June 25, 2024

The progression towards online and app-based banking has been significant over recent years, mainly driven by a reduction in physical bank branches. However, recent study data questions the extent to which this trend is viable, particularly given consumer sentiment.

According to our most recent investigation, which considered official recommendation scores from the [Ipsos independent service quality survey](https://www.ipsos.com/en-uk/personal-banking-service-quality-great-britain-february-2024), there has been a steady decline in the number of customers recommending online and mobile platforms over the past four years. Between August 2020 and February 2024, this figure has dipped by an average of 5%.

Interestingly, this report showed that 50% of Brits are currently more skeptical of online banking than they were four years ago. Our exploration suggests fears about online fraud is a key driver of this trend with 35% of UK adults pointing to this as their main concern.

Could Rising Online Fraud Hamper Online Banking Progress?

Indeed, the increase in online fraud has amplified, as displayed by the [Annual Fraud Report](https://www.ukfinance.org.uk/news-and-insight/press-release/fraud-remains-major-problem-over-ps1-billion-stolen-criminals-in) from UK Finance. It noted, for instance, that a fraud case was reported every two minutes in the last year, with Authorised Push Payment (APP) scams, involving individuals being tricked into sending money to fraudsters, growing by 12% in 2023. Importantly, 76% of these cases originated online.

This surge in online criminal activity has triggered dwindling trust between customers and their banks, hence threatening to stall progress in online banking. This is pertinent considering many banks are keen to leverage customer data to offer more personalized services online. However, our study found that 12% of Brits are wary of online banking due to excessive personal data collection, while 9% don’t trust banks with preserving the safety of their personal information.

Age also plays a role in these attitudes, with younger individuals (18-42 years) showing more apprehension over personal data collection than the older generation (43 years and over).

A Bump Ahead for Online Banking?

These findings suggest possible roadblocks for the future of online banking, especially as younger customers should ideally be their key target audience. Services must win their trust to prevent them from resorting to alternatives.

Can Personalization Enhance Trust?

Experts who participated in our study believe that banks offering tailored services to enhance customer experience could edge out competitors. Delivering an excellent customer experience and enhanced personalization, akin to interacting with local branch personnel, could foster relationships and trust. However, striking the right balance will be vital—while leveraging AI and tech could be helpful, it’s imperative to keep a customer-first approach.

Frequently Asked Questions

Why is online fraud a concern for online banking?

Online fraud poses a significant risk to online banking as it undermines customer trust. Customers may fear that their financial and personal data could be stolen by fraudsters, leading to loss of money and privacy. Rise in online fraud cases has led to customers being warier of the safety of online banking platforms.

How can online banks enhance customer trust?

Online banks can enhance customer trust by assuring them of the privacy and safety of their personal data. Clear, transparent communication regarding data usage policies and strong encryption methods can help. Enabling two-factor authentication, and educating customers on their role in securing their data, can also build trust.

What role does personalization play in online banking?

Incorporating personalized services in online banking can greatly enhance the customer experience. This can be in the form of customized product recommendations, personalized messaging, or tailored financial advice, all of which can improve customer satisfaction and loyalty.