Digital-only financial providers significantly expanded their reach from 16 per cent of adults in 2018 to 50 per cent in 2024, according to new research from data and insights company RFI Global.
While traditional banks continue to dominate financial services in the UK, customers appear to be increasingly trusting neobanks such as Monzo, Starling and Revolut, as well as digital fintechs including Klarna, with their money.
Increasing numbers of consumers have their main debit card with a neobank and spend 20 per cent more than consumers with a main debit card from the largest traditional UK banks. In fact, the average number of financial providers used per person climbed from 4.3 in 2015 to 5.3 at the end of 2024.
Gen Z and millennials are a driving factor to this increased level of switching banks. They are at least twice as likely as Gen X and three times more likely than Baby Boomers to have changed their primary bank in the past five years, signalling a generational shift in banking loyalty.
“Everywhere you look neobanks are becoming a bigger part of the system,” explained Hubert Petka, group director at RFI Global. “They are popular among younger generations such as Gen Z and millennials who value their advanced digital capabilities and convenience.
“Yet banks remain resilient as they increase their agility and consumers continue to use their cards, alongside cards from neobanks, to meet their day-to-day needs. Nonetheless, neobanks are poised to grow in the years to come and could really threaten the dominance of the incumbent players over the next decade.”
RFI’s research shows that consumers holding their main debit card with a neobank rose from one per cent at the end of 2020 to nine per cent at the end of 2024, while the share of the market for the Big Six banks decreased from 85 per cent to 71 per cent in the same period.
Switching banks for rewards
Unsurprisingly, it appears rewards and incentives are the biggest drivers to people switching banks. While people used to be more likely to get divorced than change their main bank provider, today UK consumers are more likely to switch banks to utilise attractive deals and to access rewards such as cash bonuses, interest and other perks.
Of consumers who are strongly considering switching their main current account in the next 12 months, half claim they are considering switching to access an incentive or that the other provider offers better rewards.
“Amidst fierce competition, banks have ramped up their efforts to win over consumers. These attractive rewards are reshaping the landscape of consumer loyalty and engagement. Yet with the majority of consumers lacking access to any loyalty perks through their main banks and dissatisfied with their current rewards proposition, there is still more that could be done by financial providers to attract and retain customers,” added Petka. “As consumer expectations continue to shift, all financial institutions need to pay attention to the nuances of these trends.”
Saving struggles
Nearly half (49 per cent) of UK consumers are dipping into their savings to cover rising household expenses and unexpected costs, the highest amount for over a decade. A further 27 per cent say they will need to access more credit this year to cover continued rising costs – opening additional credit cards or using BNPL.
Of the 43 million people in the UK who save (80 per cent of the banked population), more than one-third – predominantly millennials aged between 27 and 42 years – have less than £1,000, and 29 per cent have less than £500, in their savings accounts. At the same time, the top 25 per cent of savers, largely retired baby boomers, boast average savings of £91,500.
“Despite rising intentions to save for a rainy day, consumers struggled to save last year and turned to savings to cover a higher cost of living,” continued Petka. “New savings account openings, which followed a rise in interest rates, have now tapered off and the average balance in the main savings account has reduced by a third.”
RFI also found that around one in five people (18 per cent) are not confident in managing their finances. Vulnerable consumers are increasingly unconfident, with 69 per cent saying this is due to limited knowledge and experience.
