Platform the way forward for British consumers

By Robin Amlot

Younger cohorts of British consumers increasingly want their banks to act as a hub for different financial services products, suggesting providers should adopt this model to retain their competitive edge. Good news for incumbents – the research also showed that most British consumers would prefer their primary bank account to act as this platform for financial services products.

Research from Deposit Solutions finds that 56% of British consumers say they want as few financial services providers as possible. However, despite this desire for financial simplicity, the UK now has 2.8 bank accounts per person – up from 2.5 just six years ago – the highest among Europe’s large economies with the country now possessing a total of 156 million bank accounts. By comparison, Germans have 2.0 bank accounts per person, the Spanish have 1.7, the French 1.4, and Italians 0.9.

These findings have been published in Deposit Solutions’ latest report, Platform banking: Customers’ changing expectations and desire for financial simplicity, which examines how the savings account market will be a key battleground between large incumbent banks and challengers for customers in coming years.

The research suggests that the market could be ripe for the consolidation of UK consumers’ bank accounts under the umbrella of one provider. When asked, more than half (52%) of UK consumers said that they liked the idea of their primary bank or financial services provider acting as a marketplace and offering them products from other financial services providers. Furthermore, this idea is much more attractive to younger consumers, with 63% of 18-34-year-olds finding it appealing, compared to 41% of 55+year-olds. This suggests adopting a platform model will be inevitable for banks as the share of customers who expect this is going to increase even further.

Although many challenger banking brands are trying to position themselves as platforms and hubs for customers’ finances, there are signs that the big retail banks may be missing out an opportunity by not adopting such an approach. Four in five (79%) UK consumers say they would prefer to consolidate all their financial services with a traditional bank, and very few were comfortable with a mobile or challenger bank taking on this role (13%). Respondents were even more reticent with the idea of a tech company like Apple or Google (4%) taking on all their financial services.

The report also shows that British consumers are less satisfied with savings accounts offered by big retail banks than those offered by challengers, and that savings accounts customers are more likely to switch than current account customers. By using open banking to offer their customers access to savings accounts and products from third parties, large banks can negate the risk this presents to their customer relationships. A platform approach could allow large banks to keep ownership of the customer relationships while also meeting customers’ desire for financial simplicity and ease-of-use.

Mark Davison, Deposit Solutions’ Managing Director for UK & Ireland said: “Conditions are favourable for the platform banking model to prosper in coming years. While consumers will always want choice, they also want to reduce the headaches associated with having a lot of different financial services providers. There is growing appetite among consumers to manage their finances from one easy-to-use hub, which will drive the platformification of banking. Furthermore, younger age cohorts are even more enthusiastic about this model, which should further cement platform banking’s spread in the medium to long-term.

“This presents large retail banks with a sizeable opportunity, as consumers have a clear preference for their primary bank to act as this hub. Successful banks will therefore expand their own products and services to include those of other players. If they don’t lead the way on this, other companies could step in to fill the void. Open Banking offers big banks the opportunity to retain the customer relationship.”