Current account ownership is almost universal, making current accounts the most widely held financial product in the UK. Market share data, with the top five individual current account providers accounting for nearly two thirds of the market, reveals a mature and heavily concentrated market. Historically, barriers to entry have been high as a result of strict regulation and high levels of customer inertia.

The introduction of the Current Account Switch Service (CASS) in September 2013 however, coupled with the entry of several challenger brands, has recently heated up competition in the market. Although these developments have had some positive impacts on switching activity, customer churn remains rather limited with nearly half of current account holders never having switched their main account provider.

This report examines how the current account market is evolving in light of these changes. It provides an overview of the size and composition of the market and reviews competitive strategies including various recent product developments in the market. Mintel’s exclusively commissioned research concludes the report, looking at current account ownership, factors influencing consumers’ choice of current account, consumer attitudes towards paid-for packaged accounts, satisfaction with providers, current account switching activity and consumer satisfaction with the CASS.

Report scope and definitions

The focus of this report is on retail current accounts, including packaged accounts for mass-market customers, but excluding premium and private bank accounts targeted at the mass affluent to high net worth. The latter are covered in Mintel’s Premium and Mass Affluent Banking – UK, November 2014 report.

Current accounts can be classified into various sub-types according to their target market and pricing model. The predominant type 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’. Charges are usually significant on borrowing above an arranged overdraft limit.

Student and graduate accounts are variants of the free-if-in-credit model and may offer special features, such as an interest-free overdraft. Similarly, standard and basic bank accounts are based on the free-if-in-credit model and do not carry any charges provided there are sufficient funds in the account to meet any payments made.

The other main category is the premium or packaged account. This 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. A number of premium or packaged accounts on the market more recently offer extra benefits for no additional fee or the fee is waived, but these generally include perks such as in-credit interest rates and cashback, instead of insurance add-ons.

Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland.

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