Gen Z Business Leaders Trust Neobanks Over High Street Banks

A new wave of banking has hit the UK as more people are learning about and switching to neobanks, or ‘faceless’ banks. We’ve seen that Monzo and Starling have the most amount of clients in the region, and other startups, too, are growing as time goes.

A survey on business owners and leaders to UK SMEs, conducted by NerdWallet UK, found that 46% of said leaders trust both banking methods equally. This means that they would use both, a common trend across both business and individual banking clients.

Amy Knight, personal finance expert and business spokesperson at NerdWallet UK explained, “Given how challenging the economic climate has been for small businesses in recent years, it’s no surprise that free business banking, followed by free transactions is top of the wishlist for business leaders.

“Business banking is shifting more online than ever now that bigger financial decisions, such as taking out a business loan, credit card or overdraft, can be actioned with a few swipes of a thumb. As in-branch services continue to fade out, access to online features has become more important than ever.”

In the past year, already 45% of these leaders have opened a neobank account. This is a huge increase and should this increase continue at this rate, neobanks could surpass traditional banks after all. 21% of the leaders have already thought about opening one, if they haven’t already.
 

What About The Different Generations?

 
The report found that younger respondents were more likely to trust neobanks over legacy banks, with a quarter of them (18-44) trusting in neobanks more than traditional banks. As for the older generations, over 45 year old respondents trust traditional banks more. In fact, 38% of them have more faith in high street banks, compared to 28% of the younger respondents.

“Though most app-based and online-only banks offer users the same level of financial protection as their high street competitors, it will take time to build their reputation – particularly with business owners aged 45-plus who may not consider themselves digital natives,” said Knight. Only 6% of the older respondents trust neobanks more trustworthy.
 

What Do Leaders Look For In A Bank?

 
The respondents were asked what the key features they value are, and 43% of them prioritise having a free business bank account, with no fees, and 34% think that free basic national transactions should be the norm. When it comes to the UX, 33% of them want an app that is easy to use, and 31% value around the clock customer service.

From a convenience perspective, only 20% find branch access important, and 37% believe find digital accessibility more convenient.
 

What Are Some Pitfalls Of Neobanks?

 
While the report shows that there is a clear interest in more digital-based solutions, it’s important to think about the possible downsides of neobanks. For starters, without physical branches, access for those who prefer in-person services, especially older generations who are not comfortable with online platforms, could be put at a disadvantage. Neobanks also have fewer safety nets than traditional banks, which has contributed to the trend of “debanking” in the UK.

A recent Treasury Committee report showed a 44% jump in debanking complaints between the 2022/23 and 2023/24 cycles, pointing out that many businesses have been “unfairly debanked.” More than 140,000 business accounts were closed by major banks due to worries over financial crime, fraud, and the banks’ risk appetite. Neobanks might contribute to this issue because some may only have limited support and protection against such risks.

Dame Harriett Baldwin, Chair of the Treasury Committee, stated, “Banks should be doing all they can to support small businesses in this country, not pulling the rug out from beneath them with little warning.” Neobanks, like Revolut and Monzo, have these great services, but they need to provide solid security measures and customer support to build trust.