Financial technology start-ups like Revolut and Trussle threaten established banks in the UK’s £1.3 trillion mortgage market, with four in 10 customers being open to Fintech competitors instead.
In the ‘Battling for Buyers’ report, behavioural science experts Decision Technology (Dectech) found consumers are more open to considering fintech companies for mortgages, personal loans and credits cards than for other products.
Dr Henry Stott, director of Detech, said: “These findings are a stark warning to incumbent banks. There is considerable consumer appetite for fintech providers already, especially when buying products based on price rather than brand trust.
“As name recognition for challenger brands increases, the threat they will pose will do likewise, and we’d expect them to start taking market share across a wider range of products.”
Nearly four in 10 (39%) consumers are happy to choose a fintech provider for a mortgage, with nearly half (43%) open to a fintech personal loan provider.
This compares to one in three (33%) being open to having their current account with a fintech and only one in four (26%) considering using a fintech company for a savings account.
Consumers on average change mortgage provider once every 13 years, compared with once every three years for personal loan.
Brands like Revolut promote their ability to streamline the lending process and issue first-time buyers and existing homeowners with quotes in principle in under five minutes.
Stott added: “Established banks should pick their battles, leveraging trust in their brand for savings products where customers are more focused on reliability and aiming to stay competitive on price and speed for lending products where customers are most open to newcomers.”
The research showed that one of the biggest barriers to fintechs is low brand recognition.
The most recognised fintech brand, online investment manager Nutmeg, was only recognised by one in four (26%) consumers, compared with five out of six (83%) recognising Virgin Money, the least recognised big bank.
One explanation offered was loss aversion, people’s tendency to be more sensitive to potential losses than potential gains, meaning customers are more willing to trust unrecognised brands when borrowing money than when saving.
The report suggested established banks should emphasise the trust that comes from being an established brand to hold onto customers in savings markets and ensure their offer remains competitive for lending products where they are more liable to be outcompeted on price and speed.