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Digital banking is not helping with the loss of mainstream banks on our high streets and the competition from so-called ‘challenger’ banks. As customers are facing cost of living concerns how banks respond is key.

The Competition and Markets Authority recently commissioned customer surveys to glean whether and on what basis individuals and businesses would recommend their current account banks.

The results were not great for the traditional high street banks even where they are not on the high street but were for the challengers and the digital operations on the market.

Overall, the top-ranked personal current account providers in Great Britain were Starling Bank, Monzo and first direct. Bottom of the list were: Royal Bank of Scotland, Virgin Money and TSB.

Overall, the top-ranked business current account providers in Great Britain were Starling Bank, Monzo and Handelsbanken. At the bottom were: The Co-operative Bank, Virgin Money and HSBC UK.

In response, several banks specified a focus on digital: quoted in the Financial Times Virgin Money spoke of “investment in compelling customer propositions and digital innovation”; TSB of “evolving our digital services” and HSBC of having “simplified a number of processes and introduced more digital tools”.

The question is whether it is easy to add on such tools and be a match for the fintech operations that are unencumbered by demands for high street services. Investment houses don’t have walk-in sales premises – do banks need them anymore?

One such fintech operator Tide (Tide Platform Limited) managed to achieve fourth spot for overall service for business current accounts in the survey, third place for online and mobile banking services and fourth spot again for relationship and account management.

Tide only set up in 2015 providing mobile-first banking services for small and medium sized enterprises.  It enables businesses to set up a current account and get instant access to various financial services (including automated bookkeeping and integrated invoicing).

As one of the first digital-only finance platforms in the UK to provide current accounts for businesses, one wonders when next the CMA looks at the sector, how many digital-only operators will have ousted the high street names.

Beyond current account facilities – when it comes to lending, elsewhere on the market there is iwoca, one of Europe’s largest small business lenders.

Research by iwoca reveals that despite rising economic concerns, 93 new businesses were created every hour across the UK in the first half of 2022. Analysis of Companies House data reveals that over 402,000 businesses were registered in the UK between January and June 2022, an increase of 18% from 340,500 over the same time period in 2021.

Seema Desai, iwoca’s Chief Operating Officer says: “Despite the prevailing headwinds of an impending recession, we are encouraged to see that so many businesses have been created during the first half of this year.

“As many of these businesses struggle with cash flow in the coming months due to skyrocketing business costs, it is vital that lenders step in to provide a helping hand.”

Iwoca says it does this, adapting to the needs of small businesses by deploying the latest embedded technology.

The high street names, that have SME lending arms may also be facing swifter/slicker competition from such fintech lenders, as they are in their current account offerings.