That Virgin Money, like Tesco, is looking to capitalise on current public dissatisfaction with traditional high street banks will come as a further blow to the sector. Consumer confidence in financial institutions is already at a low but mounting competition from more trusted, big brand names could finally give customers a reason to switch banking providers. One way banks can prevent this from happening is by taking advantage of the growth in online banking usage.
Evidence shows that online banking is becoming increasingly popular with consumers, with over two thirds (68%) of customers surveyed by Callataÿ & Wouters using this channel to manage their main account. From the banks' perspective, the direct savings banking model in particular allows customers to be self-directed, meaning banks can minimise overheads during these tough times whilst meeting customers' needs, such as more competitive rates. In a period when cost-savings are so important, the internet could prove to be the most reliable channel to retain customers and compete with new and unlikely entrants into the market.