The notion that customers don’t trust non-legacy banking brands is starting to fade, at least in the U.K.

A study from consultancy A.T. Kearney released this month entitled “How Convenience, Innovation, and Trust Will Shape Tomorrow’s Banking,” noted that while U.K. customers still overwhelmingly trust incumbent large banks, challengers are slowly gaining ground among all customer categories.

“The most concerning trend—for traditional banks—that our findings expose is how challenger banks are increasingly used for the day-to-day spend categories that allow a bank to remain intimately acquainted with the lifestyles and habits of its customers,” reported A.T. Kearney.

A notable product area for which customers showed increasing openness to using challenger banks is credit offerings. As digital-only brands like Monzo, Starling and Revolut build their product ecosystems, credit is proving to be an area challengers have capabilities to take market share away from incumbents.  According to A.T. Kearney, more than 40 percent of challenger bank customers said they would consider taking out a loan with a challenger bank and nearly half would consider using them as a mortgage provider.

A.T. Kearney’s findings challenge the contention that challenger bank accounts are simply paycheck motels, or secondary accounts customers use while retaining a primary account relationship with an incumbent. In addition, while younger customers are seen as enthusiastic early adopters of digital-only banking offerings, older customers are becoming increasingly open to the idea of banking with non-legacy institution.

“Although our data suggests that challenger banks are particularly popular with younger customers, it would be wrong to imply that this is the only demographic drawn to challenger banks,” the study noted.

While millennials and Gen Z are more likely to use a digital-only bank, some older banking customers are willing to make the switch as well.

The study found that although customers aged between 55 and 73 were least likely to switch from a traditional bank to a challenger bank, a third said that they would be open to switching if challengers’ pricing was competitive, or if their current provider made a mistake. In effect, new customer expectations resulting from digital adoption are affecting how all customers perceive of the performance of their providers.

“Consumers across the spectrum are increasingly comfortable using new technology and could become impatient with service providers that fail to deliver digital services that meet their expectations,” the report pointed out, noting that the pressure is on for incumbent brands to innovate. If older brands are unable to adapt, they risk being relegated to “back-end utility provider” status, A.T. Kearney argued.

Will White, head of international operations at fintech consultancy 11:FS, said in a short few years, U.K. challenger banks have made the transition from the periphery to the mainstream. In doing so, they are slowly capturing market share beyond early adopters.

“They’ve gone from early adopters to early majority,” he said. “With that, they’re starting to get the technology-minded older customers. It’s a really underserved market, given the number of people in their fifties, sixties, and seventies who have smartphones.”

The A.T. Kearney study was conducted through an anonymous online survey this past September with 2,096 banking customers in the U.K. Survey participants were between the ages of 16 and 73 years old.

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