Table of Contents
Issues in the Market
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- Key issues
- Abbreviations
Future Opportunities
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- Engaging the young
- Let’s start treating customers fairly…
- … and rebuilding trust through greater transparency
- Targeting the wealthy… and keeping them
Market in Brief
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- Big changes in the retail banking market in 2008
- The economy is improving but we’re not out of the woods yet
- Consumer confidence has picked up
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- Figure 1: Monthly, 3-monthly and 12-monthly UK consumer confidence index, Jan 1982-Jan 2008
- The number of current accounts has fallen slightly since 2006
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- Figure 2: Estimated number of current accounts in the UK, 2004-09
- Retail savings balances increased by just 5% in 2008
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- Figure 3: Retail savings balances and market shares, 2002-09
- Unsecured personal loan advances have plummeted
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- Figure 4: Estimated gross lending for unsecured personal loans, 2004-09
- Credit card lending has also declined in the recession
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- Figure 5: Gross lending and net amounts outstanding on credit card lending (monthly data, seasonally adjusted), Jan 2003-Sep 2009
- Mortgage lending has been severely affected by the credit crunch
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- Figure 6: Total mortgage lending, gross and net advances, 2003-09
- Banks account for 17% of the general insurance market
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- Figure 7: Value of the UK personal motor, home, travel, and total general insurance markets, by GWP, 2003-09
- The boom in online banking
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- Figure 8: Number of registered customers, and number of online/telephone banking transactions, by transaction type (MBBGs only), 2002 and 2008
- Ownership of financial products increases with age and wealth
- Savings accounts are the most common cross-holding
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- Figure 9: Other financial products held with current account provider, September 2009
- Over-55s are most likely to be happy with their provider
Internal Market Environment
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- Key points
- A new banking landscape in 2010 and possibly beyond
- A quick overview of 2008
- Rebuilding capital is a key priority for banks at present
- Banks’ income fell substantially in 2008…
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- Figure 10: Sources of bank income, net interest and net non-interest (MBBGs only), 2002-08
- …while bad debts increased
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- Figure 11: Total sterling write-offs by UK banks, 2002-08
- Consumer lending has fallen sharply during the downturn
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- Figure 12: Gross lending to individuals, by category, 2000-08
- More demanding customers, less loyalty in the market
- The CC announces new rules on selling PPI
- The OFT investigation into bank charges continues
- Banks face stricter regulation in the future…
- … and here is just one example
- Possible changes to the current regulatory system in 2010
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- Figure 13: The different pledged approaches to financial regulation of the two main political parties, 2009
Broader Market Environment
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- Key points
- House prices have fallen… but have started to pick up again
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- Figure 14: Average UK house prices, Jan 2007-Jul 2009
- The inter-bank lending challenge
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- Figure 15: 3-month LIBOR rate vs the BoE base rate, Jan 2002-Jul 2009
- Unemployment is high, and rising
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- Figure 16: UK unemployment levels, Q1 2002-Q1 2009
- Arrears and repossessions are rising…
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- Figure 17: Repossessions and the number of homes with mortgages three months or more in arrears. 2002-08
- … as are personal insolvencies
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- Figure 18: Individual insolvencies and bankruptcies in England and Wales (seasonally adjusted), Q1 2002-Q1 2009
- An ageing population, but one which is heavily technology-driven
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- Figure 19: UK Population, by lifestage, 2004-14
The Consumer Environment
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- Key points
- Consumer confidence on the up…
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- Figure 20: Monthly, 3-monthly and 12-monthly UK consumer confidence index, Jan 1982-Sep 2009
- … though some people are still struggling
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- Figure 21: Households’ current financial position, Q2 2008-Q2 2009
- Uncertainty leads to good intentions in the savings market
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- Figure 22: Intended cash-based activities, Q3/Q4 2002-Q2/Q3 2009*
- Consumer credit demand has increased slightly this year
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- Figure 23: Intended consumer credit activities, Q3/Q4 2002-Q2/Q3 2009
- Mortgage activity has declined alongside the fall in house prices
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- Figure 24: Expected mortgage and property purchase activity, Q3/Q4 2002-Q2/Q3 2009
- Lloyds TSB is the leading main financial services provider
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- Figure 25: Top 10 main financial services providers, June 2009
SWOT Analysis
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- Figure 26: Retail banking overview – SWOT analysis, 2009
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Current Accounts and Overdrafts
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- Key points
- The number of current accounts has fallen slightly in recent years
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- Figure 27: Estimated number of current accounts in the UK, 2004-09
- Current accounts have very high levels of penetration
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- Figure 28: Ownership of financial products, September 2009
- Packaged accounts are being pushed hard
- Borrowing on overdrafts increased by 4% in 2008
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- Figure 29: Overdraft advances to individuals and individual trusts (MBBGs only), 2003-08
- Lloyds Banking Group has a 28% share of the market
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- Figure 30: Current account provider, September 2009
Savings Accounts and ISAs
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- Key points
- Retail savings balances grew less in 2008 than previous years
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- Figure 31: Retail savings balances and market shares, 2002-08 and September 2009
- Instant-access savings accounts are the most popular…
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- Figure 32: Ownership of deposit or savings accounts and NS&I products, December 2008
- … but cash ISA subscriptions have grown strongly
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- Figure 33: Amounts subscribed into ISAs, by type of component, 2002/03-2008/09
Unsecured Personal Loans
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- Key points
- Unsecured personal loan advances continue to fall
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- Figure 34: Estimated gross lending for unsecured personal loans, 2004-09
Credit Cards
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- Key points
- Gross credit card lending increased marginally in 2008…
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- Figure 35: Gross lending and net amounts outstanding on credit card lending (monthly data, seasonally adjusted), Jan 2003-Sep 2009
- … although usage was down slightly in value and volume terms
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- Figure 36: Number of credit cards in issue, transaction volumes and value of UK purchases, 2002-08
Mortgages
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- Key points
- Gross mortgage lending remains subdued in 2009…
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- Figure 37: Gross mortgage advances*, by type of loan, Q1 2008-Q2 2009
- …after falling significantly in 2008…
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- Figure 38: Total mortgage lending, gross and net advances, 2003-09
- … as lending criteria remain extremely tight
- The specialist lending market has virtually disappeared
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- Figure 39: Gross advances, by type of lender, Jan 2007-Jul 2009 (monthly data, seasonally adjusted)
General Insurance
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- Key points
- Motor insurance is the largest category of general insurance…
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- Figure 40: Value of the UK personal motor, home, travel, and total general insurance markets, by GWP, 2003-09
- Bancassurers hold 17% of the general insurance market
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- Figure 41: GWP in the UK personal general insurance market, by distribution channel, 2008
Companies and Products
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- Overview of the retail banking market
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- Figure 42: Main retail banking parent and subsidiary brands, 2009
- Company profiles – the key players
- Barclays
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- Figure 43: Barclays company profile, 2004-08
- Figure 44: Barclays key facts
- HSBC
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- Figure 45: HSBC company profile, 2004-08
- Lloyds Banking Group
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- Figure 46: Lloyds TSB company profile, 2004-08
- Nationwide Building Society
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- Figure 47: Nationwide company profile, 2004-08
- Royal Bank of Scotland
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- Figure 48: RBS company profile, 2004-08
- Santander
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- Figure 49: Abbey company profile, 2004-08
- Figure 50: Alliance & Leicester company profile, 2004-08
- Other providers in the market
- Co-operative Bank/Britannia BS
- First Direct
- Northern Rock
- Yorkshire Bank/Clydesdale Bank
Brand Communication and Promotion
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- Key points
- Adspend for loans and mortgages fell markedly in 2008
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- Figure 51: Top 15 advertising categories within financial services, 2007-08
- Lloyds Banking Group has a massive advantage in terms of advertising
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- Figure 52: Retail banking adspend of selected providers, 2007-08 and H1 2009
- Direct mail is the highest area of adspend
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- Figure 53: Retail banking adspend, by media type, 2008
Brand Elements
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- Key points
- Brand map
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- Figure 54: Attitudes towards and usage of retail banking brands, September 2009
- Brand qualities of retail banking brands
- Barclays still profit-centric, but also most authoritative
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- Figure 55: Personalities of various retail banking brands, September 2009
- Experience of retail banking brands
- Halifax most used, HSBC lags behind
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- Figure 56: Consumer usage of various retail banking brands, September 2009
- Brand intentions for retail banking brands
- Consideration consistent, but First Direct and Tesco less appealing
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- Figure 57: Consideration of various retail banking brands, September 2009
- Brand satisfaction for retail banking brands
- Nationwide best for satisfaction, big banks have poorer performance
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- Figure 58: Satisfaction with various retail banking brands, September 2009
- Brand commitment to retail banking brands
- Lloyds TSB sees firm commitment
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- Figure 59: Commitment to various retail banking brands, September 2009
- Barclays
- What the consumer thinks
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- Figure 60: Attitudes towards the Barclays brand, September 2009
- First Direct
- What the consumer thinks
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- Figure 61: Attitudes towards the First Direct brand, September 2009
- Halifax
- What the consumer thinks
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- Figure 62: Attitudes towards the Halifax brand, September 2009
- Abbey
- What the consumer thinks
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- Figure 63: Attitudes towards the Abbey brand, September 2009
- HSBC
- What the consumer thinks
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- Figure 64: Attitudes towards the HSBC brand, September 2009
- Tesco
- What the consumer thinks
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- Figure 65: Attitudes towards the Tesco brand, September 2009
- NatWest
- What the consumer thinks
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- Figure 66: Attitudes towards the NatWest brand, September 2009
- The Co-operative Bank
- What the consumer thinks
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- Figure 67: Attitudes towards the Co-operative Bank brand, September 2009
- Lloyds TSB
- What the consumer thinks
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- Figure 68: Attitudes towards the Lloyds TSB brand, September 2009
- Nationwide
- What the consumer thinks
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- Figure 69: Attitudes towards the Nationwide brand, September 2009
Channels to Market
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- Key points
- Most banks have downsized their branch networks…
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- Figure 70: Number of branches of selected banks and building societies, 2002-08
- … but Santander increased its number of branches by 63% in 2008
- The number of ATMs in the UK has steadily increased…
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- Figure 71: Number of ATMs of selected banks and building societies and in the whole of the UK, 2002-08
- … especially those owned by independent operators
- Online banking is booming
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- Figure 72: Number of registered customers, and number of online/telephone banking transactions, by transaction type (MBBGs only), 2002 and 2008
The Consumer – Product Ownership
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- Key points
- Nine in ten people in the UK have a current account…
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- Figure 73: Ownership of financial products, September 2009
- … while mortgages and loans are less commonly owned
- Young adults are less likely to own financial products
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- Figure 74: Types of financial products owned, by demographics, September 2009
- Higher earners are more likely to own most products
- Complex products attract more financially engaged people
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- Figure 75: Cross-holdings of different financial products, September 2009
- Inter-relationships exist between different products
The Consumer – Choosing a Provider
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- Key points
- Lloyds Banking Group is a force to be reckoned with
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- Figure 76: Current account provider, September 2009
- The traditional ‘big five’ dominate the younger market
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- Figure 77: Type of current account provider, by demographics, September 2009
- High earners are more likely to use a direct bank
- HSBC attracts a lot of young adults…
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- Figure 78: Leading current account providers, by demographics, September 2009
- … who are also affluent and well-educated
- Direct banks have the highest level of customer satisfaction
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- Figure 79: Leading current account providers, by attitudes towards banks and current accounts, September 2009
The Consumer – Cross-selling
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- Key points
- Savings accounts are the most common cross-holding
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- Figure 80: Other financial products held with current account provider, September 2009
- Men are more likely to have other products with their main bank…
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- Figure 81: Other financial products held with current account provider, by demographics, September 2009
- … as are ABs, but not because they are apathetic
- Savings accounts have the highest cross-sales penetration
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- Figure 82: Penetration rates of cross-selling other financial products to existing current account customers, September 2009
- Despite being a small market, loans are a key cross-sale product
- Which banks are best at cross-selling?
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- Figure 83: Proportion of people who hold other financial products wuth their current account provider, by individual brand, September 2009
The Consumer – Attitudes towards Providers
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- Key points
- Most people are happy with their current account provider…
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- Figure 84: Attitudes towards banks and current accounts, September 2009
- …but are they delighted?
- The introduction of charges could destroy inertia
- Older people are less likely to be considering switching
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- Figure 85: Attitudes towards banks and current accounts, by demographics, September 2009
- ABs are more difficult to please
- People with cross-holdings are more loyal and less likely to switch
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- Figure 86: Attitudes towards banks and current accounts by, financial products held with current account provider, September 2009
- Loan customers are keen to get a grip on their finances
The Consumer – Target Groups
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- Key points
- Am I Bovverd’s are uninterested and apathetic
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- Figure 87: Target groups, by attitudes towards banks and current accounts, September 2009
- Engaged Loyalists are happy with their bank
- Likely Switchers have very low customer satisfaction
- Prudence Bearers may have been hard hit by the recession
- Engaged Loyalists are more likely to be men
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- Figure 88: Target groups, by demographics (profile format), September 2009
- Avoid 25-34-year-olds – they’re Likely Switchers
- Engaged Loyalists own the widest range of financial products…
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- Figure 89: Financial products owned and those held with current account provider, by target groups, September 2009
- … and hold more products with their current account provider
- Likely Switchers are most likely to bank with Barclays
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- Figure 90: Bank with which current account is, by target groups, September 2009
Appendix – The Consumer
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- Figure 91: Financial products owned, by demographics, September 2009
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- Figure 92: Financial products owned, by demographics, September 2009 (continued)
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- Figure 93: Cross-holdings of different financial products, September 2009
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- Figure 94: Cross-holdings of different financial products, September 2009 (continued)
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- Figure 95: Type of current account provider, by demographics, September 2009
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- Figure 96: Current account provider, by demographics, September 2009
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- Figure 97: Proportion of people who hold other finaincial products wuth their current account provider, by individual brand, september 2009
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- Figure 98: Other financial products held with current account provider, by demographics, September 2009
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- Figure 99: Financial product owners that hold their product with their current account provider, September 2009
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- Figure 100: Financial product owners that hold their product with their current account provider, September 2009 (continued)
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- Figure 101: Attitudes towards banks and current accounts, September 2009
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- Figure 102: Attitudes towards banks and current accounts, September 2009 (continued)
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- Figure 103: Target groups, by demographics (profile format), September 2009
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Appendix – The Regulatory Environment
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- Retail Distribution Review
- Splitting sales and advice
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- Figure 104: Proposed regulatory landscape, 2012
- From commission to fees
- Possible extension to non-investment markets
- Treating Customers Fairly
- Creditor Insurance
- CAB, Office of Fair Trading and Competition Commission investigations
- Severe restrictions place on the sale of policies
- Consumer Credit Act 2006
- Banking Code Revisions
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