Competition in the current account market has intensified in recent years as the traditional dominance of the 'big four' retail banks has been challenged by converted building societies and Internet-based providers. New entrants into, and indeed existing players within, the personal current account market have endeavoured to secure new business by paying credit interest on demand accounts, up to 4% in the case of Cahoot. Switching current accounts has been made easier than ever and the tendency of consumers to stay with their nominated bank for life is gradually changing.

Competition in the current account market has intensified in recent years as the traditional dominance of the 'big four' retail banks has been challenged by converted building societies and Internet-based providers. New entrants into, and indeed existing players within, the personal current account market have endeavoured to secure new business by paying credit interest on demand accounts, up to 4% in the case of Cahoot. Switching current accounts has been made easier than ever and the tendency of consumers to stay with their nominated bank for life is gradually changing.

In order to leverage increased revenue from their current account customer bases and to engender greater consumer loyalty, a number of providers launched fee-based packaged current accounts in the second half of the 1990s. The intention was to charge a monthly fee for which the customer would gain access to a range of additional benefits and services. In the region of 6 million people now pay a fee for their current account with the likes of NatWest's Advantage Gold/Premier, Barclay's Additions and Lloyds TSB's Gold Service/Platinum Current products.

The introduction of packaged current accounts (PCAs) has not been universally welcomed and consumer groups have queried the benefit of the provided services and intimated that the development is a means of making everyone eventually pay for current accounts. The savings offered by these accounts are for products provided by the bank, whereas they can probably be obtained cheaper by shopping around. However, packaged current accounts have proved undoubtedly popular.

It appears that packaged current accounts are now established in this country and penetration looks set to increase. Providers take every opportunity to encourage their customers to switch from their standard offering to a packaged alternative, with good reason. Fees from these types of accounts probably earn

banks in the region of £480 million annually. The cost of the provided benefits is nowhere near this figure and proffered discounts on personal loans, credit cards and general insurance policies will enable extensive cross-selling opportunities.

The scope of the report

This report examines the main factors that are driving the move towards packaged account banking and have enabled a core of fee-paying current account customers to emerge. The estimated size of the packaged current account market is outlined, together with details of the major products currently on the market. Products competing with these types of accounts are also covered. The distribution and promotion of PCAs is examined and Mintel finally looks at the likely future developments in this sector of retail banking.

Consumer research was specially commissioned by Mintel among a sample of 1,926 adults in April 2002 in order to determine respondents' attitudes towards packaged account banking. The sample was initially asked where they held their main current account. Thereafter, respondents were given a list of potential benefits to be included within a packaged bank account and asked to indicate which they found most appealing. Finally, the sample was asked a series of attitudinal questions about the value and prestige of fee-based accounts.

Other Mintel reports of relevance to this market include:

- Travel Insurance, Finance Intelligence - UK Report, February 2002

- Personal Loans, Finance Intelligence - UK Report, January 2002

- Interactive Money Transmission & Banking, Finance Intelligence - UK Report, November 2001

and the forthcoming:

- Credit Cards & Debit Cards, Finance Intelligence - UK Report, July 2002

- Deposit & Savings Accounts, Finance Intelligence - UK Report, September 2002.