Table of Contents
Introduction and Abbreviations
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- Shifting dynamics
- Understanding the consumer
- Key sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Better software is the key to more precise targeting
- You have mail
- More than just a penny for your thoughts
- Rewarding customers for loyalty isn’t so hard
Executive Summary
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- Technology and regulation aid evolution of retail banking
- The ageing population will drive demand for saving products
- More ATMs, fewer branches
- Lloyds TSB is the leading current account provider in the UK
- More adspend is dedicated to specific products than to services
- Consumers are generally happy with their bank’s service
- Typologies
- Branch networks will continue to shrink
Market Background
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- The evolution of the financial services sector
- The credit boom adds to the appeal of retail banking
- More than half of banks’ income is now derived from non-interest income
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- Figure 1: Sources of bank income, net interest and net non-interest, 1999-2004
- Depolarisation will bring benefits and challenges
- Is it ‘leading’ edge or ‘bleeding’ edge technology?
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- Figure 2: Illustration of the pros and cons of the Internet in financial services, 2005
- Further regulation will squeeze already lean profit margins
Market Factors
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- Bigger wallets means greater expenditure on financial services
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- Figure 3: PDI, consumer expenditure, savings and savings ratio, 1995-2010
- The ageing population will drive the need for savings products
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- Figure 4: UK population, by age, 1995-2010
- The base rate’s impact on saving and spending
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- Figure 5: The Bank of England’s base rate, September 1990-September 2005
- Increasing Internet penetration will strengthen demand for online banking facilities
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- Figure 6: British Internet penetration, 2001-05
- Offshoring and outsourcing are frequently used to reduce costs
- The repatriation of offshore funds
- New entrants drive competition in retail banking
The Branch and ATM Networks
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- Branch networks are shrinking
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- Figure 7: Number of branches, by bank, 1999-2004
- Backlash against branch closures and bans
- Creating a more ‘retail’ feel
- Other branch improvements
- More ATMs to compensate for branch closures
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- Figure 8: Number of cash dispensers and ATMs, by bank, 1999-2004
- ATMs are more than just cash dispensers
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- Figure 9: Availability of additional ATM facilities, 1999-2004
- The number of fee-charging ATMs is on the rise
- Telephone and Internet banking
- More consumers register to access their accounts remotely
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- Figure 10: The number of personal customers registered to access their accounts by telephone and computer, 1999-2004
- Balance information queries account for almost half of all telephone transactions
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- Figure 11: Number of transactions by telephone, by transaction type, 2001-04
- The number of online transactions nears 2 billion in 2004
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- Figure 12: Number of transactions by computer, by transaction type, 2001-04
- M-banking
The Key Players
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- Banking groups and their retail brands
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- Figure 13: Composition of MBBG member organisations (offering current accounts), 2005
- One in five consumers banks with Lloyds TSB
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- Figure 14: Estimated market share of current account providers, 2000 and 2005
- Company profiles
- Lloyds TSB
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- Figure 15: Company snapshot, Lloyds TSB, 2001-04
- RBS/NatWest
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- Figure 16: Company snapshot, RBS/NatWest, 2001-04
- Barclays
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- Figure 17: Company snapshot, Barclays, 2001-04
- HSBC
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- Figure 18: Company snapshot, HSBC, 2001-04
- HBOS
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- Figure 19: Company snapshot, HBOS, 2001-04
- Abbey
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- Figure 20: Company snapshot, Abbey, 2001-04
Provider Performance
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- Tier 1 capital ratios range between 7.0% and 10.4% of risk-weighted assets
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- Figure 21: Tier 1 capital ratio, MBBGs, 1999-2004
- Consumers have a moderate level of confidence in their providers’ ability to sell them suitable products
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- Figure 22: Confidence in financial providers, by current account provider, August 2005
- The way forward
Advertising and Promotion
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- Adspend on banking services halved from 2000/01 to 2004/05
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- Figure 23: Advertising expenditure on general banking services, by top 10 advertisers, August 2000-July 2005
- More than a third of adspend goes to TV
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- Figure 24: Advertising expenditure on general banking services, by top 10 advertisers, by outlet, August 2004-July 2005
- Most retail banking adspend goes to general insurance
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- Figure 25: Advertising expenditure, by product area, by provider, August 2004-July 2005
- Government launches £4 million advertising campaign
Consumer Financial Activity
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- Consumer confidence remains weak but prospects look more promising
- Relationship with the main financial services providers (MFSP)
- High levels of activity from June 2005 onwards
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- Figure 26: Savings, investment, borrowing and debt repayment – consumers’ expected activity, March 2004-June 2005
- Younger respondents looking to refresh their financial affairs
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- Figure 27: Expected financial activity by socio-demographic and income groups, June 2005 and average for the last 14 quarters
- More activity than a year ago
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- Figure 28: Leading financial activities planned in the next 6 months, June 2004-June 2005
- Housing indicators pick up sharply
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- Figure 29: Intended mortgage and property purchase activity, June 2003-June 2005
- HSBC gains ground in terms of MFSPs
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- Figure 30: Leading main financial services providers: market shares, June 2004-June 2005
- Bank of Scotland will gain life and pensions business, Nationwide BS should be strong in savings
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- Figure 31: Saving, investment and lending, market sizes by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), June 2005
- The Scottish banks will have the most active customer base
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- Figure 32: Activity levels of main financial providers’ customer bases, June 2005
The Consumer and Product Ownership
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- Current account ownership
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- Figure 33: Current account penetration, by gender, age and socio-economic group, August 2005
- One in five consumers banks with Lloyds TSB
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- Figure 34: Current account penetration/market share, 2000 & 2005
- Bank customer profiles
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- Figure 35: Current account holder profiles, August 2005
- Customer service is key to gaining more wallet share
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- Figure 36: Attitudes towards current account provider, by current account provider, August 2005
- General insurance opportunities abound
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- Figure 37: Financial products owned, with current provider and elsewhere, August 2005
- HSBC’s customers are drawn to their competitive savings accounts
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- Figure 38: Products held with current account provider, by current account provider, August 2005
- Repertoire analysis suggests some cross-selling success
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- Figure 39: Number of products held with current account provider, August 2005
- 25-44s most likely to have 4+ products with main bank
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- Figure 40: Repertoire of products owned with main bank, by gender, age, socio-economic group and region, August 2005
- Lloyds TSB is most successful at cross-selling
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- Figure 41: Repertoire of products owned with main bank, by bank, August 2005
- How many companies do customers deal with?
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- Figure 42: The providers with which consumers have a relationship, August 2005
- A quarter of consumers have relationships with 4+ financial services providers
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- Figure 43: Number of relationships with financial services companies, by current account provider, August 2005
Consumer Attitudes and Targeting Opportunities
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- The bank as a financial supermarket
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- Figure 44: Attitudes towards current account provider, August 2005
- The branch versus the Internet
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- Figure 45: Illustration of branch usage and its overlap with Internet banking, August 2005
- Older consumers may have no contact with their bank
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- Figure 46: Demographic analysis of branch visits and/or banking online, August 2005
- Two in five HSBC customers access their account regularly online
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- Figure 47: Attitudes towards current account provider by current account provider, August 2005
- Branch visits do not necessarily build up product repertoires
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- Figure 48: Attitudes towards provider by repertoire of products held with provider, August 2005
- Typologies
- ABs don’t bother with branches
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- Figure 49: Banking typologies, by gender, age, socio-economic group and region, August 2005
- Full-time workers prefer to access their accounts remotely
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- Figure 50: Banking typologies, by working status, gross annual household income and tenure, August 2005
- Retired consumers are most likely to be Branch Bankers
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- Figure 51: Banking typologies, by marital status and detailed lifestage, August 2005
- Broadsheet readers more likely than average to be Remote Bankers
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- Figure 52: Banking typologies by newspaper readership, new technology and supermarkets, August 2005
- CHAID analysis
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- Figure 53: CHAID analysis of banking typologies, August 2005
- The Content Customers have the largest product repertoire
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- Figure 54: Banking typologies by product repertoire with provider, August 2005
- One in five of HSBC’s current account holders are Content
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- Figure 55: Banking typologies, by current account provider, August 2005
- Providers can expect to generate more business from Content Customers
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- Figure 56: Attitudes towards current account provider, by banking typologies, August 2005
Industry Views
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- Branch banking versus remote banking
- Gaining more wallet share
- Future challenges
The Future
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- Regulation will continue to shape the face of retail banking
- Depolarisation will hasten goal of becoming comprehensive product distributors
- What will happen to the branch?
- The rise of m-banking?
- Customer loyalty: on the verge of extinction?
Forecast
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- Scenario 1 sees growth in the number of Content Customers
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- Figure 57: Forecast of retail banking typologies, scenario 1, 2005-10
- More people turn to Internet banking in Scenario 2
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- Figure 58: Forecast of retail banking typologies, scenario 2, 2005-10
- Scenario 3 predicts a branch banking renaissance
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- Figure 59: Forecast of retail banking typologies, scenario 3, 2005-10
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