61% of current account holders are satisfied with the support that their main current account provider has given to customers whose health or finances have been harmed by COVID-19, compared to just 3% who disagree. Standing by consumers during this time, and being seen to do so, gives banks an opportunity to improve perceptions and boost trust in the industry and their own brand.

Current accounts are essential products and therefore largely insulated from the worst effects of COVID-19. Consumers will continue to need accounts. However, as unemployment is expected to rise in the coming months, this will put pressure on household finances and threaten the health of current accounts, with increased reliance on overdrafts likely and defaults expected to rise.

Weakened household finances will also make it difficult to upgrade consumers to premium accounts. This is a central goal for brands and particularly important for digital banks that have so far built growth on attractive freebies. Improving revenue and profitability will be crucial for all banks in the next few years as they try to mitigate the losses due to rising bad debts stemming from the crisis.

Despite this, there are opportunities to expand the premium segment of the market by tailoring packaged accounts to appeal to underrepresented groups. This includes under-35 year olds, who are significantly less likely than older consumers to pay for banking but otherwise seem good candidates to upgrade given the financial responsibilities that people tend to acquire during this time of their lives.

This Report was finalised as the government announced a second national lockdown in England to last between 5 November and 2 December 2020. While this will be disruptive for many consumers, it is not anticipated to significantly change the outlook for the current accounts market.

• The impact of COVID-19 on the current accounts market and satisfaction with providers’ support for consumers affected by the pandemic.

• Ownership of current accounts and the type of accounts consumers hold.

• Important factors considered when choosing a current account.

• Use of overdrafts and changes in this over the last year.

• Attitudes towards free banking and the role of current account providers.

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. Also in April, the FCA announced measures requiring financial services providers to offer support to consumers through debt repayment holidays and a £500 interest-free overdraft buffer.

The Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 were amended 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. Rules on travel remain fluid: from 10 July, travellers from more than 50 “low risk” countries no longer had to self-isolate for 14 days, but on 28 July the removal of Spain from this list of low-risk countries dominated headlines in the UK, and by August further countries (including France) had been removed from this list.

On 9 September, new guidelines were announced in England as a reaction to rising numbers of COVID-19 cases. The major change was a tightening of restrictions on social contact, with people only allowed to socialise with groups of up to six people who they don’t live with.

This was followed by a new wave of nationwide restrictions announced on 22 September, including limits on opening hours for pubs, bars and foodservice outlets, a recommendation that people work at home if possible, and stricter regulations on when face coverings must be worn.

As new cases continued to rise in October, a three-tier system of local restrictions was introduced with Liverpool, Greater Manchester and South Yorkshire quickly put under the most stringent rules, which include the closure of pubs and bars. On 19 October, the Welsh government announced a ‘firebreak’ lockdown, closing all non-essential businesses between 23 October and 9 November.

On 31 October, a second national lockdown of England was announced, to take effect from 5 November until 2 December. Much like the first national lockdown, it was announced that all non-essential retail and hospitality venues would be closed, with restrictions put on social mixing and outdoor activities. However, the government announced that childcare services, schools and universities would remain open.

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.

The focus of this Report is on retail current accounts, including packaged accounts for mass-market customers. The Report does not cover premium or private bank accounts targeted at the mass affluent to high-net-worth customers.

The predominant type of pricing model for current accounts in the UK is the free-if-in-credit (or ‘free banking’) model. This is where the customer does not pay any direct fees for having the account if in credit, or for core services such as direct debits and cheques. Interest is usually charged on any money borrowed via an overdraft, which can be either ‘authorised’ or ‘unauthorised’.

Current accounts can be classified into various sub-types:

• Basic current account – designed for those with a poor credit score, it does not carry any charges. Customers can set up direct debits and are provided with a debit card, but the account typically does not come with an overdraft facility or in-credit interest.

• Standard current account – based on the free-if-in-credit model, it does not carry any charges provided there are sufficient funds in the account to meet any payments made.

• Student and graduate current accounts – variants of the free-if-in-credit model and may offer special features, such as an interest-free overdraft.

• Premium or packaged current account – usually involves the customer being charged a monthly fee in return for a range of additional benefits, such as travel insurance and motor breakdown cover.

• Reward current account – usually offers a cash bonus or reward upon switching and offers cash rewards for paying in a set amount of money each month or for paying utility bills with the account.