Despite the unprecedented and massive disruption to daily routines during the COVID-19 outbreak, 80% of banked adults say that online banking is the most convenient way to manage bank accounts. This has vastly contributed to money management being one of the few activities which have continued in a relatively seamless way during lockdown for a majority of people.

Social isolation and home working have resulted in people of all ages exploring technology such as video conferencing and online chat. Beyond basic everyday transactions, consumer willingness to engage with these channels for everyday activities can result in opportunities for financial services providers. This could include cheaper and more efficient distribution channels for more complex products such as mortgages as well as financial advice.

It is likely that providers will be seeking ways to cut costs. All major banks have announced multi-billion provisions to cover bad debts and potential losses linked to the pandemic, while low interest rates will place additional pressure on margins and profitability. However, despite being tasked to cover a significant amount of risk as part of the efforts to support the economy, UK banks are in a stronger financial position compared to the financial crisis.

However, during these challenging times the largest providers in the country have taken the chance to reach out to consumers and reassure them in terms of their stability and ability to continue supporting them through the crisis. Mintel’s research shows this approach has been successful in helping to improve the image of the sector. Looking forward, the economic downturn will provide further opportunities for providers to bolster consumer sentiment. This is particularly true when it comes to leaving a long-lasting impression on the younger generations, many of whom are looking for support and guidance to weather the COVID-19 upheaval.

Key issues covered in this Report

  • The impact of COVID-19 on retail banking in the UK.

  • Changing consumer behaviours and attitudes as a result of the outbreak.

  • Main current account switching activity and intentions.

  • Channel preferences in 2020, compared to 2018.

  • Opportunities and threats arising from COVID-19.

COVID-19: Market context

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20 March.

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks.

The Health Protections Regulations 2020 came into effect on 15 June allowing the reopening of all non-essential stores in England as well as the mandatory use of face coverings on public transport. Pubs, restaurants, hotels and hairdressers were able to reopen on 4 July, with many beauty businesses following on 13 July.

From 24 July, it became mandatory to wear face coverings in shops and supermarkets. Following a resurgence of infections, from 14 September more stringent limits on mixing between households were imposed across the UK, although the rules vary between the home nations. On 21 September, the alert level was moved from 3 to 4, which means transmission is high or rising exponentially. New restrictions took effect from 24 September, including a 10 pm curfew on pubs, restaurants and bars in England. Government officials have expressed hope that acting early could avoid having to impose more severe measures later.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its July 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP could fall by 12.4% in 2020, recovering by 8.7% in 2021, and that unemployment will reach 11.9% by the end of 2020, falling to 8.8% by the end of 2021.

The current uncertainty means that there is wide variation on the range of forecasts however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q1 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

Products covered in this Report

This Report covers the ‘big picture’ relationships between consumers and retail banking providers. This includes everyday banking products: current accounts, savings accounts and credit cards, as well as loans, mortgages and insurance. The Report explores the strategies of the leading players, latest developments in the market, brand research and above-the-line advertising expenditure.

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