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Changing Channel Preferences in Retail Banking - UK - October 2016

“Consumers have made an irreversible switch from traditional banking channels to digital banking. People not only use online banking more than branches, but see it as the preferential choice for everyday banking and are more satisfied with it than any other channel. The challenge for banks is how to prevent the shift online weakening customer relationships and undermining customer loyalty. This will become even more pressing as Open Banking looms on the horizon.”
– Rich Shepherd, Senior Financial Services Analyst

This report discusses the following key topics:

  • Consumers have forgiven security concerns to reap the benefits of online banking
  • Branches still have a place in modern banking
  • Early adopters have significant influence over future innovation

Banking in the UK has changed significantly in the last 15 years. The growth of digital channels offers consumers greater choice over how they manage their accounts and interact with their bank. Online and mobile banking provide more convenience than traditional options such as branch services, and current account holders have taken advantage of this by moving on from a reliance on branches. By moving their customers on to new, remote channels, banks have had the opportunity to reduce their branch networks and significant overheads, increasing profitability.

This report examines consumers changing channel preferences in retail banking. This includes looking at the wider market trends in channel use and a brand-level discussion of what channels are offered by both leading banks and newer challengers. Mintel’s exclusive consumer research includes a look at the frequency of use of different banking channels and what tasks they are used for, how people would prefer to bank, and how satisfied they are with their bank’s channels. Attitudes towards banking channels are also examined. This includes consumers’ approach towards new digital services, branch closures and how people prefer to be contacted by their bank.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Current account holders have moved online…
            • Figure 1: Number of customer instructions by telephone and computer (millions) at high street banks
          • …and new regulations offer further opportunities for development
            • Companies and brands
              • All major banks have closed branches and invested in digital services
                • Challengers look to digital opportunities, but Metro Bank bucks the trend
                  • The consumer
                    • Current account holders more likely to use online banking than branches
                      • Figure 2: Use of different retail banking channels, July 2016
                    • Digital channels are the go-to choice for managing accounts
                      • Figure 3: Retail banking channels used to complete various activities, July 2016
                    • Branches still hold some appeal
                      • Figure 4: Preferred retail banking channels to complete various activities, July 2016
                    • Consumers are most satisfied with online banking
                      • Figure 5: Satisfaction with retail banking channels, July 2016
                    • Consumers tend to be cautious about new features
                      • Figure 6: Attitudes towards using new online digital features, July 2016
                    • Consumers are most likely to respond to letters from their bank
                      • Figure 7: Favoured methods of contact by banks, July 2016
                    • Branch closures weaken customer relationships
                      • Figure 8: Attitudes towards changing retail banking channels, July 2016
                    • Convenience has made the online revolution a success
                      • Figure 9: Attitudes towards changing retail banking channels, July 2016
                    • What we think
                    • Issues and Insights

                      • Consumers have forgiven security concerns to reap the benefits of online banking
                        • The facts
                          • The implications
                            • Branches still have a place in modern banking
                              • The facts
                                • The implications
                                  • Early adopters have significant influence over future innovation
                                    • The facts
                                      • The implications
                                      • The Market – What You Need to Know

                                        • Current account holders have moved online…
                                          • …and new regulations offer further opportunities for development
                                          • Market Drivers

                                            • More people are registered for, and use online banking than telephone banking
                                              • Figure 10: Number of personal customers registered to access their accounts by telephone and computer (millions) at high street banks
                                              • Figure 11: Number of customer instructions by telephone and computer (millions) at high street banks
                                            • Access to Banking Protocol
                                              • PSD2 and open APIs to offer new ways to manage accounts
                                              • Companies and Brands – What You Need to Know

                                                • All major banks have closed branches and invested in digital services
                                                  • Challengers look to digital opportunities, but Metro Bank bucks the trend
                                                  • Company Profiles

                                                    • Barclays
                                                      • HSBC
                                                        • Lloyds Banking Group
                                                          • RBS Group
                                                            • Santander
                                                              • Nationwide
                                                              • Launch Activity and Innovation

                                                                • Online-only banks come to market
                                                                  • Metro Bank uses ‘stores’ to fuel growth
                                                                  • The Consumer – What You Need to Know

                                                                    • Current account holders more likely to use online banking than branches
                                                                      • Digital channels are the go-to choice for managing accounts
                                                                        • Branches still hold some appeal
                                                                          • Consumers are most satisfied with online banking
                                                                            • Consumers tend to be cautious about new features
                                                                              • Consumers are most likely to respond to letters from their bank
                                                                                • Branch closures weaken customer relationships
                                                                                  • Convenience has made the online revolution a success
                                                                                  • Banking Channels – Frequency of Use

                                                                                    • Branches: Highly valued, seldom used
                                                                                      • Figure 12: Use of different retail banking channels, July 2016
                                                                                    • Younger consumers are most likely to ask for in-branch help…
                                                                                      • Figure 13: Use of “In-branch advice services (eg for more detailed queries and product advice)” at least once a month, July 2016
                                                                                    • …and to use mobile apps
                                                                                      • Figure 14: Use of “Mobile banking (including smartphone/tablet apps)” at least once a month, July 2016
                                                                                  • Choice of Banking Channels

                                                                                    • Digital channels are the go-to choice for managing accounts…
                                                                                      • Figure 15: Retail banking channels used to complete various activities, July 2016
                                                                                    • …and for making new applications
                                                                                      • Branches are the top choice to find help and to complain
                                                                                        • Most consumers stick to one channel
                                                                                          • Figure 16: Retail banking channels used to complete various activities, repertoire, July 2016
                                                                                      • Banking Channel Preferences

                                                                                        • Consumers still appreciate the value of branches
                                                                                          • Figure 17: Preferred retail banking channels to complete various activities, July 2016
                                                                                        • Little demand for mobile banking expansion
                                                                                          • Telephone banking: The worst of all worlds
                                                                                          • Satisfaction with Channels

                                                                                            • Online banking achieves the highest levels of satisfaction…
                                                                                              • Figure 18: Satisfaction with retail banking channels, July 2016
                                                                                            • …but few service users are dissatisfied with anything
                                                                                              • Nationwide and Santander customers are most satisfied with their branches…
                                                                                                • Figure 19: Satisfaction with in-branch counter services (eg paying and withdrawing money), by main current account provider, July 2016
                                                                                                • Figure 20: Satisfaction with in-branch advice services (eg for more detailed queries and product advice), by main current account provider, July 2016
                                                                                              • …while Barclays and NatWest lead the way in apps
                                                                                                • Figure 21: Satisfaction with mobile banking (including smartphone/tablet apps), by main current account provider, July 2016
                                                                                            • Attitudes towards New Channels

                                                                                              • Consumers tend to be cautious about new features
                                                                                                • Figure 22: Attitudes towards using new online digital features, July 2016
                                                                                              • Millennials are the most likely to be early adopters
                                                                                                  • Figure 23: Attitudes towards using new digital banking features, by generation, July 2016
                                                                                              • Attitudes towards Customer Engagement

                                                                                                • Consumers are most likely to respond to letters from their bank
                                                                                                  • Figure 24: Favoured methods of contact by banks, July 2016
                                                                                                • Emails are a popular choice, but are open to fraud
                                                                                                  • Non-online banking customers would rather visit a branch
                                                                                                    • Figure 25: Customers’ favoured methods of contact by banks about a matter regarding their account, by use of online banking, July 2016
                                                                                                • Attitudes towards Branch Closures

                                                                                                  • 55% think branch closures negatively impact banking relationships
                                                                                                      • Figure 26: Attitudes towards changing retail banking channels, July 2016
                                                                                                    • Call centres aren’t a sufficient replacement
                                                                                                      • HSBC and Barclays customers most likely to have lost their local branch
                                                                                                        • Figure 27: Agreement with the statement “My local branch has closed in the last 5 years”, by main current account provider, July 2016
                                                                                                    • Attitudes towards Changing Channels

                                                                                                      • The importance of convenience
                                                                                                          • Figure 28: Attitudes towards changing retail banking channels, July 2016
                                                                                                        • The digital revolution has been positive, and more is to come
                                                                                                          • New features could cause account switches
                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                              • Abbreviations
                                                                                                                • Consumer research methodology

                                                                                                                Companies Covered

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                                                                                                                Changing Channel Preferences in Retail Banking - UK - October 2016

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