Table of Contents
Issues in the Market
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- Abbreviations
Insights and Opportunities
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- ‘Stay with us’ vs ‘switch to us’
- Breaking the hold of the ‘big four’
- Helping businesses meet technological demands
- The benefits of having a business bank account
Market in Brief
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- Small businesses play major role in UK economy
- Banks are the main source of external finance for small businesses
- 3.28 million small business bank accounts are in existence
- The ‘big four’ account for 79% of all small business accounts
- The leading providers are also the leading advertisers
- Small businesses make use of all banking platforms
- Small business customers are overwhelmingly satisfied with their banks’ service
- Many banks are already working on giving customers what they want
Fast Forward Trends
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- Trend 1: ‘Crowd sourcing’
- Definition
- Context
- Market touch points/implications
- Trend 2: Customise This!
- Definition
- Context
- Market touch points/implications
- Trend 3: Wisdom Markets
- Definition
- Context
- Market touch points/implications
Broader Market Environment
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- Strong GDP growth reflects healthy business conditions
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- Figure 1: GDP, at current and constant 2001 prices, 2001-11
- Low base-rate environment makes it less expensive for SMEs to borrow money
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- Figure 2: Bank of England base-rate activity, November 1990-August 2006
- Small businesses account for 99% of all enterprises in the UK
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- Figure 3: Number of enterprises, employment and turnover in the private sector (including public corporations and nationalised bodies), by number of employees and industry division, UK, start 2005
- The number of sole proprietorships continues to grow
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- Figure 4: Number of companies, by legal status, 2000-05
- VAT-registered businesses account for 42% of UK businesses
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- Figure 5: Volume of VAT registrations and de-registrations, 1994-2005
- Business survival rates are improving
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- Figure 6: One-year and three-year VAT-registered business survival rates, 1994-2003
- The self-employed accounted for 12.5% of employed people in 2005
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- Figure 7: Number of self-employed and as a percentage of the total employed, 1996-2011
Internal Market Environment
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- More small businesses are relying on retained profits
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- Figure 8: Sources of finance used in the last two years, in order of significance, 2002-06
- Branches function primarily as transaction centres
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- Figure 9: Reasons for visiting a local branch, 2006
- Levelling the playing field…or not?
- Making it easier to switch
Competitive Context
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- Personal finance providers are a main source of competition
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- Figure 10: Number of individual current accounts, 2000-05
- Gross lending dips slightly in 2005
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- Figure 11: Consumer credit gross lending, by product category, 2001-05
Strengths and Weaknesses in the Market
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- Contentment with banks is good news for providers
- Base-rate rises could be damaging
Who’s Innovating?
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- Using innovation to gain a leading edge
- Abbey
- Alliance & Leicester
- Barclays
- Lloyds TSB
- NatWest
- RBS
Trade Perspective
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- Levels of contentment
- Distribution
- Challenges and the future
Market Size and Forecast
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- The number of small business bank accounts continues to increase, albeit slowly
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- Figure 12: Number of small business bank accounts, 2000-05
- Total small business lending surpassed £42 billion in 2005
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- Figure 13: Annual value of small business bank lending versus deposits, 2000-05
- The value of the average term loan increased to £55,480 in 2005
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- Figure 14: Average amounts borrowed on term loans and overdraft versus average value of deposits during the year, 2000-05
- Variable-rate loans continue to thrive in low base-rate environment
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- Figure 15: Value of term loans, by length and type, 2000-05
- The value of SFLGs issued has more than doubled since 2000
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- Figure 16: Number and value of SFLGs issued and average loan size, 2000-06
- A healthy future for small business banking is on the cards
- Dependency on bank overdrafts to lessen
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- Figure 17: Forecast of small business current account market, 2005-11
- Term lending to surpass £42 billion in 2011
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- Figure 18: Forecast of the small business term lending market, by type, 2005-11
- Little change in the value of deposits expected over the forecast period
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- Figure 19: Forecast of the small business deposit market, 2005-11
Market Share
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- Too level a playing field?
- The top four still reign supreme
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- Figure 20: Market share of small business banking market, by volume, July 2006
Companies and Products
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- Similar product offerings
- Company snapshots
- RBS/NatWest
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- Figure 21: Company snapshot, RBS/NatWest, 2001-05
- Barclays
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- Figure 22: Company snapshot, Barclays, 2001-05
- Lloyds TSB
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- Figure 23: Company snapshot, Lloyds TSB, 2001-05
- HSBC
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- Figure 24: Company snapshot, HSBC, 2001-05
- HBOS
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- Figure 25: Company snapshot, HBOS, 2001-05
- Abbey
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- Figure 26: Company snapshot, Abbey, 2001-05
- Alliance & Leicester
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- Figure 27: Company snapshot, Alliance & Leicester, 2001-05
- Non-traditional providers do not play a big role in the business sector…
- …as of yet
- Something for everyone
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- Figure 28: Selection of business current and cheque account comparison results, August 2006
- Introductory offers play a crucial role in attracting new customers
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- Figure 29: Introductory offers on business banking, 2006
Brand Communication and Promotion
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- Relatively little money is spent advertising business banking services
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- Figure 30: Advertising expenditure on financial services, 2001/02-2005/06
- Business banking accounts are a key area of business banking services
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- Figure 31: Advertising expenditure on business banking services, by category, 2001/02-2005/06
- £1.8 million was spent advertising business loans over the last five years
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- Figure 32: Advertising expenditure on business finance and loans, 2001/02-2005/06
- The leading provider is the second-largest advertiser of business bank accounts
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- Figure 33: Advertising expenditure on business bank accounts, by advertiser, 2001/02-2005/06
- Almost a third of adspend was dedicated to press adverts in 2005/06
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- Figure 34: Advertising expenditure on business bank accounts, by media outlet, 2005/06
Channels to Market
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- The UK’s branch network has shrunk considerably over the last five years…
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- Figure 35: Number of UK branches, by institution, 1999-2005
- …but branch expansion is on the cards 2006-07
- Alternatively, there’s always the Post Office…
- …or even other bank branches
- Relationship managers are an important aspect of business banking
- The Internet facilitates the rise of the 24-hour economy
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- Figure 36: Number and proportion of small businesses using online facilities, 2001-05
Consumer Financial Activity
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- Saving retains place at top of priorities
- Consumers will be subdued through the summer
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- Figure 37: Savings, investment, borrowing and debt repayment – consumers’ expected activity, March 2005-June 2006
- UK savings and spending climate
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- Figure 38: UK saving and spending climate – indexed, January 2001-June 2006
- 23-29s are looking to be active
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- Figure 39: Expected financial activity, by socio-demographic and income groups, June 2006 and average for the last 18 quarters
- Savings and life insurance come to the fore
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- Figure 40: Leading financial activities planned in the next six months, June 2005-June 2006
- First-time buyer activity will gradually recover
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- Figure 41: Intended mortgage and property purchase activity, June 2004-June 2006
Business Bank Account Ownership
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- Mintel’s consumer research
- About small businesses
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- Figure 42: Profile of small businesses in the UK, July 2006
- Implications and opportunities
- The presence of technology
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- Figure 43: Presence of technology at work, July 2006
- Implications and opportunities
- A strong preference to keep business and personal transactions separate
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- Figure 44: Business account usage, July 2006
- Implications and opportunities
- Having a business account adds a touch of professionalism
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- Figure 45: Business account usage, by number of years in business, number of employees and sector, July 2006
- Implications and opportunities
- NatWest/RBS customers seem content with their relationship with their bank
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- Figure 46: Business account usage, by main business bank used, July 2006
- Implications and opportunities
- Those with company websites are keen on image
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- Figure 47: Business account usage, by the presence of PCs at work, the presence of the Internet at work, the presence of a company website and the presence of e-commerce at work, July 2006
- Levels of satisfaction are high
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- Figure 48: Level of satisfaction with business bank, July 2006
- Implications and opportunities
- Lloyds TSB appears to have the largest proportion of dissatisfied customers
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- Figure 49: Level of satisfaction with business bank, by bank used, July 2006
- Implications and opportunities
- Levels of satisfaction vary little by sector
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- Figure 50: Level of satisfaction with business bank, by sector and number of employees, July 2006
- Implications and opportunities
What Business Banking Customers Want
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- Free banking and faster cheque clearance are key desires
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- Figure 51: Services desired by business customers, July 2006
- Implications and opportunities
- Retailers could benefit from longer opening hours
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- Figure 52: Services desired by business customers, by sector, number of years in business, turnover and number of employees, July 2006
- Implications and opportunities
- Who wants free access to an account manager?
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- Figure 53: Services desired by business customers, by bank and satisfaction with bank, July 2006
- The influence of the presence of technology
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- Figure 54: Services desired by business customers, by techonology, July 2006
Attitudes Towards Changing Provider
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- Gauging switching activity
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- Figure 55: Small business customer switching activity, July 2006
- Implications and opportunities
- Almost half of SMEs in the retail or wholesale sector have considered switching
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- Figure 56: Switching activity, by sector, the amount of time in business, turnover and number of employees, July 2006
- Some business customers remain with their bank despite being dissatisfied
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- Figure 57: Switching activity, by bank and satisfaction with bank, July 2006
- Implications and opportunities
- The technologically savvy seem keener to switch provider
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- Figure 58: Switching activity, by the presence of technology, July 2006
- Implications and opportunities
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