subject: Banking On Change: Uk Current Accounts - Market Research Report On Aarkstore Enterprise [print this page] Introduction Introduction
This report considers the latest developments in the UK Current Account market and looks at whether competition is returning to the market after the fallout from the credit crunch. It investigates key market issues such as regulation and consumer attitudes towards their current accounts as well as the impact of new entrants. It concludes with a consideration of the future direction of the market.
Scope
*Analyses consumer attitudes and behavior regarding their current account.
*Presents competitor data in terms of market share but also in terms of overdraft usage and tenure of account holding.
*Considers the impact of current and future regulatory measures on the market.
*Investigates the likely impact of new entrants into the sector.
Highlights
Free banking is expected to remain available to current account holders for at least the next two years. The large banks are currently more concerned about rebuilding their battered reputations after the financial crisis than bringing in a blanket fee-paying model across their account offering.
Consumers have looked to reduce their reliance on their overdraft facility. The regularity of overdraft usage declines with age as the wealth that consumers accrue through their lifetime reduces their need to borrow. The percentage of current account holders without an overdraft facility grew by 17.7 percentage points between 2009 and 2010.
Current account switching remains low, with only around 7% having switched their account in the last year. However, this has not prevented current account providers from trying a variety of different methodologies to tempt consumers to switch from their rivals. The most prominent method being a cash incentive.
Reasons to Purchase
*Gain insight on consumer behavior from Datamonitors proprietary Financial Services Consumer Insights and Retail Banking Consumer Surveys.
*Use Datamonitors competitor share metrics to benchmark your performance against that of your competitors.
*Read about industry opinions on the best time to acquire younger consumers.
Table of Contents :
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The vast majority of the UK population has a current account 2
Current account penetration remains at around 93% 2
Consumers are reining in their overdraft usage 2
The regularity of overdraft usage declines with age 2
New entrants into the current account market look set to have a limited impact 3
Branch will remain number one but will be supported by online and even mobile banking 4
Branch will remain important for the cross-selling possibilities 4
Mobile phone banking still suffers from perceptions of potential fraudulent activity 5
TABLE OF CONTENTS 6
TABLE OF FIGURES 7
Table of tables 8
Market Context 9
The vast majority of the UK population has a current account 9
Datamonitor estimates that there are almost 71m current accounts in the UK 9
Consumers are increasing their holding of multiple current accounts 10
Current account penetration remains at around 93% 11
The UK current account market is split into a few large players and a fringe of small players 11
The majority of current account holders are at a bank with a national presence 12
Dormant current accounts are less of a problem as a result of measures put into place by banks 12
Dormant accounts to fund big society bank 13
Banks seek more revenue through a proliferation of added-value accounts 13
Banks are turning to added-value accounts to compensate for lost revenue 13
Lloyds TSB has the most extensive selection of added-value accounts 13
Added-value accounts have caused some controversy 14
Premium accounts are a minority product that can generate some revenue 15
Free bank accounts will not disappear during the next couple of years 15
Providers identify different life-stages as key for attracting new customers 15
Youth accounts offer a relatively easy way to attract customers 15
Student accounts are expensive for banks if the account holder decides to leave 16
Graduate accounts are harder to attract but can be more lucrative 17
Regulatory measures are looking to increase competition, but fraud remains a concern 18
The OFT unauthorized overdraft investigation will lead to some important changes in the market 18
Providers will endeavor to give consumers more control over their account through cross industry initiatives 18
The OFT intends to work with providers to ensure that transparency initiatives are met 18
Current account providers will publish their policies for dealing with providers in difficulty 19
Pressure from the European Commission to force branch disposals is intended as punishment for the government bailouts 19
The level of security on some of the large banks online banking remains minimal 20
Consumer Attributes and Behavior 22
Current account holders place little importance on bundled extras 22
Consumers are most likely to look for a debit card 22
Consumers are least interested in bundled extras 22
Interest free overdrafts scored highest in terms of most popular feature on packaged accounts 23
UK current account holders remain skeptical about paying for the product 24
Current account holders do not feel that it is worth paying much for a standard bank account 25
Branch remains the most important channel for current account activity 26
Branch remains the most popular channel for opening a current account 26
Branch remains the key motivator for choosing current account provider 27
Online is the most popular channel for the majority of current account activity 28
Over the last six months checking balances on the account was the most common online activity 29
Consumers are reining in their overdraft usage 30
The regularity of overdraft usage declines with age 30
The percentage of consumers without an overdraft facility grew by 17.7 percentage points in 2010 31
Males continue to have larger authorized overdraft facilities 32
Competitive Pressures in the Current Account Market 34
Market shares have not changed significantly as switching remains low 34
The current account market has seen further consolidation with a smaller fringe of medium-sized players 34
Lloyds and Barclays have the largest share of loyal customers 36
NatWest offers the largest average overdraft facility but First Direct has the largest percentage of overdraft holders 37
There is some correlation between how regularly consumers go overdrawn and the size of the overdraft 38
Fewer current account providers now offer attractive rates 39
However, there has been a move to be more accommodating to those dipping into their overdraft 40
There is a feeling that competition is returning which may manifest itself in better rates 43
Advertising expenditure has been cut at an overall level but some players continue to spend heavily 43
Halifax is focusing on advertising standard accounts while HSBC is focused on added value 43
Advertising expenditure on standard accounts declined in 2009 44
HSBC and Alliance & Leicester are the biggest spenders on added-value account advertising 45
Switching volumes remain low although providers continue to make an effort to attract switchers 46
Alliance & Leicester customers are the riskiest in terms of switching provider 46
Banks such as Santander, First Direct and Halifax are looking to attract switchers 47
Santander has launched a highly competitive current account package 47
First Direct encourages consumers to switch with an added bonus should they not like the service 49
Halifax is interested in attracting new customers but is also looking to encourage them to switch internally 50
The Santander Zero account has been created to build existing relationships rather than encourage switching 51
New entrants into the current account market look set to have a limited impact 52
Tesco Bank has been identified as the biggest threat to the established players 53
The Datamonitor Retail Banking team view 54
Virgin Money is taking a chance with the likely Introduction of a fee-paying model 54
The Datamonitor Retail Banking team view 55
Metro Bank is basing its entry into the market both on service and a narrow geographic segment 55
The Datamonitor Retail Banking team view 56
Project New Bank is comprised of city heavyweights looking to get into the current account market 57
The Datamonitor Retail Banking team view 57
Consumers place most trust in building societies and cooperatives 57
The Future Decoded 59
Current accounts are set to remain a key banking product 59
Banks will look to segment their customers to a greater extent 59
Current account providers will increasingly learn to harness the power of the internet 59
The performance of the new entrants may encourage other firms to enter 59
M&S Money is mulling over its options to enter the current account market 60
John Lewis is another possible future entrant 60
There is confusion over whether the Post Office will start to offer current accounts 60
General Electric is looking to set up an online banking operation in the UK 61
Branch will remain number one but will be supported by online and even mobile banking 61
Branch will remain important for the cross-selling possibilities 61
Mobile phone banking still suffers from perceptions of potential fraudulent activity 61
Contactless payments could boost debit card usage further 62
Regulation will be introduced to facilitate competition in the market 62
The OFT intends to investigate the barriers to entry into the market 63
The market is expected to be subjected to more regulation in the future 63
APPENDIX 64
Supplementary data 64
Market Context Chapter 64
Consumer Attributes and Behavior Chapter 66
Competitive Pressures in the Current Account Market Chapter 72
