Loyalty in Financial Services - UK - October 2019

OVERVIEW
What you need to know
EXECUTIVE SUMMARY
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
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
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
Figure 3: Top 15 financial companies with highest ratio for multiple product holdings, July 2019
Trust is multi-faceted
Figure 4: Top 15 financial companies with highest ratio for trust, July 2019
Supermarket banks are best at rewarding loyalty
Figure 5: Top 15 financial companies with highest ratio for rewarding loyalty, July 2019
Insurers generally have shorter customer tenures
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
Figure 7: Top 15 financial companies with highest ratio for recommending the brand, July 2019
Bank customers want reliable and convenient access
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
Figure 9: Factors that make people loyal to a particular insurance company, July 2019
What we think
ISSUES AND INSIGHTS
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
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
An evolving market but major banks still dominate
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
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
Difficult to stand out in a crowded market and engage an apathetic audience
High levels of churn demonstrate the challenge insurers face
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
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
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
Figure 13: Brand customer share – retail banks, July 2019
LBG is the largest on a group basis
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
Figure 15: Brand customer share – specialist and digital-only banks, July 2019
One in four UK adults holds a product with Nationwide Building Society
Figure 16: Brand customer share – building societies, July 2019
Barclaycard reigns supreme in the credit card market
Figure 17: Brand customer share – credit card providers, July 2019
Aviva stands out in the crowded insurance market
Figure 18: Brand customer share – insurance companies, July 2019
28% of UK adults hold an NS&I savings product
Figure 19: Brand customer share – other providers, July 2019
TOP 30 BRANDS BY CUSTOMER SHARE
NS&I has the most customers of all the brands
Figure 20: Top 30 financial brands by customer share, July 2019
THE CONSUMER – WHAT YOU NEED TO KNOW
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
The average person is a customer of five different financial companies
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
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
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 
In pursuit of greater wallet share
Some companies are better than others
Product range is a factor
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
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
The major high street banks attract the highest levels of trust
…although RBS still has work to do
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
Figure 27: Top 15 financial companies with highest ratio for trust, July 2019
It takes time to build trust
VALUED CUSTOMERS – REWARDING LOYALTY
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
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
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
Current account providers generally have the highest concentration of long-standing customers
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
Figure 31: Top 15 financial companies with highest ratio for 5+ years tenure, July 2019
POSITIVE CUSTOMER EXPERIENCE – RECOMMENDING THE BRAND
A customer recommendation is the highest praise a brand can get
Figure 32: Customers who would recommend the brand – largest 30 financial companies by customer share, July 2019
First Direct has highest level of recommendation
Figure 33: Top 15 financial companies with highest ratio for recommending the brand, July 2019
WAYS TO WIN CUSTOMER LOYALTY – BANKING
Convenient and reliable access points are key to winning bank customer loyalty…
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
Figure 35: Factors that make people loyal to a particular bank or building society – cross-analysis, July 2019
WAYS TO WIN CUSTOMER LOYALTY – INSURANCE
Renewal premiums heavily influence loyalty
Figure 36: Factors that make people loyal to a particular insurance company, July 2019
There’s no magic bullet for building loyalty
Figure 37: Factors that make people loyal to a particular insurance company, July 2019
APPENDIX: DATA SOURCES AND ABBREVIATIONS 
Abbreviations
Consumer research methodology