The UK is embracing digital banking according to a new report published by the BBA this week. ‘The way we bank now‘ found that millions of people are now using banking apps, and mobile banking is growing faster than internet banking was ten years ago. As well as this, it predicted the decline of bank branches. And, leafing through the report, I found this fascinating from the point of view of young people, given their misgivings about digital banking as little as two years ago.
So what has changed and why is it surprising? Well, numerous studies have noted how conservative young people are. MRM’s 2013 Young Money – Generation Austerity report which surveyed 2,000 people aged between 18 and 60 on their attitudes to financial services found that young people were the most conservative of any age group.
And just 2 years ago, research by the CSFI think-tank, “Generation Y: the (modern) world of personal finance)” revealed that young people were wary about online or mobile banking – so much so that three quarters of those surveyed had never used mobile banking, believing security to be a major issue. In both reports, young people were particularly on banks keeping a physical presence on the high street – according to “Generation Y”, nearly all still visited their bank branch, if only to pay in cheques and get face-to-face advice.
But since then, an almost astonishing turn-around has happened, and recent research indicates that generation Y are warming to the idea. In May 2014, a report by the global consultancy Accenture found that young people were open to alternative financial services, with nearly four in 10 of those aged between 18 and 34 open to switching to a bank branch without any physical branches.
What are the reasons for such a shift in attitude? Well, first is the increase in smartphone usage – 70% of young people now own a smartphone, as well as the growing digitalisation of other areas of everyday life.
But, credit has to go to the banking industry (or at least the payments part of it), who have done a phenomenal amount of work in making digital banking more accessible. The Paym network, launched by the major banks earlier this year, and allows users to send payments via text message, saw a download every 7.5 seconds in its first month, according to the BBA’s research. Other payment apps have also been successful, such as Barclay’s Pingit. Young people’s acceptance of digital banking seems to have come full circle with the new Payfriendz payment app – which is aimed specifically at Generation Y.
Of course, there is still a way to go before physical bank branches are completely done away with, but as young people get more comfortable with digital banking, it will be interesting to see how it unfolds.