Buzzy challenger banks such as Monzo, Revolut, and Starling have been blamed for tarnishing the brands of traditional high street lenders, who have lost a collective $2bn (£1.6bn) in brand value over the last 12 months.
The brands of eight of the UK’s biggest banks declined by an average of 7% during the last year, according to market research organisation Kantar. It means top lenders — including HSBC, Barclays, Lloyds Bank, and RBS — have lost a collective $2bn of notional brand value.
Kantar said the decline was due to challenger brands like Monzo showing up traditional lenders.
App-only bank Monzo was founded in 2015 but has grown rapidly and today has over 2.5m customers. The bank has built a strong customer-friendly brand around its coral coloured debit cards and has a net promoter score of about 80, compared with an industry average of around 25.
“This is a wake-up call for UK banks that have been over-reliant on their name and history,” Alex Wright, a partner at Kantar’s Insights Division, said in a statement.
“Banks are facing a number of challenges right now, not least the emergence of new and disruptive brands that are connecting with millennials that want a service that is available anytime, anyplace, anywhere.”
Barclays saw the biggest decline in its brand value among the traditional high street banks. Barclays brand value dropped by 10% in the last 12 months to $5.7bn. HSBC was the most resilient, losing just 2% in brand value.
“The big banks are going to have to find ways to create an emotional connection with younger people who require less personal contact, but who still want to engage via banking apps that offer simple, quick and convenient services,” Wright said.
NatWest was the only major bank to see an increase in its brand value, rising 7% to $2bn. The rise may be down to the increased prominence of the bank after owner RBS took the decision to promote NatWest over its financial crisis-tarnished brand.
Kantar’s findings are based on its annual BrandZ report on the most valuable brands, which takes into account financial data and a survey of more than 130,000 UK consumers.
Monzo was not big enough to be included in the brand study. The company was valued at over £2bn as part of a funding round in June this year.
Vodafone was found to be the most valuable brand in the UK, with a notional value of $26.5bn. HSBC came second with its brand valued at $23.2bn.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.