Almost Half (46%) of UK Business Leaders Trust Digital-Only Banks as Much as Traditional Banks

Digital banking
07.08.2024 10:35 am

Online-only or ‘faceless’ banks are becoming a more familiar part of the UK banking landscape, with increasing numbers of businesses managing their finances through digital-only providers like Starling or Monzo.

To uncover attitudes towards digital versus traditional business banking, NerdWallet UK surveyed 1,000 business owners and decision-makers of UK small to medium-sized enterprises (SMEs), asking their thoughts on the online business banking landscape.

Key findings

45% of UK business owners and senior decision-makers have opened an online-only bank account in the last 12 months, while 21% have considered opening one
46% of UK business leaders trust online-only banks and traditional high street banks equally
The two most desirable features for business were a free business bank account with no monthly fee (chosen by 43% of respondents) and free basic UK transactions (selected by 34%)
31% said customer service was an important factor in their choice of business bank account, including the ability to contact an adviser easily
Only one in five (20%) said convenient branch access was an important consideration when choosing a business bank account, compared to nearly double (37%) who said easy online access was a key factor

UK business leaders placing their trust in online banks

A large percentage of British business leaders now trust online and high street banks equally, with 46% having the same degree of confidence in these different types of providers. With 45% of UK business owners and senior decision-makers having opened an online-only bank account in the last 12 months, challenger banks are beginning to dominate the business landscape.

However, trust in different banks varied significantly among different age groups. Respondents between the ages of 18 and 44 were significantly more likely to trust online-only providers than their older counterparts, with 25% of the younger group finding online-only providers more trustworthy compared with just 6% of the older respondents.

In contrast, older respondents tended to trust traditional banks more. Of the over 45s, 38% said they had more faith in a high street bank, compared with 28% of those aged 18 to 45.

The most popular reason (at 14%) respondents gave for trusting a traditional bank more was because they were more confident about being protected by the Financial Services Compensation Scheme with a high street bank and fear online scams, hacks and data breaches relating to Authorised Push Payments. This is despite most online-only or app-based bank accounts being protected by the FSCS, so challenger banks could be missing a trick by not promoting that deposits worth up to £85,000 are protected by the FSCS.

Trust in online vs. traditional business bank accounts among business leaders	All ages	25 to 34	35 to 44	45 to 54	55 to 64	65 and over
Trust both traditional and online banks the same	46%	54%	35%	54%	50%	40%
Trust traditional high street banks more	32%	26%	30%	34%	38%	51%
Trust online or app-based banks more	18%	15%	32%	8%	6%	0%
Neither or not sure	5%	5%	3%	5%	7%	9%

Free bank accounts (43%) and free basic UK transactions (34%) among most important business banking features

When choosing the features business leaders valued most in a business bank account, 43% said their top priority was to have a free bank account, with no monthly fee. Meanwhile, just over a third (34%) of respondents thought free basic UK transactions were a key feature that would appeal to them.

A third (33%) of respondents said an easy-to-use app was among the most desirable features for a business bank account. Digital services are not solely the domain of online banks – traditional high street banks need to appeal to their customers with a convenient app too.

Almost a third (31%) of respondents said customer service influenced their choice of business bank account provider, including the ability to speak to an adviser over the phone.

Only one in five (20%) said convenient branch access was important, compared to nearly double (37%) who said easy online access was the key factor when picking a bank.

Top 5 most desirable bank account features for businesses

Additional features or characteristics business leaders find most desirable in a business bank account	All ages	25 to 34	35 to 44	45 to 54	55 to 64	65 and over
No monthly fee	43%	30%	35%	57%	61%	67%
Free basic UK transactions	34%	29%	25%	41%	52%	47%
Easy-to-use app	33%	34%	28%	41%	35%	18%
24/7 customer service	31%	34%	25%	28%	34%	42%
Business savings options	21%	25%	19%	20%	21%	19%

Amy Knight, personal finance expert and business spokesperson at NerdWallet UK says:

“Given how challenging the economic climate has been for small businesses in recent years, it's no surprise that free business banking, followed by free transactions is top of the wishlist for business leaders.
“Business banking is shifting more online than ever now that bigger financial decisions, such as taking out a business loan, credit card or overdraft, can be actioned with a few swipes of a thumb. As in-branch services continue to fade out, access to online features has become more important than ever.
“Though most app-based and online-only banks offer users the same level of financial protection as their high street competitors, it will take time to build their reputation – particularly with business owners aged 45-plus who may not consider themselves digital natives.
“Challenger banks, such as Revolut, Monzo and Starling, have designed their user interface to create frictionless digital experiences that appeal to Millennials and Gen Z. To compete with these newcomers, traditional banks need to up their game, ensuring banking apps are intuitive and engaging, as well as being inclusive and accessible to a wider demographic of business owners.”