Digital banks and neobanks are a fairly recent evolution in the financial services world. Incumbent banking has been around for decades, if not hundreds of years. Old banks taking deposits for safekeeping, paying little in return (or charging fees), packaged with mediocre services, and queues for a teller have long been the norm. But complacency creates opportunity and digital banks are taking advantage of the inability of old banks to change – or at least change quickly enough – and consumers and businesses are responding.
According to a recent statement by the UK Competition and Markets Authority (CMA), the top banks in regards to the quality of service for personal and business current account providers prove that digital upstarts now lead the pack.
The CMA reports that overall, the top-ranked personal current account providers in Great Britain are Monzo and Starling Bank tied for first. Neither has a physical location but both host a pretty robust app.
In regards to the highest ranked business current accounts in Great Britain, once again, digital wins with Starling Bank first and Monzo second.
There must be a special mention for first direct, an offshoot of HSBC that is digital only. This bank is in 3rd for personal account providers.
At the bottom of the list for personal current accounts, according to the CMA, are the following:
- Royal Bank of Scotland (16th)
- Virgin Money (15th)
- TSB (14th)
And for business current accounts, the worst of the lot are as follows:
- The Co-operative Bank (15th)
- Virgin Money (=13th)
- HSBC UK (=13th)
The shake-up of incumbents being surpassed by Fintechs is aided in part by the UK government’s push to facilitate account switching. There is even a “Current Account Switch Service” designed to make leaving one bank for another with better service. Prior to an emphasis on switching, old banks could count on shear inertia to keep acc0unt holders in line. The hassle was simply not worth the pain – even if the service and fees were horrendous. Today, not so much as digital banks work hard to gain new accounts, and incumbents, apparently, are struggling to figure things out.