%) and poor customer service (14%).
(The Fintech Times)
Improving customer experience is one of the top priorities of banks in the UK. This is why 36% of banking institutions were considering a FinTech partnership in 2019. Another 36% of more than three-quarters of British banks were thinking about a FinTech partnership to gain real-time visibility.
How safe is online banking? Although it comes with many benefits, there are also a lot of risks involved. The most common scams in digital banking are bank cards, and online banking fraud, with 13% of respondents in a 2020 survey saying they were victims of these crimes at least once.
Losses from online banking scams and hacking attacks vary annually. The biggest hit from online banking scams was registered in 2020 when £159.7 million were lost. The second-largest loss stood at £133.5 million, recorded back in 2015.
As mobile banking rose in the last couple of years, so did telebanking frauds. Based on these UK mobile banking statistics, there was an increase of 3,250 telephone banking fraud cases in 2019 compared to 2018. The good news is that by 2020, the number of cases declined to 3.25 thousand.
The London-based online bank Revolut has seen exponential growth in the last three years. In February 2020, it had 10 million customers, up from 1.5 million two years before. On top of that, the Revolut app has had more downloads than any other bank worldwide — another reason why it is considered one of the biggest and most popular banks in the UK.
Monzo Bank was founded in 2015 and is one of the best online banks for consumer banking in the UK. In a period of one year, the bank attracted 2.3 million new consumers and reported over £930 million in customer deposits.
(CNBC) (The Daily Telegraph)
2020 was the second year that Monzo recorded losses — in 2019, it lost £47.1 million due to hiring, expansion and marketing costs. The doubling in annual losses was also attributed to the coronavirus pandemic, which the company said might put their future operations at considerable risk.
Judging by digital banking statistics in the UK, Revoult managed to break even in 2020, and despite a decline in the number of downloads, its performance has improved in the autumn compared to the start of the year.
(Statista) (Business of Apps)
Starling Bank was founded back in 2014 and is considered the third biggest online bank in the UK, right after Revolut and Monzo. In 2019, the bank had 1.06 million customers and recorded average deposits of £940 million.
Earning £30 million in 2019, Starling may have lower revenue than Revolut and Monzo, which generated £160 million and £67 million, respectively. However, digital banking trends and data indicate that users tend to deposit more in this bank (£1,140 compared to average deposits at Monzo of £359 and Revolut with £305). Starling Bank users are also more loyal and do not have second accounts in other banks.
37. Atom Bank was the first app-only bank in the UK.
It was also the first online bank to receive a UK regulatory banking license. However, in terms of employees and customer base, Atom Bank is much smaller than other European app-based banks. As with other disruptor banks in the UK, Atom also suffered losses in 2019 — as of March 31, it recorded an operating loss of almost £49 million.
Digital banks have many advantages over traditional banking facilities. Since they have lower overheads, online banks in the UK can provide lower fees and better rates than high street banks ever could. That is not to say that disruptor banks are not without flaws. Security remains an issue, which considerably lowers consumer trust in these companies.
Nevertheless, as the digital banking statistics from the UK above demonstrate, this sector of the online banking industry has enormous potential for growth and numerous benefits to investors, business owners and users.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.