Online payment providers - such as PaylPal and WePay - have emerged as the most significant challengers to high street banks, according to new research from international law firm Pinsent Masons.
According to a YouGov survey of over 2000 UK consumers commissioned by the firm, technology-enabled payment providers are more likely to disrupt the banking market than challenger banks such as Metrobank or Virgin Money.
The research comes in the wake of several scandals which have highlighted the increased importance of technology in the post-crisis banking landscape.
According to the Pinsent Masons / YouGov survey, almost a quarter of respondents (24%) said they would be 'likely' to be banking with an alternative payment provider, such as PayPal, within two years. Less than a fifth (19%) of respondents said they would bank with a company best known for non-banking products or services, while only 13% said they would consider banking with a new banks - such as Metrobank.
Less than 5% of respondents considered it likely that they would be banking with tech companies such as Google or Facebook.
Pinsent Masons says the findings show the challenge high street banks face a challenge to maintain market share amid a digital revolution.
John Salmon, Head of Financial Services at international law firm Pinsent Masons says:
“These findings highlight the scale of the challenge facing the banks. Nobody can doubt that transitioning to a digital strategy is essential for any customer-facing bank given the potential for greater speed, reliability and security of payments and other services. However, financial institutions are going to have to focus on taking consumers with them on that digital journey. "
“The good news for the banks is that the vast majority of British customers expect to be banking with established institutions in two years' time, so they have a strong competitive position. But interestingly, the strongest challenge is coming not necessarily from high street brands or technology companies outside of finance, but from payment service providers.”
"It is also interesting to note how people envisage themselves making payments in two years' time. Just 10% envisage themselves using a bank branch or telephone banking. Surprisingly, only 12% of people see themselves using mobile devices to make payments, something which I think will be more common than people anticipate."
"What is also striking is that digital currencies like Bitcoin don't get much of a look in in terms of how people expect to be banking and making payments in future. Clearly digital currencies have a long way to go to get into the mainstream."
The survey also found that 65% of respondents cited security of payments made using new technologies - such as contactless cards or mobile phone apps - as their main concern in adopting new technologies.