Current, Packaged and Premium Accounts - UK - June 2010

ISSUES IN THE MARKET
Key issues
Market definitions
Abbreviations
FUTURE OPPORTUNITIES
Moving new brands into the market
Winning the ‘main’ share of the customer’s wallet…
…and harnessing the power of social media
The future is mobile
MARKET IN BRIEF
Size of the personal current account market
Influencing factors and trading environment
Regulatory and political developments
Leading providers
Figure 1: Share of ‘main’ customers, by largest banking groups, 2010
Cross-selling activity and recent product development
Distribution trends
Advertising activity
The key findings of Mintel’s consumer research
The most common and most used packaged account benefits
Figure 2: Ownership and use of benefits – fee-charging packaged account customers only, March 2010
Figure 3: Interest in and willingness to pay for packaged account benefits, March 2010
Assessing newcomer threat
Most persuasive switching factors
INTERNAL MARKET ENVIRONMENT
Key points
Overdraft rates rise despite a low base rate
Figure 7: Monthly overdraft interest rate versus official bank rate, January 2005-March 2010
Cost of card fraud falls, but online banking losses rise
Regulation round-up
Future banking reform
BROADER MARKET ENVIRONMENT
Key points
Summary of the economic backdrop: Uncertainty reigns
The downturn has created fresh challenges
Rising cost of bad debt
Interest rates will inevitably rise
Confidence remains fragile
Figure 4: GfK Consumer Confidence Barometer – UK, January 1988-April 2010
Consumer spending fell in 2009
The overall population continues to grow
Figure 5: Size of the UK population, by age, 2001-20
Nearly 70% of British adults now have broadband access
Figure 6: Broadband and internet penetration – GB, 2004-09
COMPETITIVE CONTEXT
Key points
Savings accounts are the most commonly cross-sold product
Figure 8: Proportion of peoople who hold additional products with their current account provider, September 2009
Credit cards and loans also record fairly high cross-sell conversion rates
Figure 9: Current account cross-selling conversion rates, by product type, September 2009
Nationwide reigns supreme in the savings arena
Figure 10: Proportion of people who hold additional products with their current account provider, by brand, September 2009
Plastic card usage
Prepaid cards may compete, but they also complement existing portfolios
Main target markets
Closed versus open loop
Product outlook
MARKET SWOT ANALYSIS
Figure 11: UK current account market – SWOT analysis, 2010
WHO’S INNOVATING?
Key points
Round-up of recent product developments
Halifax extends its ‘Rewards’ programme
Santander adds to its ‘Zero’ range with a new current account
Alliance & Leicester lures switchers with a cash reward
HSBC enhances its current account range
Nationwide offers “more” to its main FlexAccount customers
MARKET SIZE
Key points
Product availability
The size of the market continues to grow steadily
Figure 12: Number of current account holders and number of current accounts, 2007-09
The ‘free banking’ model dominates
Figure 13: Proportional distribution of personal current accounts, by type – established banks only, 2006
There are some eight million basic bank accounts
Current accounts provide an important revenue stream for retail banks…
Figure 14: Proportional distribution of retail banking revenue, by product area, 2006
…with the greatest share of income coming from net credit interest
Figure 15: Breakdown of personal current account revenue, by main income stream, 2006
MARKET SHARE
Key points
Lloyds TSB has the largest share of ‘main’ current account customers
Figure 16: Main current account provider, by individual brand, 2009 and 2010
Figure 17: Main current account provider, by type of account, March 2010
Top five banking groups control over four fifths of the market
Figure 18: Share of main current account holder customer base, by banking group (top seven only), March 2010
Barclays claims second place in the packaged account market
Figure 19: Share of main packaged account holder customer base, by banking group (top six only), March 2010
NEW CHALLENGER BRANDS
Key points
Crisis has transformed the banking landscape
RBS and Lloyds set to divest assets and give up share
New entrants emerge to crack the current oligopoly
Home and Savings Bank
Metro Bank
Post Office
Triodos
Tesco Bank
Virgin Money
Walton & Co
Are non-traditional financial providers better at customer service?
COMPANIES AND PRODUCTS
Barclays
Figure 20: Barclays’ current account range, May 2010
Figure 21: Segmentation of Barclays' adspend, year ending January 2010
Co-operative Financial Services
Figure 22: The Co-operative Bank’s current account range, May 2010
Figure 23: smile’s current account range, May 2010
Figure 24: Segmentation of CFS’ adspend, year ending January 2010
HSBC
Figure 25: HSBC’s current account range, May 2010
Figure 26: First Direct’s current account range, May 2010
Figure 27: Segmentation of HSBC's adspend, year ending January 2010
Figure 28: Segmentation of First Direct's adspend, year ending January 2010
Lloyds Banking Group
Figure 29: Lloyds TSB’s current account range, May 2010
Figure 30: Halifax’s/Bank of Scotland’s current account range, May 2010
Figure 31: Segmentation of Lloyds TSB’s adspend, year ending January 2010
Figure 32: Segmentation of Halifax’s adspend, year ending January 2010
Figure 33: Segmentation of Bank of Scotland’s adspend, year ending January 2010
Nationwide Building Society
Figure 34: Nationwide’s current account range, May 2010
Figure 35: Segmentation of Nationwide Building Society’s adspend, year ending January 2010
National Australia Bank
Figure 36: Clydesdale’s and Yorkshire Bank’s current account range, May 2010
RBS/NatWest
Figure 37: RBS’ current account range, May 2010
Figure 38: NatWest’s current account range, May 2010
Figure 39: Segmentation of NatWest’s adspend, year ending January 2010
Figure 40: Segmentation of RBS’ adspend, year ending January 2010
Grupo Santander
Figure 41: Santander’s current account range, May 2010
Figure 42: A&L’s current account range, May 2010
Figure 43: Segmentation of Santander’s adspend, year ending January 2010
Figure 44: Segmentation of Alliance & Leicester’s adspend, year ending January 2010
BRAND ELEMENTS
 KEY POINTS
 BRAND MAP
Figure 45: Attitudes towards and usage of current account brands, April 2010
 BRAND QUALITIES OF CURRENT ACCOUNT BRANDS
Lloyds and Barclays lead on authority, but lack warmth
Figure 46: Personalities of various current account brands, April 2010
 EXPERIENCE OF CURRENT ACCOUNT BRANDS
Halifax nearing Lloyds
Figure 47: Consumer usage of various current account brands, April 2010
 BRAND CONSIDERATION FOR CURRENT ACCOUNT BRANDS
Nationwide and Santander most considered
Figure 48: Consideration of various current account brands, April 2010
 BRAND SATISFACTION FOR CURRENT ACCOUNT BRANDS
Smaller brands most excellent, Nationwide top performer
Figure 49: Satisfaction with various current account brands, April 2010
 BRAND COMMITMENT TO CURRENT ACCOUNT BRANDS
Inertia drives loyalty to Lloyds
Figure 50: Commitment to various current account brands, April 2010
 BRAND INTENTIONS FOR CURRENT ACCOUNT BRANDS
Nationwide and Santander have best retention
Figure 51: Future usage intentions for various current account brands, April 2010
 BRAND RECOMMENDATION FOR CURRENT ACCOUNT BRANDS
Nationwide and Santander most recommended
Figure 52: Recommendation of various current account brands, April 2010
 NATWEST
What the consumer thinks
Figure 53: Attitudes towards the NatWest brand, April 2010
 SANTANDER
What the consumer thinks
Figure 54: Attitudes towards the Santander brand, April 2010
 BARCLAYS
What the consumer thinks
Figure 55: Attitudes towards the Barclays brand, April 2010
 LLOYDS TSB
What the consumer thinks
Figure 56: Attitudes towards the Lloyds TSB brand, April 2010
 NATIONWIDE
What the consumer thinks
Figure 57: Attitudes towards the Nationwide brand, April 2010
BRAND COMMUNICATION AND PROMOTION
Key points
Current account adspend is cut by more than a fifth
Figure 58: Advertising expenditure on current accounts and related services, by sub-product category, 2006-10
TV and press account for the largest share of adspend
Figure 59: Share of advertising expenditure on current accounts and related services, by media type, 2008-10
Three challenger banks feature in the top five advertiser rankings
Figure 60: Top ten advertisers of current accounts and related services, 2008-10
Halifax spends the most on promoting its current account range
Figure 61: Top five advertisers of ordinary current accounts, 2008-10
A&L and HSBC focus their efforts on the packaged account market
Figure 62: Top five advertisers of packaged/premium accounts, 2008-10
CHANNELS TO MARKET
Key points
A branch network helps to grow and retain share
Figure 63: Number of branches belonging to the largest current account providers (shown on group basis), year-end 2009
ATM withdrawals continue to rise
Figure 64: Number of ATMs belonging to the largest current account providers (shown on group basis), 2008
More people switch from telephone to online banking
Figure 65: Number of registered telephone and online banking customers and number of transactions (MBBGs only), 2002 and 2008
Faster Payments driving growth in automated payments
Mobile phone banking technology continues to develop…
…and, while take-up is currently small, there is huge potential
THE CONSUMER – OWNERSHIP AND USAGE TRENDS
Key points
Current account penetration has remained broadly stable over the past four years
Figure 66: Current account ownership, 2006-09
Two fifths of the current account customer base have a joint account
Figure 67: Breakdown of current account holders, 2009
Around one in six customers have a premium or packaged account
Figure 68: Type of current account held – main account only, 2009
Three in four customers have held their main account for over five years
Figure 69: Length of time held main current account, 2009
Branch-based providers dominate the market
Figure 70: Type of provider – main current account only, 2009
Nearly two thirds of current account holders have access to an authorised overdraft
Figure 71: Facilities available – main current account only, 2009
Almost four fifths pay bills by direct debit
Figure 72: Type of transaction used – main current account only, 2009
When choosing a current account, people are most likely to consider a company’s reputation, interest rates and locality
Figure 73: Most important factors when choosing a current account, 2009
THE CONSUMER – FEE-BASED PACKAGED ACCOUNTS
Key points
About Mintel’s consumer survey
One in six have a fee-charging packaged account
Figure 74: Ownership of fee-based packaged and free/ordinary current accounts, March 2010
Packaged accounts appeal to a broad socio-economic spectrum
Figure 75: Type of current account held, by gender and socio-economic group, March 2010
25-34-year-olds are a key target group
Figure 76: Type of current account held, by age, March 2010
THE CONSUMER – POPULARITY OF PACKAGED ACCOUNT BENEFITS
Key points
Motor breakdown cover and travel insurance are the most common features of a packaged account costing over £10 a month
Figure 77: Benefits have access to, by type of account, March 2010
Overdraft anomaly?
Card protection and travel insurance are the most ‘valued’ benefits
Figure 78: Benefits actually used, by type account, March 2010
Scope to make better use of preferential rates and retail vouchers
Figure 79: Ownership and use of benefits – fee-charging packaged account customers only, March 2010
Customers are keen on identity theft and card protection, but most wouldn’t pay extra for them
Figure 80: Interest in and willingness to pay for packaged account benefits, March 2010
Those aged 25-34 show the greatest willingness to pay extra for value-added benefits
Figure 81: Willingness to pay for packaged account benefits, by age, March 2010
THE CONSUMER – ATTITUDES TOWARDS POTENTIAL CHALLENGERS
Key points
Tesco and Virgin could pose a real threat to incumbent providers
Figure 82: Awareness of potential new entrants and willingness to switch to them (selected brands only), March 2010
Brand rankings vary among the different age groups
Figure 83: Willingness to switch to selected brands, by age, March 2010
Men are more prepared to switch than women
Figure 84: Willingness to switch to selected brands, by gender and socio-economic group, March 2010
Tesco Bank is the top choice for those on low-to-mid incomes
Figure 85: Willingness to switch to selected brands, by household income, March 2010
Virgin Money could poach a fair slice of existing fee-paying customers
Figure 86: Willingness to switch to selected brands, by type of account held, March 2010
THE CONSUMER – TARGETING OPPORTUNITIES
Key points
One in two people might be persuaded to switch if offered a cash incentive
Figure 87: Most persuasive factors that would prompt switching to a new bank, March 2010
Switching motivations vary with age
Figure 88: Most persuasive factors that would prompt switching to a new bank, by age, March 2010
Over a third of fee-paying customers could be persuaded to switch for a low overdraft fee
Figure 89: Most persuasive factors that would prompt switching to a new bank, by type of account held, March 2010
THE CONSUMER – COMPETITOR ANALYSIS
Key points
Barclays and Lloyds TSB lead the fee-based packaged market
Figure 90: Type of current account held, by main account provider (top seven only), March 2010
Over half of A&L’s and Barclays’ customers have access to an interest-free overdraft
Figure 91: Benefits have access to, by main current account provider (top eight only), March 2010
HSBC has greatest success at selling ‘preferential rates’
Figure 92: Benefits actually used, by main current account provider (top eight only), March 2010
Willingness to pay for benefits by customers of the Lloyds Banking Group
Figure 93: Interest in and willingness to pay for packaged account benefits – Lloyds TSB Group customers only, March 2010
Willingness to pay for benefits by customers of RBS Group
Figure 94: Interest in and willingness to pay for packaged account benefits – RBS Group customers only, March 2010
Willingness to pay for benefits by customers of HSBC and First Direct
Figure 95: Interest in and willingness to pay for packaged account benefits – HSBC Group customers only, March 2010
Willingness to pay for benefits by customers of Barclays
Figure 96: Interest in and willingness to pay for packaged account benefits – Barclays customers only, March 2010
Willingness to pay for benefits by customers of Santander Group
Figure 97: Interest in and willingness to pay for packaged account benefits – Santander Group customers only, March 2010
Willingness to pay for benefits by customers of Nationwide
Figure 98: Interest in and willingness to pay for packaged account benefits – Nationwide customers only, March 2010
Santander has the least to fear from any new entrants that emerge
Figure 99: Willingness to switch to the listed brands, by main current provider, March 2010
A&L’s customers are the most prepared to switch for a cash reward
Figure 100: Persuasive factors that would prompt switching to a new bank, by main current provider, March 2010
Further analysis
APPENDIX – SEGMENTATION OF CURRENT ACCOUNT CUSTOMERS
Figure 101: Type of current account held, by full demographics, March 2010
APPENDIX – PROFILE OF PACKAGED ACCOUNT CUSTOMERS
Figure 102: Demographic profile of fee-based packaged account customers, March 2010