Table of Contents
Executive Summary
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- The market
- Open Banking has introduced more choice and competition
- Incumbents are responding to the digital challenge
- Not all newcomers will survive
- Fostering ‘true’ loyalty in the more commoditised insurance markets is difficult
- Pricing models typically used by insurers do not help the problem
- Companies and brands
- 86% of UK adults are customers of one of major banking groups
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- Figure 1: Brand customer share shown on a group basis (top eight banking groups only), July 2019
- More than a quarter of UK adults are customers of a mid-sized challenger or supermarket bank
- Nationwide stands apart in the building society sector
- Digital banks are attracting customers but struggle to turn a profit
- Barclaycard is the leading credit card specialist
- Aviva is ahead of its rivals in the insurance sector
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- Figure 2: Brand customer share – insurance companies, July 2019
- The consumer
- The average person is a customer of five different financial companies
- The major retail banks are best at cross-selling
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- Figure 3: Top 15 financial companies with highest ratio for multiple product holdings, July 2019
- Trust is multi-faceted
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- Figure 4: Top 15 financial companies with highest ratio for trust, July 2019
- Supermarket banks are best at rewarding loyalty
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- Figure 5: Top 15 financial companies with highest ratio for rewarding loyalty, July 2019
- Insurers generally have shorter customer tenures
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- Figure 6: Top 15 financial companies with highest ratio for 5+ years tenure, July 2019
- First Direct customers are most likely to recommend the brand
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- Figure 7: Top 15 financial companies with highest ratio for recommending the brand, July 2019
- Bank customers want reliable and convenient access
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- Figure 8: Factors that make people loyal to a particular bank or building society, July 2019
- A fair pricing policy will help insurers to foster loyalty
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- Figure 9: Factors that make people loyal to a particular insurance company, July 2019
- What we think
Issues and Insights
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- Building brand loyalty is particularly challenging for new banks
- The facts
- The implications
- How can insurers improve customer loyalty?
- The facts
- The implications
The Market – What You Need to Know
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- Open Banking injects more competition into the market…
- …but incumbents are responding to the challenge
- Not all newcomers will survive
- Fostering loyalty in more commoditised markets is much more difficult
- Pricing models typically used by insurers do not help the problem
Market Challenges and Drivers – Retail Banking
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- An evolving market but major banks still dominate
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- Figure 10: Main current account provider, July 2019
- A current account is the bedrock of the customer relationship
- Many current account customers need a push to switch
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- Figure 11: Satisfaction with various banking services, July 2019
- The dawn of Open Banking
- Gaining customers is one thing, making a profit out of them is another
- Barclays’ mobile app aims to offer a “one-stop-shop”
- RBS launches new standalone digital brand, Bó
- Credit card issuers scale back on rewards…
- …potentially jeopardising brand loyalty
Market Challenges and Drivers – Insurance
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- Difficult to stand out in a crowded market and engage an apathetic audience
- High levels of churn demonstrate the challenge insurers face
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- Figure 12: Proportion of general insurance policyholders who have switched, by type of policy and length of time ago switched, September 2017
- Limited opportunity for customer interaction with the brand
- One in four home policyholders has been with their insurer for over five years
- Regulator steps in to tackle ‘loyalty penalty’
- Some insurers introduce price promises in response
Companies and Brands – What You Need to Know
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- 86% of UK adults are customers of one of major banking groups
- 29% are customers of a mid-sized challenger or supermarket bank
- Nationwide stands apart in the building society sector
- Digital banks are attracting customers but struggle to turn a profit
- In the insurance sector, Aviva is well ahead of its rivals
Largest Providers by Sector
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- Barclays is the largest retail bank brand by customer share…
- …followed by Halifax
- TSB Bank works on restoring trust
- Tesco Bank is the largest supermarket bank
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- Figure 13: Brand customer share – retail banks, July 2019
- LBG is the largest on a group basis
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- Figure 14: Brand customer share shown on a group basis (top eight banking groups only), July 2019
- Monzo leads the charge among specialist and digital-only banks
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- Figure 15: Brand customer share – specialist and digital-only banks, July 2019
- One in four UK adults holds a product with Nationwide Building Society
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- Figure 16: Brand customer share – building societies, July 2019
- Barclaycard reigns supreme in the credit card market
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- Figure 17: Brand customer share – credit card providers, July 2019
- Aviva stands out in the crowded insurance market
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- Figure 18: Brand customer share – insurance companies, July 2019
- 28% of UK adults hold an NS&I savings product
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- Figure 19: Brand customer share – other providers, July 2019
Top 30 Brands by Customer Share
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- NS&I has the most customers of all the brands
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- Figure 20: Top 30 financial brands by customer share, July 2019
The Consumer – What You Need to Know
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- The average person is a customer of five different financial companies
- The major retail banks are best at cross-selling…
- …and generally have the longest-standing customers
- Trust is often only truly tested when things go wrong
- Supermarket banks are best at rewarding customers
- Customers of First Direct are most likely to recommend the brand
- Insurers can improve loyalty by adopting a fair pricing policy
Number of Financial Brand Relationships
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- The average person is a customer of five different financial companies
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- Figure 21: Repertoire analysis – number of financial brands a customer of, July 2019
- Income is a factor
- Most NS&I customers hold products with at least three other financial brands
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- Figure 22: Top 20 financial brands based on customer share, by number of financial brands a customer of, July 2019
- Seven brands account for three quarters of the single-provider market
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- Figure 23: Top 17 financial brands based on share of customers who hold products with a single provider, July 2019
Breadth of Customer Relationship – Multiple Products
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- In pursuit of greater wallet share
- Some companies are better than others
- Product range is a factor
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- Figure 24: Customers who hold two or more products with brand – largest 30 financial companies by customer share, July 2019
- Major banks have the highest concentration of multiple product holdings
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- Figure 25: Top 15 financial companies with highest ratio for multiple product holdings, July 2019
- Scope for Nationwide to increase wallet share
- Aviva is the best insurance company at cross-selling
Strength of Customer Relationship – Trust in the Brand
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- The major high street banks attract the highest levels of trust
- …although RBS still has work to do
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- Figure 26: Customers who trust brand to resolve any problems – largest 30 financial companies by customer share, July 2019
- Customers of First Direct and Bank of Scotland are most likely to trust them to resolve problems
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- Figure 27: Top 15 financial companies with highest ratio for trust, July 2019
- It takes time to build trust
Valued Customers – Rewarding Loyalty
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- Most customers do not feel rewarded…
- …or perhaps they don’t value the rewards on offer as much as providers think
- A lack of awareness may be a factor
- Bank loyalty schemes are not as generous as they were a few years ago
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- Figure 28: Customers who are rewarded for their custom or loyalty – largest 30 financial companies by customer share, July 2019
- Insurers fare particularly poorly
- Supermarket banks lead the way for rewarding loyalty
- Challenger brands, Co-op Bank and TSB Bank offer no-fee reward accounts
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- Figure 29: Top 15 financial companies with highest ratio for rewarding loyalty, July 2019
- Starling Bank and Revolut offer extra benefits at no extra cost
Length of Customer Relationship – 5+ Years Tenure
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- Current account providers generally have the highest concentration of long-standing customers
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- Figure 30: Customers who have been with the brand for at least five years – largest 30 financial companies by customer share, July 2019
- Brands belonging to the top five banking groups have the highest tenure ratios
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- Figure 31: Top 15 financial companies with highest ratio for 5+ years tenure, July 2019
Positive Customer Experience – Recommending the Brand
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- A customer recommendation is the highest praise a brand can get
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- Figure 32: Customers who would recommend the brand – largest 30 financial companies by customer share, July 2019
- First Direct has highest level of recommendation
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- Figure 33: Top 15 financial companies with highest ratio for recommending the brand, July 2019
Ways to Win Customer Loyalty – Banking
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- Convenient and reliable access points are key to winning bank customer loyalty…
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- Figure 34: Factors that make people loyal to a particular bank or building society, July 2019
- …competitive interest rate and the offer of rewards also help
- 25-34 year olds are the most difficult to extract loyalty from
- Loyalty is generated through a combination of factors
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- Figure 35: Factors that make people loyal to a particular bank or building society – cross-analysis, July 2019
Ways to Win Customer Loyalty – Insurance
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- Renewal premiums heavily influence loyalty
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- Figure 36: Factors that make people loyal to a particular insurance company, July 2019
- There’s no magic bullet for building loyalty
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- Figure 37: Factors that make people loyal to a particular insurance company, July 2019
Appendix: Data Sources and Abbreviations
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- Abbreviations
- Consumer research methodology
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