Table of Contents
Introduction and Abbreviations
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- Aims of the report
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Getting the ‘switchers’ to switch again
- Hit the North!
- Younger consumers are most likely to switch for better overdrafts
- HSBC can take advantage of ‘flexible’ customers
Executive Summary
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- Mintel estimates suggest there are around 73 million current accounts
- The branch remains at the heart of the current account distribution mix
- But telephone and Internet banking continue to gain in popularity
- Lloyds TSB commands the largest share of the current account market
- Current accounts are the most widely held financial product
- Around 6 million customers are considering changing provider
- The vast majority of switchers open their accounts at a branch
- Customers are adopting a multichannel approach to managing finances
- Disaffection with service is the most common switching prompt
Market Factors
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- Total adult population is set to grow by around 10% in next 20 years
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- Figure 1: UK population, by age bracket, 1995-2025
- Rising employment levels could boost demand for current accounts
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- Figure 2: Total employment levels in the UK, by gender, 2000-10
- Changing household patterns could also boost the number of accounts
- Growth in consumer expenditure should stimulate banking activity
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- Figure 3: Personal disposable income and consumer expenditure, 2000-10
- Basic bank accounts provide further potential for market growth
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- Figure 4: Total number of basic bank accounts opened net of closures, 2003 and 2004
The Branch Network
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- The combined branch network has declined by a fifth in the past decade
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- Figure 5: UK bank and building society combined branch networks, 1995-2003
- Lloyds TSB has shut the most branches…
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- Figure 6: UK bank and building society branch networks, 1995 and 2003
- …although Northern Rock has implemented the deepest cuts
- Lloyds TSB currently has the most customers per branch
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- Figure 7: Average current account holders per branch, largest seven banks, 2005
- But the branch will remain at the heart of the distribution mix
Market Size
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- Total balances held within personal bank accounts continue to rise
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- Figure 8: Value of UK personal bank accounts (MBBG only), 1998-2003
- There were 95 million interest-bearing sight accounts in 2003
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- Figure 9: Number of UK personal bank accounts (MBBG only), 1998-2003
- Mintel estimates suggest that there are around 73 million current accounts
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- Figure 10: Estimated number of current accounts, 1998-2005
- Overdraft advances have risen rapidly over the last five years
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- Figure 11: Value of overdraft advances to individuals in the UK (MBBG only), 1998-2003
- The total number of plastic cards in circulation continues to grow
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- Figure 12: Number of plastic cards in issue, by type, 1993-2004
- The number of MBBG-owned ATMs has remained static in last few years
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- Figure 13: Total number of ATMs (MBBG only), 1998-2003
Key Players
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- The number of current account providers has increased dramatically
- The banking industry has gone through a period of major consolidation
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- Figure 14: Composition of MBBG member organisations (offering current accounts), 2005
- Lloyds TSB commands the largest market share
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- Figure 15: Estimated market shares of current account providers, 2000 and 2005
- Company profiles
- Lloyds TSB
- RBS/NatWest
- Barclays Group
- HSBC
- HBOS
- Abbey
Product Development
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- Standard current accounts tend to offer similar features
- Price has therefore provided the main basis for competition
- In-credit interest rates are now particularly important parts of the offering
- HBOS and HSBC have recently launched innovative new products
- A range of packaged current accounts have also been introduced
Distribution
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- ATMs are now an important part of the current account distribution mix
- RBS/NatWest boasts the largest ATM network
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- Figure 16: Number of bank ATMs and volume of transactions, 2003
- Telephone and Internet banking continue to gain in popularity
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- Figure 17: Number of personal bank accounts accessible by telephone and via the internet (MBBG only), 1999-2003
- The volume of online transactions has risen rapidly in the past few years
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- Figure 18: Number of direct banking transactions (MBBG only), 2001 and 2003
Advertising and Promotion
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- The importance of advertising rises when competition intensifies
- Current account advertising totalled £25 million during the last 12 months
- Direct mail is now the main channel used to advertise current accounts
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- Figure 19: Advertising expenditure on current accounts, by media type, April 2004-March 2005
- The press and TV channels are also commonly utilised
- First Direct has invested most heavily in advertising
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- Figure 20: Advertising expenditure on current accounts, by organisation, April 2003-March 2004 and April 2004-March 2005
Consumer Financial Activity
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- Consumers are looking to refresh their finances
- Relationship with the main financial services providers
- Activity levels set to rise in the six months from March 2005
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- Figure 21: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2003-March 2005
- Those aged 30-39 will be most active over the next few months
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- Figure 22: Expected financial activity, by socio-demographic and income groups, March 2005 and average for the last 13 quarters
- Consumers looking to build up savings
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- Figure 23: Leading financial activities planned in the next six months, March 2004-March 2005
- Mixed messages on housing activity
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- Figure 24: Intended mortgage and property purchase activity, December 2002-March 2005
- Lloyds TSB increases leading market share position
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- Figure 25: Leading main financial services providers: market shares, March 2004-March 2005
- RBS and Nationwide BS should boost their savings business
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- Figure 26: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2005
- Bank of Scotland has the most ‘active’ customers
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- Figure 27: Activity levels of main financial providers’ customer bases, March 2005
The Consumer
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- A current account is the most widely held financial product
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- Figure 28: Ownership rates for selected financial products, by gender, March 2005
- ABC1s, people in the South and 25-44s boast highest ownership rates
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- Figure 29: Current account ownership rates, by age, socio-economic group and TV region, March 2005
- A fifth of current account holders bank with Lloyds TSB
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- Figure 30: Where respondents hold their main current account, 2003 and 2005
- Lloyds TSB has an ageing current account customer profile
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- Figure 31: Current account provider, by gender, age and socio-economic group, March 2005
- Nearly a fifth of C2DE 18-34-year-olds hold their main account with HBOS
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- Figure 32: Current account provider, by age/socio-economic group and TV region, March 2005
- HSBC is particularly strong in the pre-/no family group
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- Figure 33: Current account provider, by lifestage, working status, marital status and technology users, March 2005
- Almost a quarter of broadsheet readers bank with RBS/NatWest
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- Figure 34: Current account provider, by newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Two thirds of account holders still bank with their original provider
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- Figure 35: Propensity to switch provider, March 2005
- But three in ten current account holders have switched providers…
- …and around 6 million customers are considering changing supplier
- Inertia is particularly strong among the over-55s
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- Figure 36: Propensity to switch provider, by gender, age and socio-economic group, March 2005
- People in northern Britain are more inclined to consider switching
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- Figure 37: Propensity to switch provider, by TV region, lifestage and newspaper readership, March 2005
- HBOS customers are more inclined to consider switching
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- Figure 38: Propensity to switch provider, by current account provider, March 2005
Consumer Attitudes and Targeting Opportunities
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- The range of access routes has expanded in the last few years
- But the vast majority of switchers open their accounts at a branch
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- Figure 39: Channels that switchers used to open their account, March 2005
- One in seven 35-44-year-olds used the phone to switch
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- Figure 40: Channels that switchers used to open their account, by gender, age and socio-economic group, March 2005
- Recent switchers are more likely to have made online applications
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- Figure 41: Channels that switchers used to open their account, by when switched, March 2005
- HBOS switchers overwhelmingly use the branch to open accounts
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- Figure 42: Channels that switchers used to open their account, by provider, March 2005
- The branch remains the most popular way to operate an account
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- Figure 43: Channels that switchers use to manage their account, March 2005
- But a third of switchers now use the Internet to conduct their finances
- ABs, 25-44-year-olds and men are most likely to manage accounts online
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- Figure 44: Channels that switchers use to manage their account, by gender, age and socio-economic group, March 2005
- Four in ten switchers who open accounts online still use branches
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- Figure 45: Channels that switchers use to manage their account, by how switched, March 2005
- Half of HSBC switchers use the Internet to manage their account
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- Figure 46: Channels that switchers use to manage their account, by provider, March 2005
- Disaffection with service is the most common switching prompt
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- Figure 47: Reasons why current account customers might switch, by gender, March 2005
- Higher interest rates can also encourage customers to switch
- Overdraft charges were also found to be relatively important
- But four in ten current account holders would not switch provider
- ABC1s and younger consumers are more likely to consider switching
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- Figure 48: Reasons why current account customers might switch, by age/socio-economic group, March 2005
- Younger consumers are the most likely to switch for better overdrafts
- CHAID analysis indicates that NatWest/RBS has a fairly affluent customer base
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- Figure 49: CHAID analysis of the customer bases of the main current account providers, March 2005
- Repertoire analysis reinforces interest rate as the second most important factor
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- Figure 50: Repertoire of number of prompts to persuade people to switch provider, by main prompts, March 2005
Industry Views
The Future
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- Competition in the current account market will remain intense
- The account switching market could be set to increase
- Service will remain the key switching prompt…
- …but consumers are likely to become increasingly price-conscious
- The Internet is increasingly expected to come to the fore
Forecast
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- 79 million current accounts by 2010
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- Figure 51: Forecast of the volume of current accounts, 2005-10
- Factors incorporated in the forecast
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