- Monzo and Starling took the top spots in a study of customers' likelihood to recommend their bank to family and friends.
- And while it's good news for their customer growth, weakened account switching amid the pandemic clouds their future outlook.
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UK neobanks Monzo and Starling are the two most likely banks to be recommended by their customers to friends and family based on their overall service, per a poll by Ipsos Mori cited by Money Saving Expert.
Eighty-six percent of Monzo users polled said they would recommend the neobank's service overall, while 84% of respondents who are Starling customers said they would do the same. The best showing by a high-street bank with branches was Metro Bank's fourth-place finish, with 81% of customers polled saying they would recommend the bank based on its overall service.
While these customer satisfaction numbers bode well for neobanks' growth prospects, their outlooks following recent financial results are mixed. Both Monzo and Starling saw their losses approximately double between their past two financial reports, as they invested heavily in expansion and felt the negative economic effects of the coronavirus pandemic.
But while Starling is confident despite its losses that it will break even by the end of this year — thanks in part to its concerted business banking efforts — Monzo has expressed "significant doubt" about its ability to continue operating, citing the pandemic and stricter financial crime reporting requirements.
And complicating the outlook for neobanks even further, current account switching has plunged since the onset of the coronavirus crisis. Current account switching rates in the UK have crashed due to pandemic-driven lockdowns, per AltFi, declining by 65% from 280,520 switches in Q1 2020 to 98,192 in Q2. For context, UK current accounts are intended for everyday transactions, akin to checking accounts.
While Monzo and Starling were among the winners of the switching activity that did occur — netting over 15,000 new accounts each from customers who switched — the drastic reduction in switching rates suggests that neobanks' pool of potential new customers may be diminished for the duration of pandemic-driven economic uncertainty. And if neobanks start to exhibit depressed account growth numbers, investors may interpret it as a sign of weakened growth potential, and be reluctant to pour in much-needed fresh funding.
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