Consumers and Retail Banking - UK - September 2015

INTRODUCTION
Abbreviations
EXECUTIVE SUMMARY
The market
Consumer credit is once again a key focus for banks
Figure 1: Growth rates for personal deposits, mortgage lending and consumer credit among the main high street banks*, 2009-15
Companies and brands
High concentration continues to define UK retail banking
Figure 2: Main banking groups, by aggregated share of main current account market, May 2015
Banks split on branch and tech strategies
Banks make the most of TV advertising to get their message across
Figure 3: Recorded above-the-line, online display and direct mail advertising expenditure on retail banking, by media type, 2013-15
The consumer
The majority have just one current account
Figure 4: Number of current accounts owned, May 2015
71% of current account holders use four or more banking services
Figure 5: Number of different types of banking services used, May 2015
Banks must keep a close eye on cost sensitivity
Figure 6: Attitudes towards switching and value, May 2015
Convenience reigns when it comes to banking preferences
Figure 7: Attitudes towards banking channels, May 2015
Excessive charges and data breaches get under customers’ skin
Figure 8: Consumer concerns over various issues in the financial services industry, May 2015
Trust is on the up, with branches acting as a driving force
Figure 9: Proportion of people with any trust in different elements of the banking industry, June 2014 and May 2015
Customers are not convinced banks have their best interests at heart
Figure 10: Agreement with statements concerning different concepts of trust in retail banking, May 2015
What we think
ISSUES AND INSIGHTS
Making the best return on tech strategies will make all the difference
The facts
The implications
Cost sensitivity is one of few factors that can drive customers away
The facts
The implications
Loyalty has few rewards, encouraging customers to look for better deals
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Consumer credit gets competitive
Banks are growing overdrafts and loans at the same rate as credit cards
MARKET OVERVIEW
Growth in consumer credit borrowing overtakes personal deposits
Figure 11: Growth rates for personal deposits, mortgage lending and consumer credit among the main high street banks*, 2009-15
Banks clash with specialist lenders over booming credit market
MMR slows growth in mortgage lending
Growth in overdrafts and loans is back in line with credit cards
Figure 12: Growth rates for credit card lending and personal loans & overdrafts among the main high street banks*, 2009-15
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
High concentration continues to define the market
The relative importance of technology and branch networks divides opinion
Year-on-year adspend is on the up, and heavyweights use TV to get their message across
RETAIL BANKING PROVIDERS: MARKET SHARE
High concentration prevails despite spin-off activity
Figure 13: Current account providers, by share of main and other current account market, May 2015
Challenger brands fight for a small share
Switching service is benefiting established providers more than new entrants
Lloyds Banking Group stays dominant despite loss of TSB
Figure 14: Main banking groups, by aggregated share of main current account market, May 2015
COMPANY STRATEGIES
Branching out or going without?
Barclays
HSBC
Metro Bank
TSB
Atom Bank
Innovate or integrate?
Apple
Barclays
Banks get personal to win wary customers
Yorkshire Bank and Clydesdale Bank
Tesco Bank
TSB
BRAND COMMUNICATION AND PROMOTION
Barclays cranks up the pressure with growing adspend…
Figure 15: Top 15 highest spenders for recorded above-the-line, online display and direct mail advertising expenditure on retail banking, 2013-15
…and TV takes the starring role
Figure 16: Recorded above-the-line, online display and direct mail advertising expenditure on retail banking, by media type, 2013-15
Banks use digital media to support personal focus
Search is crucial in gaining share of voice
Note on NMR Data
THE CONSUMER – WHAT YOU NEED TO KNOW
Attractive credit card and mortgage deals hamper banks’ cross-selling
92% of banking customers say they use in-branch counter services
Cost sensitivity is high when it comes to banking products
Employed 16-34s are leading the charge for ultimate convenience
Excessive charges and neglecting existing customers get the thumbs down
Trust in banks is rising and branches have a key role to play
Only half of customers feel banks have their best interests at heart
PRODUCT OWNERSHIP AND CROSS-SALES
The majority have just one current account
Figure 17: Number of current accounts owned, May 2015
Savings accounts remain the most cross-sold product but rate rises could drive more switching
Mortgage and credit card deals have encouraged customers to look elsewhere
Figure 18: Financial services product ownership and cross-sales, May 2015
Credit card loyalty wanes as current account holders age
Figure 19: Credit card ownership among women, by provider and age group, May 2015
Banks have missed out on mortgages from 35-44-year-old customers
Figure 20: Mortgage ownership, by provider and age group, May 2015
FREQUENCY OF BANKING SERVICE USE
92% of current account holders use in-branch counter services
Telephone services still have a role to play…
Figure 21: Banking services, by frequency of use, May 2015
…but online and mobile services are used more often
Figure 22: Proportion of current account holders that use each banking service provided by their main current account provider two or three times a month or more often, by age, May 2015
71% of current account holders use four or more banking services
Figure 23: Number of different banking services used, May 2015
ATTITUDES TOWARDS SWITCHING AND VALUE
Current account holders reveal sensitivity over cost…
Figure 24: Attitudes towards switching and value, May 2015
…and experience does little to break this down
Figure 25: Agreement with the statements ‘I don’t believe banking is ever really free’ and ‘I’d switch accounts if my bank ever tried to charge me a monthly fee’, by age, May 2015
ATTITUDES TOWARDS BANKING CHANNELS
Convenience reigns when it comes to banking preferences
Human interaction remains a key part of branch banking experience
Figure 26: Attitudes towards banking channels, May 2015
16-34s will demand a more flexible branch service
Figure 27: Agreement with the statement ‘I would make use of bank services offered in different locations (ie supermarket, from a vehicle)’, by age, May 2015
LEVEL OF CONCERN OVER THE INDUSTRY’S FAILINGS
Charges and data breaches are key customer concerns…
…while mis-selling continues to cloud perceptions of the industry
Figure 28: Consumer concerns over various issues in the financial services industry, May 2015
Rewarding only new customers is starting to get old
Figure 29: Credit card ownership, by proportion concerned by better deals offered to new customers only, May 2015
TRUST IN DIFFERENT ELEMENTS OF THE BANKING INDUSTRY
Local branches play a key role in maintaining customer relationships…
…but call centre staff find it harder to build trust
Scepticism increases at corporate and industry level
Figure 30: Trust in different elements of the banking industry, May 2015
Overall trust levels are improving year on year in all areas
Figure 31: Proportion of people with any trust in different elements of the banking industry, June 2014 and May 2015
DIFFERENT CONCEPTS OF TRUST IN RETAIL BANKING
Customers are confident their banks are here for good…
…but the majority are not convinced banks have their best interests at heart
Figure 32: Different concepts of trust in retail banking, May 2015