Why do challenger banks have a female problem?

New research has found that women are much less likely to know about – let alone use – a digital bank compared to men.

According to a comprehensive survey conducted by AltFi (with a sample of more than 4,500 people across Europe), more than a quarter of British women have never heard of any challenger banks – contrasting with 17 per cent of men.

And all seven market leaders in nu-banking consistently ranked lower for recognition among women compared to men.

For instance, Metro Bank was the best-known bank among men, with 59 per cent of male respondents saying they have heard of the high street bank. Meanwhile, only 45 per cent of women could say the same.

The awareness gap was much smaller for Monzo, overall the second most recognised name in challenger banking, but men were still more likely to know about it (53 per cent) compared to women (46 per cent).

Most dispiriting of all, Starling’s efforts to woo the millennial female market appear not to have been completely successful. Despite running a campaign which shows the extent of damaging gendered language in the financial media, the bank is much less well-known among women than men (31 versus 44 per cent). But in all fairness, every leading ‘challenger’ name on the financial circuit, from Monese to Revolut, drew more of a blank among women than men.

I wish I could say I’m surprised by these findings, and that they completely go against my experience of a forward-thinking, outward-looking industry. Sadly, they confirm what I have long suspected: challenger banks are just as – if not more – likely to be disconnected and far removed from women’s daily lives as the financial establishment.

I commented on Alt-Fi’s research, which it conducted with market research firm StreetBees, and was pretty bracing in my views about fintech’s universality – or lack of it.

“This is not entirely the fault of fintech—there are complex and deep-seated cultural factors that hinder women’s financial empowerment. But I think many brands pander to a geeky fandom who are digitally savvy and quick to embrace new financial products. And, more often than not, this excludes and alienates women. Fintech is also in danger of appealing to those who are already digitally and financially literate.”

I’d like to contextualise and expand on my comments, before offering a potential way forward. Because I believe that technology can be a huge financial leveller in the long-term, but only if it is devised and marketed in a radically female-friendly way.

1) The gender gap already existed in financial services – the problem is not unique to challenger banks.

The financial industry (and media) tend to serve and help men far more than women, which has contributed to a huge gap in financial awareness between the sexes. Women end up being financially uneducated and disenfranchised. This renders them unprofitable and unreachable in the eyes of big money institutions. And so the vicious circle continues.

It is one of the reasons why the gender investing gap is estimated to be £15bn in the UK alone (according to a study by Kantar TNS). And it partially contributes to a 39.5 per cent gender chasm in pension income in the this country – twice as large as the pay gap between the sexes.

This is slowly changing. Big financial institutions want to tap into the female pound as more women enter (and thrive) in the labour market. Financially empowered women move society forward but they also shore up taxes, pension funds, infrastructure spending, retail spending and social care. The financial industry stands to lose £130bn worth of business if they neglect this growing female market, according to research by Kantar.

We also have more female journalists writing about money today than ever before – four out of the seven editors overseeing the major personal finance sections in national newspapers are women – with both female and male journalists writing about gender issues in finance. So there is a coalition of major interests working hard to close the gender gap in financial awareness.

But it will take decades. Even as women gain greater and greater power, progress in the financial sphere will be slow and hard-won. It’s against this tough backdrop that challenger banks have to operate.

2) Only the finance nerds tend to know about challenger banks. And generally speaking, finance nerds are men (sorry chaps!)

The gender gap in challenger bank awareness has complex and varied causes. One major factor to consider is that men are more likely to be “early adopters” than women, latching onto new technology quicker. Women are doubly disadvantaged when it comes to fintech because they have also been left behind in the world of tech, both as consumers and producers. As Anne Boden, CEO of Starling points out:

“This is not just an industry problem. It goes wider than that. Research tells us that women are generally more cautious when making money decisions than men. It’s why women are better investors than men. [But] this can mean that women are more reluctant to try new things. Unfortunately, with anything to do with technology and digital, the early adopters are more likely to be men.”

Of course, many women are enthusiastic early adopters. And technology brands shouldn’t dumb down, patronise or slap some pink on their brand just to appeal to us.

But many fintech brands like Monzo have been built by close-knit online communities, populated by confident and tech-savvy consumers who geek out over “APIs” (that’s application programming interface), “TPPs” (third party providers) and other head-scratching acronyms. It’s wonderful to see financial companies allowing the public to shape their products and services from an early stage. But fintech fans are not a wide cross section of the public, and they tend to focus more on the ‘tech’ than the ‘fin’.

The result is that even people like me – a financial journalist! – can feel alienated by fintech culture. The esoteric language, insularity and ‘cool kid’ culture that pervades this world are all very off-putting to outsiders, and women who are not used to being addressed directly by financial brands can easily think this whole shebang is simply not for them.

3) Challenger banks need to up their game to win over the wider public.

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The high street banks totally dominate our financial lives. Our psychology and spending-centric culture make it difficult (though not impossible) to make good financial decisions. So our default mode is to be apathetic about money – and the traditional banks love that. Most of the British public does not switch bank and saving accounts from one decade to the next. There is a (wrongful) perception that it’s too much hassle and a (justified) view that switching will make little difference to our overall banking experience. They’re all just as bad as each other. It’s an exaggeration – but with a ring of truth.

I remember the advent of challenger banking well. I was working on a financial trade paper at the time and one of my ‘beats’ (i.e. specialities) was the crop of new banks being fast-tracked for approval by Britain’s financial regulators. Prior to the financial crash, setting up a new bank was about as viable as becoming Prime Minister from anywhere but Eton. In some respects, this was understandable: taking people’s money is serious business. The dangers of permitting anyone to set up a bank are self-evident. But it’s no wonder, in hindsight, that we ended up with a complacent and dangerously self-serving banking monopoly that almost collapsed under its own sins in 2008.

In the UK, the majority of the public still bank with either the “big four” (HSBC, Barclays, Royal Bank of Scotland and Lloyds, plus all their subsidiaries including Halifax and Natwest) or Nationwide, Britain’s biggest building society. Challenger banks have been encouraged in order to bring desperately-needed competition into this market. During their authorisation process, they weren’t necessarily exempted from rules around capitalisation (i.e. the amount of money you need in your coffers). But the regulators essentially gave them an easier time than before.

Having been given this special treatment, the pressure is on challenger banks to prove they are…well, challenging.

Yes, they usually have a certain something that distinguishes them from the main high street bores – whether it’s a fancy app (Monzo or Starling), killer exchange rates (Revolut) or simply the rare presence of doggy bowls and safety deposit boxes (Metro). But more competitive financial products and pledges are now needed to convince the majority – including more hesitant and cautious women – to join the fray.

Switching accounts may not be as hard as people think it is, but it’s still a big decision to make. Once challenger banks have won over their natural constituency, they will need to offer dynamite reasons for others to make the move. An intuitive app and great customer service shouldn’t be seen as amazing extras, but the bare minimum in this day and age. High-street banks are already accepting the challenge and investing vast sums in technology to keep up with the times. There is a debate to be had about whether they will ever truly match the innovation of digital-first  challenger banks. But I doubt that the new entrants to this market will be able to rest on their laurels for long. Consumers fed up with low savings rates and tricksy credit products will want something more. And I’m not just not sure if the challenger wing can provide it.

Maybe women who see tech and finances as less of a hobby for its own sake and more of a means to an end instinctively know that the effort really isn’t worth the reward.

Yet.

What do you think? Do challenger banks need to do more to appeal to female consumers? Or will they always be on the fringes of banking? Let me know by leaving a comment or tweeting @ionayoungmoney.

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This Post Has 4 Comments

  1. Surely the solution is more engaging financial education? What would make it work better?

    1. I’d tentatively say “yes”, Richard, except I think the curriculum is too overwhelmed to teach basic financial concepts as it is. I don’t have great hope that they’d be able to tackle fintech and make it seem female-friendly…but perhaps the fintechs can play their part in addressing this gap at an earlier age.

  2. I think you’re right that the differences feel so small that the perceived upheaval of changing banks doesn’t feel worth it. A shiny app is nice, but my current bank provides me with a decent app anyway that serves my basic needs.
    I am a bit surprised and disappointed that this generation of women is already starting to follow the last in that they are less financially aware than men… just goes to show how heavily entrenched the gender roles still are… I really hope this can change within our generation.

    1. Jenny, I slightly differ in that I DO have gripes with my current account bank app at the moment – the inability to search comprehensively for past transactions, being just one! But I also get a decent interest rate, which (so far) the challenger banks don’t and can’t offer. I do think fintech, or rather open banking, will be the canary in the mine when it comes to the advancement of women in personal finance. If the gap in usage and awareness starts to close, then we’ll know progress is REALLY happening.

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