Consumers and Banking Innovation - UK - December 2018

OVERVIEW
What you need to know
Products covered in this report
EXECUTIVE SUMMARY
The market
Open Banking and GDPR combine to create new data sharing environment
The consumer
Current accounts are the primary point of interaction with providers
Figure 1: Retail banking product ownership, September 2018
37% consider banks to be at least somewhat innovative
Figure 2: Ranking of how innovative firms are in different sectors, September 2018
Most use contactless cards but are cold to further payment innovation
Figure 3: Banking innovations used in the last 12 months, September 2018
Most consumers are slow to pick up new services
Figure 4: Approach to new banking innovations, September 2018
Half want to see improved security
Figure 5: Interest in future banking innovations, September 2018
Open Banking still hamstrung by attitudes towards data sharing
Figure 6: Attitudes towards banking innovation, September 2018
What we think
ISSUES AND INSIGHTS
Innovation cannot be allowed to threaten financial inclusion
The facts
The implications
Security is still the key barrier to adopting new services ...
The facts
The implications
…but innovation is generally seen to be positive
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Open Banking and GDPR combine to create new data sharing environment
HSBC leads the way on the high street
MARKET ENVIRONMENT
Regulatory context
Open Banking and PSD2 come into force
GDPR provides consumers with greater control and protection over data
Payments
Cash is far from falling out of favour
Figure 7: Use of payment methods, February 2018
Channel preferences
Online platforms are favoured for almost all banking needs…
Figure 8: Channel preference in retail banking, by activity, June 2018
…but branches remain highly valued
RECENT DEVELOPMENTS
FCA welcomes the fourth cohort of regulatory sandbox participants
Open Banking launches
HSBC leads the way on the high street
Marketplaces point towards a fully realised Open Banking environment
Other major brands have been slow to develop new services
THE CONSUMER – WHAT YOU NEED TO KNOW
Current accounts are the primary point of interaction with providers
37% consider banks to be at least somewhat innovative…
Most use contactless cards but are cold to further payment innovation
Most consumers are slow to pick up new services
Half want to see improved security
Open Banking still hamstrung by attitudes towards data sharing
RETAIL BANKING PRODUCT OWNERSHIP
Current accounts are the primary point of interaction with providers
Figure 9: Retail banking product ownership, September 2018
Consumers acquire more products with age
Figure 10: Number of surveyed retail banking products owned, September 2018
Figure 11: Number of surveyed retail banking products owned, by age, September 2018
BANKING INNOVATION IN CONTEXT
37% consider banks to be at least somewhat innovative…
Figure 12: Ranking of how innovative firms are in different sectors, September 2018
…rising to half of under-25s
Figure 13: Agreement that banks are quite innovative or very innovative, by age, September 2018
Access influences perceptions of innovation
Figure 14: Ranking of how innovative credit card companies are, by gross annual household income, September 2018
Borrowers more likely to see banks and building societies as innovative
Figure 15: Agreement that banks and building societies are quite innovative or very innovative, by retail banking product ownership, September 2018
INNOVATIVE BANKING ACTIVITIES
Opposition to payment innovation is entrenched
Figure 16: Payment innovations used in the last 12 months, September 2018
Younger consumers more likely to use payment innovations
Figure 17: Payment innovations used in the last 12 months, by age, September 2018
Has mobile banking reached a plateau?
Figure 18: Banking innovations used in the last 12 months, September 2018
Analytic tools have space to grow
APPROACH TO BANKING INNOVATIONS
Most consumers are slow to pick up new services
Figure 19: Approach to new banking innovations, September 2018
Millennials are the key innovation trialists
Figure 20: Approach to new banking innovations, by generation, September 2018
Contactless cards are a must-use technology…
Figure 21: Banking innovations used in the last 12 months, by approach to new banking innovations, September 2018
…while Early Adopters are starting to get on board with Open Banking
INTEREST IN BANKING INNOVATIONS
Most can identify areas for improvement …
…but not always areas for innovation
Figure 22: Interest in future banking innovations, September 2018
Early Adopters and Early Mainstreamers show healthy interest in most innovations
Figure 23: Interest in future banking innovations, by approach to new banking innovations (Early Adopters and Early Mainstreamers), September 2018
Laggards can be tempted with security innovations
Figure 24: Interest in future banking innovations, by approach to new banking innovations (Late Mainstreamers and Laggards), September 2018
ATTITUDES TOWARDS BANKING INNOVATION
Open Banking still hamstrung by attitudes towards data sharing
Two thirds think banks should walk before they run
Figure 25: Attitudes towards banking innovation, September 2018
Innovation is appreciated, but concerns abound
Even Early Adopters doubt the potential of digital services
Figure 26: Attitudes towards banking innovation, by approach to new banking innovations, September 2018
Half say innovative brands have a competitive edge
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology