3 key drivers of UK digital-only bank growth in the next 5 years

For example, the FCA runs fintech sandboxes, making it relatively easy (versus the US) for neobanks to obtain banking licenses. It was also an early …
  • We forecast a continued rise in UK digital-only bank account holders between now and 2024.
  • This growth is largely due to innovation-friendly regulators, limited international competition amid Brexit and the pandemic, and above-average fintech adoption rates.
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Insider Intelligence’s recent Digital-Only Bank Account Holders Forecast report delves into why—despite significant risks including a pandemic-battered global economy and ongoing profitability struggles—we expect account holder numbers at digital-only banks in the US, UK, and Canada to keep rising between 2020 and 2024.

uk digital only bank account holder growth

UK digital-only bank account holders will rise between now and 2024.
Insider Intelligence

While US-based banks will experience the fastest growth during the forecast period, with a compound annual growth rate of 19.8%, the UK will come in second, with overall account holder numbers rising 12.7% between 2020 and 2024.

The UK will also boast the highest starting penetration (defined as the percent of the total population who are digital-only bank account holders) of the three countries in the forecast, standing at 22.8% in 2020—and that will increase by 13.3 percentage points between 2020 and 2024, the biggest spike in the forecast.

Here are the predominant factors we expect to fuel UK digital-only bank account holder growth over the next five years:

  • An innovation-friendly regulatory environment. UK regulators, especially the Financial Conduct Authority (FCA), have earned a reputation for fostering fintech innovation and boosting competition. For example, the FCA runs fintech sandboxes, making it relatively easy (versus the US) for neobanks to obtain banking licenses. It was also an early adopter of open banking, which eases third parties’ access to consumer financial data across multiple financial institutions to improve their services. This environment gives digital-only banks the benefits of faster time to market, freedom to launch new products, and a strong base from which to compete with older banks.
  • Reduced international competition due to Brexit and the coronavirus pandemic. Following the UK’s departure from the EU in January 2020, several non-UK-based neobanks either halted plans to expand into the country or terminated their existing operations there. German neobank N26, for example, announced in February that it would shutter its UK operations, citing Brexit and giving its homegrown competitors an immediate boost in both customer numbers and deposits being funneled in from N26 accounts. International competition should only diminish further as pandemic-related economic uncertainty halts more players’ expansion plans in the country. We therefore expect to see growing consolidation around domestic neobanks in the UK. That combination of trends will likely drive account holder growth among the biggest UK neobanks in particular.
  • Above-average fintech adoption rates. Per EY’s 2019 Global Fintech Adoption Index, 71% of the UK population uses some form of fintech service, compared with a global average of 64% (measured across 27 markets)—placing the UK 10th in EY’s rankings, while Canada comes in 23rd at 50%, and the US in 24th at 46%. This means that despite a small population, the UK’s digital-only banks have a highly receptive audience for their offerings, pushing up account holder numbers.

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