New research from the Social Market Foundation (SMF), released this Thursday, reveals that high street bank branches remain essential to Britons in the management of their money, with nearly two-thirds of consumers (63%) preferring to talk to someone face-to-face when making a big financial decision.
The new report, Balancing Bricks and Clicks: Understanding how consumers manage their money, reveals the complex nature with which people balance their use of technology and branch-based banking services. According to polling carried out exclusively for the report, when it comes to everyday money management, such as checking their balance or paying bills, most people (70%) are comfortable to do so online. The same applies for the management of more familiar financial products such as credit cards (62%).
However, when it comes to more significant and long-term financial decisions, like seeking financial advice (57%) or taking out a mortgage (50%), a majority of people visit a branch. In addition to this only a third (32%) of UK consumers would consider using a bank which had no branches as their main financial services provider.
The new polling for the report, based on a nationally representative online survey of 2,003 UK adults aged 18 and over carried out by Opinium Research, reveals differences in banking preferences between different groups of the population. It finds that women are more likely to manage all of their finances face-to-face, while people who are unemployed or aren’t working are also slightly more likely to be reliant on branches. This group is notably older than average, with relatively low average incomes (in comparison with those who manage all finances online who tend to have higher incomes), but Balancing Bricks & Clicks suggests physical financial services aren’t out of fashion yet – with younger people particularly keen on the support they find in branches when they’re faced with big decisions.
The report’s author, SMF economist Katie Evans said:
“The way we manage our money has been transformed by technology. But despite the growth in mobile and internet banking, it’s clear that many consumers value a physical presence from their financial institutions, especially for carrying out more complex transactions.
“Consumers who prefer using a branch to manage their money on a day-to-day basis are less likely to have degree-level qualifications and are more likely to be older or unemployed. These potentially vulnerable customers risk being left behind as banks reshape their high-street presence to focus on high-value transactions like mortgages.
“We argue that banks must continue to support these potentially vulnerable consumers with access to financial services and appropriate guidance. We appreciate this will require imaginative solutions to ensure that it can be done in a cost-effective way. Rather than branches, these transactions could take place in community settings like supermarkets and Post Offices.”
Nick Kennett, Group Director Financial Services Post Office Ltd, comments:
“As technology revolutionises the way we manage our lives, it is important to understand how it is changing the way we manage our financial needs and how different segments of society are responding to these changes.
“This research and report provides a valuable insight as to how consumers are responding to new technology in managing their physical needs – some are already happy to do their banking entirely digitally, while others still look to physical branches to carry out both simple and complex transactions. Many, probably the majority at the moment, mix physical and digital at different times and for differing services.
“It is vital we understand this balance between digital and physical – both today and how it will evolve in the future. This report is critical for industry and policymakers alike to ensure that all sections of society continue to benefit from the latest banking services and their financial needs are answered.”
Key findings from the polling:
- Most consumers (70%) are happy to carry out simple, day-to-day tasks like checking their balance or paying bills online. A majority are also willing to apply for and manage familiar financial products, like credit cards and insurance, online. But when it comes to big financial decisions, like taking out a mortgage (47%) or seeking financial advice (51%), half the population still prefer to visit a branch.
- Older people are most likely to carry out all their financial tasks through branches, but physical financial services aren’t out of fashion yet. Younger people are particularly keen on the support branches offer when they’re faced with big decisions.
- Four in ten (37%) UK consumers now carry out all of their financial transactions online – from simple day-to-day balance checks to applying for mortgages or seeking financial advice.
- But more than half (56%) of the population still use a range of different ways of contacting their financial services providers, depending on the task at hand.
- Nearly two-thirds of consumers (63%) would prefer to talk to someone face-to-face when making a big decision, and nearly half (47%) of all those who visited a branch in the last 12 months said this was for reassurance and support with complicated transactions.
- Only a third (32%) of UK consumers would consider using a bank which had no branches as their main financial services provider and more than a third (37%) couldn’t think of anything that would stop them from using branches to manage their money.
- While many consumers have downloaded mobile banking apps, evidence suggests that while they’re completely changing the way a small number of people manage their money, helping them to log in and check their finances every day, most people don’t make much use of them.
- Overall, men are most likely to manage all of their financial transactions online. Perhaps surprisingly, older consumers are more likely than average to manage their money completely online, while fewer younger consumers behave in this way than might be expected.
- Women are more likely to manage all of their finances face-to-face, and in particular those who are unemployed or aren’t working are slightly more likely to be completely reliant on branches. This group is notably older than average, with relatively low average incomes (in comparison with those who manage all finances online, and tend to have higher incomes).
Key policy recommendations from Social Market Foundation:
- Access to physical financial services is likely to become the main barrier to financial inclusion, as the less affluent, those with only basic (GCSE-level or below) qualifications and the unemployed are particularly likely to rely on branches to manage their money. We will need to consider alternative ways that these consumers can be provided with access to financial services, and appropriate guidance.
- Regulation of advice needs to be revised to ensure that high street financial services providers are able to offer the type of support that consumers desire on a flexible and appropriate basis, although consumer interests must continue to be safeguarded. Financial services providers should also work more closely with third-sector financial capability organisations to ensure that consumers are signposted to relevant services when purchasing products, in the same way they are currently directed to debt charities in troubled times.
- Stronger competition should encourage innovation; but we need to ensure incumbents aren’t able to block new models they find threatening, particularly around account aggregation. The Post Office could increasingly act as a physical aggregator, building on its current partner banking model to ensure that consumers who prefer to manage their money in person are able to access a variety of financial services from a wide range of providers even as branch numbers fall.
Notes to editors:
- A copy of the report, Balancing Clicks and Bricks: Understanding how consumers manage their money, is available online here: http://smf.jynk.net/publications/balancing-bricks-click-understanding-how-consumers-manage-their-money/
- The Social Market Foundation (SMF) is an independent cross-party think-tank. While it accepts support from partners to carry out its work, the SMF retains full editorial independence over its outputs. This report was kindly sponsored by Post Office.
- The analysis presented in this report is based on an online survey of 2,003 UK adults aged 18+ carried out by Opinium Research from 28th August to 1st September 2015. Results have been weighted to nationally representative criteria. The decision to use online methodology was made on the grounds of obtaining the largest possible sample size, and after running a test question to check that those who did not use online banking would be adequately represented in the results. The survey was designed to provide the broadest information possible about how UK consumers interact with a variety of financial services products and providers
- The report’s author, SMF economist Katie Evans, and Nick Kennett, Group Director Financial Services Post Office Ltd are available for interview.