UK FinTech Challengers Market Report 2023
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“The difficult economic environment has seen many FinTechs find it difficult to raise funding, with valuations falling. For consumers, there is more caution as household finances are squeezed, leading to a preference for established brands. However, innovative new providers that can offer cost savings and advanced budgeting tools have an opportunity to grow, particularly amongst younger consumers keen for market disruption.”
– Adrian Reynolds – Principal Analyst, Financial Services
This Report discusses the following key topics:
- Advertising and marketing activity of FinTech brands.
- Consumer awareness and use of FinTech companies.
- How consumers research new financial providers.
- Trust in new providers across financial services.
- Interest in financial products from big tech companies.
- Attitudes towards FinTech companies.
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Overview
- Key issues covered in this Report
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Executive Summary
- The market
- FinTech companies are driving use of financial apps
- Figure 1: Use of financial apps, 2022
- FinTechs are challenging retail banks for multiple account holders
- Figure 2: Current account ownership, 2022
- Declining financial confidence will boost the need for budgeting tools
- Figure 3: Financial confidence for the year ahead, 2021-23
- Companies and brands
- Nutmeg integration could strengthen Chase proposition
- Monzo refreshes brand and adds euro transfers
- Revolut continues to add paid tiers with Ultra level
- FinTech advertising surged in 2022
- Figure 4: Above-the-line, online display and direct mail advertising expenditure for selected FinTech and financial services brands, 2018-22
- Klarna and ClearScore lead the way as most-used FinTechs
- Figure 5: Use of FinTech brands, 2023
- The consumer
- Advertising investment has boosted awareness of Chase
- Figure 6: Awareness of FinTech brands, 2023
- Growing FinTech choice will mean more research for consumers
- Figure 7: Researching new financial providers, 2023
- Build awareness through referral codes and rewards
- Figure 8: Sources of information on new financial providers, 2023
- New providers must prove longevity to enhance trust levels
- Figure 9: Trust in new financial providers, 2023
- Big tech companies can expand into financial services
- Figure 10: Interest in tech companies providing financial products, 2023
- Savings accounts from big tech companies could prove popular
- Figure 11: Interest in financial products from tech companies, 2023
- Caution in the cost of living crisis is the biggest barrier for FinTechs
- Figure 12: Attitudes towards FinTech challengers, 2023
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Issues and Insights
- Younger consumers provide growth opportunities for FinTechs despite the cost of living crisis
- Innovative digital banks can target the main account market
- Big tech companies can look to disrupt financial services
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Market Background
- FinTech funding and valuations hit by difficult economic environment
- FinTech companies are driving use of financial apps
- Figure 13: Use of financial apps, 2022
- Open Banking creating new opportunities for FinTechs
- FinTechs are challenging retail banks for multiple account holders
- Figure 14: Current account ownership, 2022
- Continued branch closures pave the way for digital brands
- Figure 15: Bank and building society numbers, 2016-22
- FinTech challengers must understand the Consumer Duty
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Market Drivers
- Continued high inflation could make consumers more cautious
- Figure 16: CPI and CPIH, 2019-23
- Declining financial confidence will boost the need for budgeting tools
- Figure 17: Financial confidence for the year ahead, 2021-23
- Increasing cost of daily essentials will make cashback offers more appealing
- Figure 18: Issues faced in the last two months, 2023
- Continued high inflation could make consumers more cautious
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Competitive Strategies and Launch Activity
- Nutmeg integration could strengthen Chase proposition
- Monzo refreshes brand and adds euro transfers
- Revolut continues to add paid tiers with Ultra level
- Shops feature brings cashback to Revolut paying customers
- Revolut adds staking to expand cryptocurrency features…
- …and introduces instant messaging
- Starling Bank launches virtual cards and a new budget planner
- New digital challengers banking on ethical accounts
- FinTech Rita helps consumers to earn from their data
- ClearScore buys budgeting platform Money Dashboard
- Apple soft launches Pay Later in the US
- InsurTech Lemonade enters the UK market
- Klarna introduces late fees and greater personalisation
- Currensea looks to disrupt the travel money market
- Collapse of FTX could dampen confidence in cryptocurrency companies
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Advertising and Marketing Activity
- FinTech advertising surged in 2022…
- Figure 19: Above-the-line, online display and direct mail advertising expenditure for selected FinTech and financial services brands, 2018-22
- …driven by digital bank Chase
- Figure 20: Above-the-line, online display and direct mail advertising expenditure for selected FinTech and financial services brands, 2020-22
- TV leads but most brands are taking a multichannel approach
- Figure 21: Above-the-line, online display and direct mail advertising expenditure on selected FinTech and financial services brands, by media type, 2022
- Nielsen Ad Intel coverage
- FinTech advertising surged in 2022…
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Awareness of FinTech Brands
- Advertising investment has boosted awareness of Chase
- Figure 22: Awareness of FinTech brands, 2023
- Klarna advertising has produced strong awareness
- There is a lack of awareness of FinTechs beyond digital banks
- Advertising investment has boosted awareness of Chase
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Use of FinTech Brands
- Klarna and ClearScore lead the way as most-used FinTechs
- Figure 23: Use of FinTech brands, 2023
- Digital challenger banks finding a market amongst younger consumers
- Figure 24: Use of digital banks, by age, 2023
- Younger Brits are embracing buy now, pay later brands
- Figure 25: Use of buy now, pay later brands, by age, 2023
- Cryptocurrency exchanges are attracting younger investors
- Klarna and ClearScore lead the way as most-used FinTechs
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Researching New Financial Providers
- Growing FinTech choice will mean more research for consumers
- Figure 26: Researching new financial providers, 2023
- Older consumers are particularly cautious over new financial providers
- Figure 27: Researching new financial providers, by age, 2023
- Build awareness through referral codes and rewards
- Figure 28: Sources of information on new financial providers, 2023
- Price comparison sites can help target older consumers
- Figure 29: Sources of information on new financial providers, by age, 2023
- Growing FinTech choice will mean more research for consumers
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Trust in New Financial Providers
- New providers must prove longevity to enhance trust levels
- Figure 30: Trust in new financial providers, 2023
- Digital banks can boost main account take-up amongst younger Brits
- Figure 31: Trust in new current account providers, by age, 2023
- Insurance brands can build awareness and trust through price comparison sites
- Figure 32: Trust in new insurance providers, 2023
- Boosting trust will be vital to mainstream adoption of Open Banking
- Figure 33: Trust in new open banking platforms, 2023
- Collapse of FTX could limit trust in the cryptocurrency market
- Figure 34: Trust in cryptocurrency providers, 2023
- New providers must prove longevity to enhance trust levels
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Financial Services and Big Tech
- Big tech companies can expand into financial services
- Figure 35: Interest in tech companies providing financial products, 2023
- Younger Brits are keen on financial products from Amazon and smartphone providers
- Figure 36: Interest in tech companies providing financial products, by age, 2023
- Savings accounts from big tech companies could prove popular
- Figure 37: Interest in financial products from tech companies, 2023
- Big tech companies can expand into financial services
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Attitudes towards FinTech Companies
- Caution in the cost of living crisis is the biggest barrier for FinTechs…
- Figure 38: Attitudes towards FinTech challengers, 2023
- …but there are opportunities for brands that can offer cost savings
- Figure 39: Attitudes towards FinTech challengers and value, 2023
- Regulation is an important step to alleviating concerns
- Figure 40: Attitudes towards FinTech challengers and regulation, 2023
- Branches remain important to most consumers
- Younger consumers are keen for innovation and market disruption
- Figure 41: Attitudes towards FinTech challengers and innovation, 2023
- Digital banks must highlight positive action on sustainability
- Figure 42: Attitudes towards FinTech challengers and sustainability, 2023
- Caution in the cost of living crisis is the biggest barrier for FinTechs…
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
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