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Current Accounts - Ireland - February 2008

ISSUES IN THE MARKET
Key themes of the report
Definition
 ABBREVIATIONS
INSIGHTS AND OPPORTUNITIES
RoI current account price war – room for ‘modest’ banking?
Global economic downturn modifying customer needs
MARKET IN BRIEF
Healthy growth in current accounts in both RoI and NI
Standing out from the rest
RoI favours Big Two while NI consumers still keen on the Big Four
NI consumers still leaving a paper trail, unlike RoI consumers
Multiple account ownership on the rise and still more popular in NI
Changing set of criteria driving account switching – providers take note
FAST FORWARD TRENDS
 TREND 1: BRAND EXPERIENCE
What's it about?
What we've seen
What next?
 TREND 2: NO MIDDLEMAN
What's it about?
What we've seen
What next?
 TREND 3: CORNER STORE
What's it about?
What we've seen
What next?
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
INTERNAL MARKET ENVIRONMENT
Key points
Developments on the European scene
Brussels legislators threaten to get tough
Pan-European consensus converging
SEPA compliance a major driving force
Low level of card fees paid in Ireland directly linked to SEPA project
EU likely to put pressure on Irish Government
Irish bankers lobbying for card duty to be abolished – out of step with Europe
UK market could get messy
Unfair charges being investigated
Mainland UK consumers next in line
Competition Commission makes new demands of the banks
October 2008 deadline for NI banks
Overdraft fees and bank charges being contested in record numbers
No decision until 2008
UK account providers forced to bite back
Irish current account market makes for interesting analysis
Chip and Pin now operational in both markets
More RoI people switching accounts
RoI online banking uptake unremarkable but steadily increasing
Greater emphasis on segmentation
Technology is a key driver
Packaged accounts and the cheque book’s demise
Product marketing turns aggressive
Increased advertising and promotional activity in the media
Product augmentation in the form of packaged current accounts
Competing on terms of interest on credit balances
Financial attitudes
Figure 1: Attitudes towards personal finance, December 2007
NI consumers appear more short-termist
RoI consumers keen to stay in financial control
BROADER MARKET ENVIRONMENT
Key points
 THE ECONOMY
Rising interest rates
Figure 2: UK and eurozone interest rates, 2002-07
Mortgage repayments to increase
Under-40s with a credit card habit likely the hardest-hit by rate rise
Strong GDP growth both North and South
Figure 3: The economic outlook for RoI and NI, 2006-08
Consumer spending still a major engine for growth in RoI
NI consumers happy to keep spending but have their concerns
Inflationary pressure in the UK affecting NI consumers
Rising incomes good news for RoI financial institutions
Disposable incomes take a battering in NI
Declining unemployment levels in both NI and RoI
Consumer confidence a key indicator for the economy
RoI consumer confidence hits four-year low
Population statistics
Changing demographics
Figure 4: Population change, by age group, NI, 2000-20
Figure 5: Population change, by age group, RoI, 2000-20
Long-term responsibilities start later
Figure 6: Average age at marriage, by gender, NI and RoI, 2000-05
Figure 7: Average age of women at birth of first child, NI and RoI, 1991-2005
Time-poor individuals require online banking
Changing norms in Irish and UK society
Promotion of a cashless society
EU10 nationals aged 25-44 the typical immigrant profile for RoI
Disparate broadband penetration between both states
MARKET VALUE AND FORECAST
Key points
RoI growth pushes ahead
Figure 8: Number of current accounts in issue, RoI and NI, 2001-12
Value held in RoI is rising while NI continues to gain ground
Figure 9: 12-month averages of amounts held in Irish residents’ current accounts, RoI and NI, 2004-06
Irish consumers prefer a chequebook with their account
Figure 10: Type of current account held, RoI and NI, 2004-06
Joint accounts increasing at slower pace than individual current accounts
 FUTURE OUTLOOK
A cashless society by 2012?
Internet offers considerable potential
Competition set to intensify and drive the market
COMPETITIVE CONTEXT
Key points
Limited competition for personal current accounts
The great unbanked
Basic bank accounts
WHO’S INNOVATING?
Key points
New products and applications
Pay-as-you-go banking looming
The ‘Polish pound’ turns lucrative
Going green the new black
Encouraging consumers to save
Technology of the future is here now
COMPANIES AND PRODUCTS
Key points
Figure 11: Market share of leading current account providers, RoI, 2007
Figure 12: Market share of leading current account providers, NI, 2007
Abbey (NI only)
Alliance & Leicester (NI only)
AIB/First Trust Bank
Bank of Ireland
HBOS
National Irish Bank and Northern Bank
Nationwide (NI only)
Permanent TSB
Post Office (NI only)
The Royal Bank of Scotland (Ulster Bank)
 PUREPLAYS AND DIRECT BANKS
CHANNELS TO MARKET
Key points
Branch and ATM banking
NI banks contributing to a branch renaissance
Figure 13: Branches and ATMs of clearing bank groups in RoI and the top four banks in NI, 2002-06
134% growth over four years in ATM penetration in RoI
Direct banking
Online banking
Figure 14: Methods used to access banking services, RoI and NI, 2007
CONSUMER: OWNERSHIP OF CURRENT ACCOUNTS
Key points
Banking literacy
Figure 15: Penetration of any banking product, NI and RoI, 2002-07
Current account ownership
Figure 16: Current account ownership, NI and RoI, 2007
Demographic summary
Married full-timers with teenage kids – typical profile
Switching behaviour
Figure 17: Number of current accounts, NI and RoI, 2007
Multiple account holding more prevalent in NI
More RoI consumers are unbanked than in NI
 BANK ACCOUNT ACTIVITY
High demand for basic banking facilities among young people
Joint accounts popular with affluent 35-44-year-olds
Couples without kids own individual and joint accounts
CONSUMER CURRENT ACCOUNT PRIORITIES
Money talks: top 5 priorities when choosing a current account
Figure 18: Top five reasons for choosing a current account, NI and RoI, 2006
Reasons for choosing a current account
Figure 19: Most important reasons for choosing a current account, NI, 2002-06
Smarter positioning the key for account providers
Other factors at work besides interest rates
The future may lie further down the list
Figure 20: Most important reasons for choosing a current account, RoI, 2002-06
APPENDIX
Regional definitions
Population 2006
BMRB Target Group Index (TGI) sample sizes
Summary of Competition Commission ruling to NI banks – May 2007
Adults who have used the Internet
Figure 21: Number of current accounts in issue, RoI and NI, 2001-12
Adults who have used the Internet
Figure 22: Adult population who have used the Internet in the last 12 months, by gender, age, socio-economic group, lifestage, working status, presence of children and marital status, NI and RoI, 2006
Figure 23: Forecast population change, by age, NI, 2000-20
Figure 24: Forecast population change, by age, RoI, 2000-20
Additional consumer data tables
Employment statistics
Figure 25: Percentage in employment, by age group, NI and RoI, 2000-05
Household composition
Figure 26: Number of households, by size, NI and RoI, 2000-05
Figure 27: Consumers who choose ‘The amount of debt that I have’ as a concern, by gender, age, socio-economic group, working status and marital status, NI and RoI, 2006
Figure 28: Current worries, NI and RoI, 2006
Figure 29: Type of current accounts held, by gender, age, socio-economic group, lifestage, marital status, working status and presence of children, NI, 2006
Figure 30: Type of current accounts held, by gender, age, socio-economic group, lifestage, marital status, working status and presence of children, RoI, 2006
Figure 31: Number of current accounts held, by gender, age, socio-economic group, marital status, working status and number of people in household, lifestage, NI, 2007
Figure 32: Number of current accounts held, by gender, age, socio-economic group, marital status, working status and number of people in household, lifestage, RoI, 2007

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