Legacy banks are haemorrhaging customers to Monzo, Starling and Revolut,  not because of interest rates, but because of experience. Here is what is going wrong and how established firms can close the gap. 

Three years ago, switching your main bank account was a significant life admin task. Today, 47% of UK consumers who switched provider in 2025 said their primary reason was better access to online or mobile banking. Not interest rates. Not fees. The app. 

That is a fundamental shift,  and it poses a genuine strategic threat to every established financial services firm that has not made digital experience a first-order priority. 

The challenger bank effect 

Monzo, Starling, and Revolut did not win customers by offering meaningfully better financial products. In many cases, the underlying product, a current account, a payment card, a savings pot, is largely the same. What they offered was a fundamentally different experience of managing money: real-time notifications, instant spending categorisation, frictionless onboarding, and interfaces that felt built for the world as it is now rather than the world as it was in 2003. 

By 2024, half of UK consumers had chosen a digital-only provider – up from just 16% in 2018. That trajectory is not slowing down. 

The danger for legacy institutions is not losing ground on new customer acquisition alone. It is the quiet, gradual erosion of existing relationships as customers migrate more of their financial lives to platforms that serve them better day to day. 

What legacy systems actually cost you 

The legacy integration problem is real, but it is often misunderstood as a back-end engineering issue. In practice, it is a customer experience issue wearing an engineering disguise. 

When a payment takes three days to clear because your systems cannot communicate with a faster payment rail in real time, the customer does not think “legacy infrastructure.” They think “this bank is slow.” When a transaction is declined and the SMS notification does not arrive in time to explain why, the customer does not think “MFA timing issue.” They think “this bank is unreliable.” 

Poor open banking integration, clunky account-to-account transfers, and third-party connections that drop without warning are not invisible technical problems. They show up every single time a customer tries to do something with their money. 

The experience gap in practice 

Here is what the gap looks like in practice across three areas where it matters most: 

Onboarding. A customer who attempts to sign up via your website and discovers halfway through that the desktop journey is broken — and has to start again on mobile — has already formed an impression before they have used a single feature. Consistency across platforms is not a nice-to-have. It is the minimum bar for a credible digital proposition. 

Notifications and error handling. When something goes wrong — a declined card, a failed payment, a flagged transaction — the message a customer receives is either a reassurance or an anxiety trigger. Most legacy banks send the latter: vague, jargon-adjacent alerts that confirm something happened without telling the customer what to do next. The result is avoidable call centre volume and customers who feel unserved. 

Reporting and features. Spending categorisation, savings pots, subscription trackers, and financial health prompts have become expected features among digital-first customers. Their absence in a legacy banking app is not neutral — it is a signal that the bank does not understand how its customers actually use money. 

The open banking opportunity most firms are missing 

Here is the thing that often gets lost in conversations about legacy modernisation: open banking is not just a compliance obligation. It is a product opportunity. 

Handled well, open banking integration enables richer data surfaces, smarter personalisation, and genuinely seamless money movement across products and providers. It is the infrastructure layer that makes a genuinely useful, joined-up financial experience possible. 

The firms treating open banking as a minimum regulatory requirement will find themselves perpetually behind. The firms treating it as the foundation for a next-generation product experience are the ones that will close the gap with challengers — or open one with their traditional competitors. 

What good looks like 

The good news is that you do not need to become a challenger bank to close the experience gap. What you need is a clearer product strategy, better service design, and an integration approach that connects legacy infrastructure to modern experience without requiring a full system replacement. 

Platforms like Trading 212 demonstrate that combining multiple financial products — ISAs, savings, investments — within a single, consistent, well-designed interface is entirely achievable for an established business. The pattern is deliberate product thinking, rigorous testing across journeys and devices, and a willingness to treat failure states as carefully as the ideal path. 

The question for every established financial services firm is not whether to modernise the digital experience. It is how quickly. 

Key takeaways 

• 47% of UK bank switchers in 2025 cited digital and mobile banking access as their primary reason — not interest rates or fees 

• Digital-only bank adoption in the UK reached 50% in 2024, up from 16% in 2018 

• Poor open banking integration manifests as customer experience failure, not just technical debt 

• Onboarding consistency, error messaging, and reporting features are where the experience gap is most visible day to day 

• Open banking should be treated as a product opportunity, not a compliance obligation 

Frequently asked questions 

Why are customers switching from traditional banks to challengers? The most commonly cited reason is access to better mobile and online banking — not interest rates or fees. Challenger banks offer real-time notifications, spending insights, and frictionless account management that legacy banks have been slow to replicate. 

What is open banking and why does it matter for customer experience? Open banking is a regulatory framework that allows customers to share their financial data with third-party providers via secure APIs. For established banks, it creates the opportunity to build richer, more connected digital experiences,  but only if the integration is handled well. Poorly implemented open banking connections create friction, not convenience. 

Can legacy banks compete with challenger banks on digital experience? Yes. The experience gap is a product and design challenge as much as a technology one. Established firms that invest in deliberate UX design, API integration, and proper service design, including unhappy path journeys, can close the gap without replacing their core infrastructure. 

Vidatec helps financial services firms bridge the gap between legacy infrastructure and modern customer expectations through API integration, service design, and mobile development. Get in touch to discuss your digital experience strategy. 

 Our work with St James’s Place. 

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