Table of Contents
Issues in the Market
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- Key Issues
Insights and Opportunities
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- Loyalty – discretionary discounts, rewards, etc…
- Build some emotion
- Creating a bond with the young
- Building better selling capability through the online channel
Market in Brief
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- Unprecedented market conditions will fuel an uncertain domestic market, and a slowdown in consumer demand
- Retail banks in the firing line of the OFT – signalling an end to highly lucrative income streams
- Strategically, all the major bank brands are grappling with the same challenges
- Differentiate….differentiate…differentiate
- A third of adults account for well over half of all holdings
- Retail banks’ current account base means they dominate personal finance markets
- In a market where there is often little distinction between brands, innovation is key
- Banks creating a multi-channel retail mix that drives customer value
- Television and direct mail prop up banks’ advertising investment
Fast Forward Trends
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- Respect
- What's It About?
- What we've seen
- Implications
- Transparency
- What is it
- Context
- Implications
- Corner Store
- What's it about?
- What we've seen
- Implications
Internal Market Environment
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- Key Points
- Building customer relationships
- Moving the income profile
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- Figure 1: Sources of bank income, net interest and non-net interest, 2000-06
- Depolarisation presented a huge opportunity…
- …but few have made the most of it
- Charges and overdraft fees under the microscope
- So what does it mean?
- Finding alternatives
- A prompt to account switching?
- Future revenue growth
External Market Environment
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- Key points
- Consumer spending habits
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- Figure 2: Total personal disposable income (PDI), consumer expenditure and savings, 2003-12
- Caution comes to the fore
- Few signs of consumer panic…
- …but life is getting tougher for some
- Credit crunch yet to be fully felt
- Base rates and lending
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- Figure 3: BoE average annual base rate, 2004-12
- Employment trends
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- Figure 4: UK workforce and employment, by gender, 2002-12
- Consumer confidence
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- Figure 5: Year-on-year trend in monthly approvals for house purchase to individuals, September 2005-September 2007
- Bigger market opportunities from population increase
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- Figure 6: Size of UK population, by age group, 1999-2011
- Scope to adjust to the new retirement reality…
- …as well as changing ethnic makeup of the country
- Household formation delivers further opportunity
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- Figure 7: Total number of UK households and one-person households, 1991-2012
- Changing household structure leads to changing product requirements
- Online development
- Finance sales grow online
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- Figure 8: Online product purchasing, by category, April 2005-July 2007
Strengths and Weaknesses in the Market
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- Strengths/opportunities
- Growing numbers of people and households, evolving mix
- Existing large customer franchises to cross-sell to
- Inertial tie creates customer bonds
- Migrating more customers to low-cost channels
- Weaknesses/threats
- Cooling UK economy
- Under scrutiny from the OFT
- Homogeneous brands, lack of differentiation
- Cross-selling has not taken off
Who’s Innovating?
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- Key Points
- Product innovation through segmentation
- Age segmentation leads the way
- High net worth and niche services
- Packaged accounts remain a point of focus
- Account aggregation yet to hit the mainstream
- Contactless payments come of age
- Mobile banking – the next big thing...
- ...or just another channel option?
- Aggregator sites
- Green banking hits the mainstream
- Co-op still leads the way in green finance
- Lessons from the US
- The dangers of greenwash
Current Accounts and Overdrafts
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- Key Points
- Current accounts – the key battleground
- Steady growth in the number of accounts
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- Figure 9: Number of personal bank accounts held by individuals UK (Major British Banking Group only), 2000-06
- Value of personal accounts reaches £500 billion
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- Figure 10: Value of personal bank accounts held by individuals (MBBG only), 2000-05
- Overdrafts
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- Figure 11: Overdraft advances to individuals and individual trusts (MBBG only), 2001-06
Savings Accounts
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- Key Points
- UK banks account for almost 70% of individual deposits
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- Figure 12: Individual trusts’ private sector holdings of sterling assets, 2001-06
- Savings bonds see a shift in the market
- The Northern Rock debacle shakes up the market
Mortgages
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- Key Points
- Mortgages – dealing with the fallout from the credit crunch
- House prices in the balance
- First-time buyers slip away from the market
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- Figure 13: Number of loans for house purchase, by type of mortgagor, 1999-2006
- An end to fixed rates could impact mortgage business
Credit Cards
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- Key Points
- Number of payment cards in issue flattens…
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- Figure 14: Number of payment cards in issue, by type, 2001-06
- …and payment volumes reflect tough conditions
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- Figure 15: Volume of UK purchases, by card type, 2001-06
- Value of credit card purchases in decline
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- Figure 16: Value of UK purchases, by card type, 2001-06
- Big 5 leverage retail advantage
- Credit problems spread to the card market
- Charging cap hits margins
Personal Unsecured Loans
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- Key Points
- Cross selling vital
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- Figure 17: Total gross unsecured consumer lending split by product category, 2000-07
- Banks making more use of their customer relationships
- A shift away from price?
General Insurance
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- Key Points
- Market size – pressure on premiums limits growth
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- Figure 18: General insurance business for UK risks, by annual net written premiums, 2000-06
- Fall in property transactions to hit property insurance?
The Competitive Landscape
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- Key Points
- Current Accounts
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- Figure 19: Current account market share, August 2007
- A relatively static market…
- …but still huge competition
- Regional banks limited to their local strongholds
- Savings accounts
- Traditional providers reign supreme
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- Figure 20: Estimated volume share of savings acount market, November 2007
- Credit cards
- Barclays and Lloyds TSB still lead the pack
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- Figure 22: Leading credit card providers, by volume market share, April 2007
- Mortgages
- Building societies slip away
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- Figure 22: Gross mortgage advances by mortgage provider, 2005-06
- Mixed signals
- Personal insurance
- Bancassurance accounts for growing proportion of business
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- Figure 21: Distribution of personal lines general insurance business by proportion of gross written premiums, 2000-06
- Banks using subsidiaries to sell insurance
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- Figure 22: Largest general insurers in the UK – total market, by GWP, 2005-06
- Personal unsecured loans
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- Figure 23: Personal loan market share by company, August 2007
Companies and Products
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- Key Points
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- Figure 24: Selected current account parent and subsidiary brands (MBBG only), 2007
- Top 6 company profiles
- Lloyds TSB
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- Figure 25: Lloyds TSB company profile, 2002-05
- RBS Group
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- Figure 26: RBS/NatWest company profile, 2002-05
- Barclays
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- Figure 27: Barclays company profile, 2002-05
- HSBC
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- Figure 28: HSBC company profile, 2002-05
- HBOS
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- Figure 29: HBOS company profile, 2002-05
- Abbey
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- Figure 30: Abbey company profile, 2002-05
Brand Communication and Promotion
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- Key Points
- General insurance and credit products the key battleground…
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- Figure 31: Financial services adspend, by product type, 2003-07
- …but signs of a credit cutback?
- Concentrating on retail banking
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- Figure 32: Retail banking-related adspend, by advertiser, 2003-07
- TV vies with direct mail
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- Figure 33: Advertising expenditure on financial services , by media type, 2006/07
- Direct mail – the cross-selling advantage
- More to be made of online advertising?
Channels to Market
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- Key Points
- Joined-up banking in a multi-channel environment
- Branches finding new favour
- Branch numbers still falling – but not by much
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- Figure 34: Number of branches, by bank, 1999-2004
- Scope for more rationalisation?
- The scope for negative press
- ATMs take up the slack
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- Figure 35: Number of cash dispensers and ATMs, by bank, 1999-2004
- Wide variation in the ATM: branch ratio
- The independents’ growing role
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- Figure 36: Number of ATMs and withdrawals, 2001-06
- Extending the range of vended banking
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- Figure 37: Availability of additional ATM facilities, 2001-06
- Remote banking via online and telephone
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- Figure 38: Comparative performance of telephone and online banking, 2001 and 2006.
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- Figure 39: Number of transactions by telephone, by transaction type, 2001-04
- Building the online franchise
- Will a high street player break rank?
- Mobile telephony
Brand Elements
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- Figure 40: Retail banking brand map, October 2007
- Barclays
- Brand personality
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- Figure 41: Attitudes associated with Barclays, October 2007
- Brand performance
- Lloyds TSB
- Brand personality
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- Figure 42: Attitudes associated with Lloyds TSB, October 2007
- Brand performance
- HSBC
- Brand personality
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- Figure 43: Attitudes associated with HSBC, October 2007
- Brand performance
- NatWest
- Brand personality
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- Figure 44: Attitudes associated with NatWest, October 2007
- Brand performance
- Halifax/HBOS
- Brand personality
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- Figure 45: Attitudes associated with HBOS, October 2007
- Brand performance
- The Co-operative Bank
- Brand perception
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- Figure 46: Attitudes associated with Co-operative bank, October 2007
- Consideration highest for HBOS
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- Figure 47: Retail banking brand retention and consideration, October 2007
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The Consumer – Product Ownership
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- Key Points
- Financial holdings
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- Figure 48: Ownership of financial products by gender and age, August 2007
- Potential for the unbanked?
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- Figure 49: Ownership of financial products by gender and age, expressed as indices, August 2007
- Derived demand alongside discretionary spending
- Big 5 maintain their stranglehold on the market
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- Figure 50: Current account market share, August 2007
- Multiple holdings
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- Figure 51: Number of selected financial products held, August 2007
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- Figure 52: Product ownership, by number of products held expressed as Index against the All-Average, August 2007
- Profiling customers with multiple holdings
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- Figure 53: Multiple product ownership, by technology usage, August 2007
- Which bank brands have the most favourable customer profile?
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- Figure 54: Product ownership, by number of products held expressed as Index against the All-Average, August 2007
- Identifying the product opportunities
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- Figure 55: Cross holdings of (same brand) current account holders, August 2007
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- Figure 56: Opportunity scoring for financial holdings August 2007
- Potential to increase share of home insurance market
- Lloyds TSB tops the cross-selling league
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- Figure 57: Products held with current account provider, by current account provider, August 2007
- Deepening the banking relationship
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- Figure 58: Agreement with statement ‘I would be happy to arrange more products (eg a mortgage, a personal loan, an ISA) through my main bank where I hold my current account’, August 2007
- Younger people turn to their current account provider
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- Figure 59: Agreement with statements concerning current accounts by gender, age, socio-economic group, and gross annual household income, August 2007
- Barclays and Lloyds TSB could struggle to convert leads
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- Figure 60: Agreement with statement ‘I would be happy to arrange more through my main bank where I hold my current account’, by current account provider, August 2007
The Consumer – Channel Usage
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- Key Points
- The drift to remote banking
- Online banking – no longer niche
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- Figure 61: Agreement with statement ‘I use online banking regularly’ by main current account providers, August 2007
- High-value customers move online
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- Figure 62: Agreement with statements about the usage of retail banking facilities, by gender, age, socio-economic group and gross annual household income, August 2007
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- Figure 63: Agreement with statements about the usgae of retail banking facilities, by product ownerhip, August 2007
- Branch banking – still vital
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- Figure 64: Agreement with the statement ‘ I visit my local branch regularly’, by main current account providers, August 2007
- Older customers still rely on the branch
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- Figure 65: Agreement with statements about the usage of retail banking facilities, by gender, age, socio-economic group and gross annual household income, August 2007
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- Figure 66: Product ownership by agreement with the statement “I visit my local bank branch regularly”, August 2007
- Telephone banking
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- Figure 67: Agreement with statements about the usgae of retail banking facilities, by gender, age, socio-economic group and gross annual household income, August 2007
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- Figure 68: Agreement with the statement ‘I use telephone banking regularly’, by main current account provider, August 2007
The Consumer – Customer Satisfaction and Loyalty
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- Key Points
- Overall satisfaction
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- Figure 69: Agreement with statement ‘i am happy with the service provided by the bank where i hold my current account’, August 2007
- High earners could vote with their wallets
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- Figure 70: Agreement with statements concerning current accounts by gender, age, socio-economic group, and gross annual household income, August 2007
- NatWest winning the service war
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- Figure 71: Agreement with statement ‘I am happy with the service provided by the bank where I hold my current account’, by current account provider, August 2007
- Switching banks
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- Figure 72: Agreement with statement ‘i may consider switching my main bank where i hold my current account over’, August 2007
- Young and affluent the most mobile
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- Figure 73: Agreement with statements concerning current accounts by gender, age, socio-economic group, and gross annual household income, August 2007
- NatWest customers going nowhere
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- Figure 74: Agreement with statement ‘i may consider switching my main bank where i hold my current account over’, by current account provider, August 2007
- What is making unhappy customers?
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- Figure 75: Attitudes towards current account providers, August 2007
- Target analysis: where is the likely customer attrition?
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- Figure 76: Demographic profile of cluster groupings, August 2007
- Penalty charges the key push factor
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- Figure 77: Attitudes about banks by cluster groups, expressed as indices, August 2007
Appendix
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- Abbreviations
- Currencies
- Financial holdings analysis
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- Figure 78: Number of financial holdings, by key demographic and economic factors, August 2007
- Figure 79: Number of financial holdings, by key lifestyle indicators, August 2007
- Analysis of same brand holdings
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- Figure 80: Cross holdings of (same brand) current account holders by gender, age, socio-economic group and marital status, August 2007
- Figure 81: Cross holdings of (same brand) current account holders by lifestage, special group, working status and gross annual household income, August 2007
- Figure 82: Cross holdings of (same brand) current account holders by TV region, ACORN group, newspaper readership and supermarket used, August 2007
- Profiling the major UK retail banks
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- Figure 83: Main current account providers by gender, age, socio-economic group, and gross annual household income, August 2007
- Figure 84: Main current account providers by marital status, lifetstage, working status, and household tenure, August 2007
- Figure 85: Main current accont providers by technology users, newspaper readership, tv region, and supermarket usage, August 2007
- Analysis of same brand holdings, by named retail bank
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- Figure 86: Products held with current account provider, by current account provider, August 2007
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