Are younger consumers getting a better banking experience?

Key findings

Younger banking customers (16-34) are more likely to recommend their bank than older customers (over 55s).
Monzo and Starling, two new online-only banks, both have a higher proportion of younger customers than the average and consistently top the Banking service quality ratings.
The positivity of younger customers does not fully explain why satisfaction at Monzo and Starling outperform the other banks.

Demand-side solutions in the retail banking market

In 2016, the Competition and Markets Authority (CMA) concluded that action was needed to improve competition in the UK retail banking market. There was high concentration of market share, with the top 4 banks collectively holding 70% of main personal current accounts (PCAs). Compared to other markets, consumers were very static with only 3% of PCA customers switching banks in 2015.

Rather than supply side interventions, like breaking up the biggest banks, they implemented mainly demand-side remedies, aiming to encourage greater consumer engagement in the market with the aim of boosting competition. These included the collection and publication of banking satisfaction metrics. The satisfaction data was expected to boost competition by encouraging consumers to compare banks, and shop around. However, in reality we have found that satisfaction levels for the whole market have not increased over time.

Pulling up the average

Two new, digital-only banks, Monzo and Starling, are consistently highly ranked. They first appeared in the Great Britain ranking in August 2020 and neither have fallen below the top 3 since then. We aggregated all of the available service metric rankings to date (from August 2018 to February 2022) to see how the average satisfaction compares with and without Monzo and Starling data included.

In comparison to the whole market, Monzo and Starling have consistently had a higher percentage of their consumers who are more likely to recommend their bank, with scores ranging between 81 to 89% satisfaction in Great Britain personal current accounts*. After removing Monzo and Starling from the rankings, the average satisfaction levels for personal current accounts appear to be falling over time. However the absolute change is still minimal, from an average of 62% in 2018 to 59% in 2022.

*Note: there is a different ranking for Great Britain banks and Northern Ireland banks.

Younger banks with younger customers

Monzo and Starling have a notably higher proportion of younger customers compared with the other banks. Nearly two-thirds (63.8%) of the Monzo respondents and nearly a half (47.6%) of the Starling respondents are in the 16-34 age bracket. This is much higher than the quarter (24.5%) for all other banks in the Great Britain personal current account satisfaction survey. The responses are sampled to be representative of the customer demographics at the bank. This could mean that Monzo and Starling’s overall satisfaction is so high due to the differences in demographics.

Comparing overall satisfaction in the latest sample, younger customers (16-34) appear more positive about their current account provider. They are either extremely or very likely to recommend their provider to friends or family significantly more than those aged over 55 in the sample (68.2% for 16-34 vs. 56.1% for the over 55s).

The combination of younger consumers being more likely to recommend their provider plus a higher proportion of younger consumers could explain why Monzo and Starling rose right to the top of the satisfaction rankings. We ran a logistic regression to control for the age differences on the likelihood of recommendation.

After controlling for age differences, Monzo and Starling consumers are still significantly more extremely or very likely to recommend their current account provider. Therefore the age differences for the likelihood to recommend does not fully explain why consumers are so favourable of Monzo and Starling.

Conclusion

These results show that there is a clear relationship in these banking satisfaction surveys between consumer age and their likelihood to recommend their provider, with younger consumers being more positive about their banking experiences. This difference can only partially explain why Monzo and Starling consumers are more satisfied with their banking services than the whole market. It would be interesting to delve further into why consumers are so satisfied with these newer banks as this might uncover potential solutions for increasing satisfaction for other banks too.