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When it comes to innovation, most people wouldn’t pick the personal financial sector as an obvious pioneer. Tech, fashion and pharmaceuticals might be leading the way in innovating how we consume and experience life – but high street banking? Despite being one of the most traditional sectors of the UK economy, the personal finance sector can’t afford to stand still. That’s why, over the next decade, we’re likely to see a lot of change.
Online banking has been around for a while but in 2017 it has gone up a gear. Current accounts are not simple financial products – they require licences and are heavily regulated – but now most banks recognise the need to modernise. The result isn’t just online banking but cutting edge banking for all, from apps through to mobile banking facilities. And it’s not just the major high street banks that are getting this right – in fact, if anything, they’re behind the curve with this trend. Data collected by the payments body Bacs shows that roughly 90,000 switches a month are being made from traditional current accounts to the next generation of online banking options.
There are multiple benefits for those willing to make the leap from high street bank to one of the new challengers. Better rates, a range of perks and some very attractive introductory bonuses make pure online banking a very attractive prospect
Monzo – this is a current account accessed only via a smart phone. The current account is free and has been designed to help customers get on top of what they spend and how they spend it. It comes with a contactless prepaid MasterCard and no fees, even abroad.
Coconut – an account designed for freelancers and members of the gig economy. Still in development but early access is available. Once it’s fully up and running Coconut will provide all the features of a current account but with one key difference – the ability to manage unpredictable income and outgoings and to track the tax owed in real time.
Atom – this personal finance app was the first to obtain its banking licence and remains one of the original innovators. It has yet to release its current account but the fixed saver accounts are incredibly popular.
Metrobank – Metrobank is different in that it’s the first new high street bank to open in the UK for more than a century. It was established in the belief that ‘banking needs shaking up’ and offers a wide range of personal and business banking as well as contact centres open 24/7. Metrobank has pitched itself as the evolution of the traditional high street bank, combining branches and longer opening hours with technology integration, from Apple pay, to apps and online accounts.
It’s not just the way that we use banking services that is changing but the impact that we want to have with them too. Ethical banking is predicted to be one of the biggest personal finance trends this year and next. It is perfectly represented by Triodos, which lends only to those who can demonstrate they are making a positive difference to society. The people behind the bank correctly identified the demand for consumer choice in banking – we can make ethical choices in clothing and food so why not personal finance too? Current account customers are charged £3 a month as a fee – an alternative to offering ‘free’ banking and then raising cash via fees and charges. How do they avoid the costs to the bank? If you have a Triodos account then you simply can’t go over your agreed limits. Triodos interest rates are competitive too – for example, a customer with a £600 overdraft used for seven days each month would pay £23.06 a year in interest. At Santander and Halifax that would be £84 and NatWest/Royal Bank of Scotland £97.24.
The fast moving world of financial technology (FinTech) is constantly changing and could evolve the personal banking sector in future via any number of trends. That’s why – this year and into the future we could see everything from gamification, to blockchain, biometrics, voice processing and social integration increasingly used in standard personal finance products and services.
While mobile banking, apps and online interactions are generally accepted as the way forward there are some urging caution. Last year the Financial Conduct Authority began investigating ageism in banking and this could well impact on innovation. For example, while smart phone use is peaking, take up among older generations is far lower. Plus, there are many over 65s who are happy to email and message via mobile but don’t trust devices with their bank details. If these customers are found to be discriminated against because they can’t access the best deals and services – or even some basic banking services – as they’re not online that could throw a serious obstacle in the path of innovation. So, will personal finance in the UK reach its cutting edge evolutionary potential? Only time will tell.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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