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Consumers and Retail Banking - UK - October 2012

“Most people are happy with their existing provider, creating little incentive to look at alternative banking brands. However, there remains considerable discontent towards the banking sector as a whole, which should create opportunities for brands with an untarnished reputation, as long as they can convince consumers that they can deliver in the financial services market.”

– Deborah Osguthorpe, Head of UK Financial Services Research

Some questions answered in this report include:

  • Will the implementation of a current account switching service change the retail banking landscape?
  • Why are consumers so reluctant to switch current account providers?
  • Is customer satisfaction influenced by the banking channels used?
  • Is there consumer appetite for new retail banking brands and services?
  • Does the bank branch have a future?

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Table of contents

  1. Introduction

      • Note on consumer research
        • Abbreviations
        • Executive Summary

            • Product ownership and cross-selling
              • Savings accounts and credit cards top the list of cross-sales
                • Figure 1: Product holding and cross-sales, main current account provider and other providers, August 2012
              • Market factors
                • A challenging backdrop
                  • Companies and brands
                    • A concentrated market
                      • Figure 2: Main current account provider, by major banking groups, August 2012
                    • Trust is low across the market
                      • Figure 3: Attitudes towards and usage of brands in the retail banking sector, July 2012
                    • The consumer
                      • Most customers are happy with their bank
                        • Figure 4: Satisfaction with existing banking provider, August 2012
                      • Three quarters of account holders are not looking to switch providers
                        • Figure 5: Appetite for switching retail banking providers, August 2012
                      • Two thirds will only consider using a brand with a proven record in financial services
                        • Figure 6: Agreement with attitudinal statements about retail banking providers, August 2012
                      • In-branch services used by 90% of current account customers
                        • Figure 7: Usage of retail banking channels, August 2012
                      • Staff are the most important aspect of branch-based banking
                        • Figure 8: Assessment of importance of in-branch products and services, August 2012
                      • What we think
                      • Issues in the Market

                          • Will the implementation of a current account switching service change the retail banking landscape?
                            • Why are consumers so reluctant to switch current account providers?
                              • Is customer satisfaction influenced by the banking channels used?
                                • Is there consumer appetite for new retail banking brands and services?
                                  • Does the bank branch have a future?
                                  • Trend Application

                                    • Separating and extending branch services
                                      • Helping customers to save time
                                        • Mobile banking needs to deliver practical benefits
                                        • Retail Banking Environment

                                          • Key points
                                            • A difficult year
                                              • LIBOR-rigging scandal creates negative headlines
                                                • RBS IT failure undermines confidence
                                                  • Costs of PPI mis-selling continue to mount
                                                    • Interest rate swaps mis-selling add to bank compensation costs
                                                      • ICB proposals should shake up the banking sector
                                                        • Ring-fencing retail banking operations
                                                          • Higher capital requirements
                                                            • Increasing competition in retail banking
                                                              • Drive to increase competition
                                                                • Payments Council to introduce account switching service in 2013
                                                                  • End of free banking?
                                                                    • New rules for packaged current accounts
                                                                      • Banks review advice propositions
                                                                      • Retail Banking Providers – Current Account Share

                                                                        • Key points
                                                                          • Lloyds TSB and Barclays top current accounts market share
                                                                            • Figure 9: Main current account provider, August 2012
                                                                            • Figure 10: Main current account provider, by major banking groups, August 2012
                                                                          • Changing landscape of the retail banking market
                                                                            • New entrants to the market
                                                                            • Company Profiles

                                                                              • Barclays
                                                                                  • Figure 11: Key financial data for Barclays Plc (& UK Retail Banking Division), 2010 and 2011
                                                                                  • Figure 12: Key data for Barclays PLC (UK Retail and Business Banking Division) 2010 and 2011
                                                                                • RBS
                                                                                    • Figure 13: Key financial data from half-year results for RBS (UK Retail), 2011 and 2012
                                                                                    • Figure 14: Key financial data for RBS Group (UK Retail Banking Division), 2010 and 2011
                                                                                    • Figure 15: Key retail banking data for RBS Group (UK Retail Banking Division), 2010 and 2011
                                                                                  • HSBC
                                                                                      • Figure 16: Key financial data for HSBC (UK Retail Banking division), 2011 and 2012
                                                                                      • Figure 17: Key financial data for HSBC (UK Retail Banking division), 2010 and 2011
                                                                                      • Figure 18: Key retail banking data for HSBC (UK Retail Banking division), 2010 and 2011
                                                                                    • Nationwide
                                                                                        • Figure 19: Key financial data of Nationwide, 2011 and 2012
                                                                                        • Figure 20: Key retail banking data, 2011 and 2012
                                                                                      • Santander
                                                                                          • Figure 21: Key financial data for Santander UK (half-year results), 2011 and 2012
                                                                                          • Figure 22: Key financial data for Santander UK (Retail Banking Division), 2010 and 2011
                                                                                          • Figure 23: Key retail banking data, interim results, 2011 and 2012
                                                                                          • Figure 24: Key retail banking data, 2011 and 2012
                                                                                        • Lloyds Banking Group
                                                                                            • Figure 25: Key financial data for Lloyds Banking Group (half-year results), 2011 and 2012
                                                                                            • Figure 26: Key financial data of Lloyds Banking Group (Retail Banking Division), 2010 and 2011
                                                                                            • Figure 27: Key data of Lloyds Banking Group (Retail Banking Division), 2011 and 2012
                                                                                            • Figure 28: Key data of Lloyds Banking Group (Retail Banking Division), 2010 and 2011
                                                                                          • The Co-operative Bank
                                                                                              • Figure 29: Key financial data of The Co-operative Bank (retail banking division), 2010 and 2011
                                                                                          • Brand Communication and Promotion

                                                                                            • Key points
                                                                                              • Total adspend down by 9.7% in the year to May 2012
                                                                                                • Figure 30: Total advertising expenditure, 2010-12
                                                                                              • NAB brands increase adspend following launch of new products
                                                                                                • Adspend dominated by big name providers
                                                                                                  • Mobile banking developments boost adspend
                                                                                                    • TV and press are the most used advertising channels
                                                                                                      • Figure 31: Total advertising expenditure, by media type, 2010-12
                                                                                                  • Brand Research

                                                                                                    • Brand map
                                                                                                        • Figure 32: Attitudes towards and usage of brands in the retail banking sector, July 2012
                                                                                                      • Correspondence analysis
                                                                                                        • Brand attitudes
                                                                                                          • Figure 33: Attitudes, by retail banking brand, July 2012
                                                                                                        • Brand personality
                                                                                                          • Figure 34: Retail banking brand personality – macro image, July 2012
                                                                                                          • Figure 35: Retail banking brand personality – micro image, July 2012
                                                                                                        • Brand experience
                                                                                                          • Figure 36: Retail banking brand usage, July 2012
                                                                                                          • Figure 37: Satisfaction with various retail banking brands, July 2012
                                                                                                          • Figure 38: Consideration of retail banking brands, July 2012
                                                                                                          • Figure 39: Consumer perceptions of current retail banking brand performance, July 2012
                                                                                                          • Figure 40: Retail banking brand recommendation – Net Promoter Score, July 2012
                                                                                                        • Brand index
                                                                                                          • Figure 41: Retail banking brand index, July 2012
                                                                                                          • Figure 42: Retail banking brand index vs. recommendation, July 2012
                                                                                                        • Target group analysis
                                                                                                          • Figure 43: Target groups, July 2012
                                                                                                          • Figure 44: Retail banking brand usage, by target groups, July 2012
                                                                                                        • Group One – Conformists
                                                                                                          • Group Two – Simply the Best
                                                                                                            • Group Three – Shelf Stalkers
                                                                                                              • Group Four – Habitual Shoppers
                                                                                                                • Group Five – Individualists
                                                                                                                • Consumer Financial Situation

                                                                                                                  • Key points
                                                                                                                    • Most consumers are managing to get by financially
                                                                                                                      • Figure 45: Trends in consumer sentiment, current financial situation, February 2009-August 2012
                                                                                                                    • Fewer people have seen their financial position worsen in the last 12 months…
                                                                                                                      • Figure 46: Trends in consumer sentiment, financial position compared to a year ago, August 2011-August 2012
                                                                                                                    • …although only a fifth are positive about their finances over the next 12 months
                                                                                                                      • Figure 47: Trends in consumer sentiment, financial confidence for the next 12 months, February 2009-August 2012
                                                                                                                    • Consumers still making purchases and adding to their savings
                                                                                                                      • Figure 48: Trends in spending over last three months and planned spend over the next three months, June-August 2012
                                                                                                                  • Product Ownership and Cross-Selling

                                                                                                                    • Key points
                                                                                                                      • Savings products and credit cards top list of current account cross-sales
                                                                                                                        • Figure 49: Product holding and cross-sales, August 2012
                                                                                                                      • Convenience is not always enough
                                                                                                                        • Cross-sale opportunities vary between products
                                                                                                                          • A fifth have four or more products with their main banking provider
                                                                                                                            • Figure 50: Repertoire of financial products held with main current account provider and other providers, August 2012
                                                                                                                            • Figure 51: Product holding and cross-sales, by repertoire of product holding and cross-sales, August 2012
                                                                                                                          • Cross-sale consistency across retail banking brands
                                                                                                                            • Figure 52: Repertoire of product holding and cross-sales, by main current account provider, August 2012
                                                                                                                        • Satisfaction with Banking Providers

                                                                                                                          • Key points
                                                                                                                            • Most customers are happy with their main retail banking provider
                                                                                                                              • Figure 53: Satisfaction with existing banking provider, August 2012
                                                                                                                            • Even banking failures do not appear to have major impact on satisfaction
                                                                                                                                • Figure 54: Satisfaction with existing banking provider, by next most popular main current account provider, August 2012
                                                                                                                              • Mutuals have a clear edge in customer satisfaction
                                                                                                                                • Figure 55: Satisfaction with existing banking provider, by most popular main current account provider, August 2012
                                                                                                                              • Over-65s are the most contented current account customers
                                                                                                                                • Figure 56: Satisfaction with existing banking provider, by gender and age, August 2012
                                                                                                                              • Customers with at least one additional product are more satisfied
                                                                                                                                • Figure 57: Satisfaction with existing banking provider, by repertoire of product holding and cross-sales, August 2012
                                                                                                                            • Appetite and Motivation for Switching Banking Providers

                                                                                                                              • Key points
                                                                                                                                • Providers under pressure to increase current account switching activity…
                                                                                                                                  • …although appetite for account switching remains subdued
                                                                                                                                    • Figure 58: Appetite for switching retail banking providers, August 2012
                                                                                                                                  • Non-switchers are quite happy with their existing provider
                                                                                                                                    • Figure 59: Satisfaction with existing banking provider, by appetite for switching retail banking providers, August, 2012
                                                                                                                                  • Half of potential switchers are happy with existing arrangements
                                                                                                                                    • Cross-selling does little to cement a more loyal relationship
                                                                                                                                      • Figure 60: Appetite for switching retail banking providers, by repertoire of product holding and cross-sales, August 2012
                                                                                                                                    • Santander customers are more likely to be open to switching
                                                                                                                                      • Figure 61: Appetite for switching retail banking providers, by most popular main current account providers, August 2012
                                                                                                                                      • Figure 62: Appetite for switching retail banking providers, by mutual and non-mutual retail banking organisations, August 2012
                                                                                                                                    • Better deals are the main motivation for switching
                                                                                                                                      • Figure 63: Reasons for switching retail banking providers, August 2012
                                                                                                                                    • RBS customers are more likely to switch due to failure of banking service
                                                                                                                                      • Figure 64: Reasons for switching retail banking providers among those who would consider switching, by current account providers, August 2012
                                                                                                                                  • Attitudes Towards Retail Banking Providers

                                                                                                                                    • Key points
                                                                                                                                      • Banks are seen as profit-driven and lacking in differentiation
                                                                                                                                        • Figure 65: Attitudes towards retail banking providers, August 2012
                                                                                                                                      • Consumers need convincing to use new retail banking providers
                                                                                                                                        • Branches remain crucial to attracting new customers
                                                                                                                                          • In-store branches are more likely to appeal to younger adults
                                                                                                                                            • Figure 66: Agreement with statement ‘I like the idea of being able to access banking services at shops/stores that I use regularly’, by age, August 2012
                                                                                                                                          • Content customers are more likely to look for an established brand
                                                                                                                                            • Figure 67: Attitudes towards retail banking providers, by satisfaction with existing banking provider, August 2012
                                                                                                                                          • Likely switchers are looking for reassurances
                                                                                                                                            • Figure 68: Attitudes towards retail banking providers, by appetite for switching retail banking providers, August 2012
                                                                                                                                        • Usage of Retail Banking Channels

                                                                                                                                          • Key points
                                                                                                                                            • Online banking drives frequent customer contact
                                                                                                                                              • Figure 69: Frequency of usage of retail banking channels, August 2012
                                                                                                                                            • Younger adults access banking services more frequently
                                                                                                                                              • Mobile banking users are more likely to consider switching
                                                                                                                                                • Figure 70: Appetite for switching retail banking providers, by usage of retail banking channels, August 2012
                                                                                                                                              • Mobile banking users are more open to new retail banking concepts
                                                                                                                                                • Figure 71: Attitudes towards retail banking providers, by usage of retail banking channels, August 2012
                                                                                                                                                • Figure 72: Satisfaction with existing banking provider, by usage of banking channels, August 2012
                                                                                                                                            • Satisfaction with Retail Banking Channels

                                                                                                                                              • Key points
                                                                                                                                                • Users are more positive about online banking experience
                                                                                                                                                  • Figure 73: Satisfaction with retail banking channels, August 2012
                                                                                                                                                • Channel variety allows users to select channels that suit
                                                                                                                                                  • In-branch services contribute to higher levels of customer satisfaction
                                                                                                                                                    • Figure 74: Key driver analysis of current account holders’ satisfaction with banking providers with satisfaction with main banking channels, August 2012
                                                                                                                                                    • Figure 75: Key driver analysis of current account holders’ satisfaction with banking providers with satisfaction with main banking channels, August 2012
                                                                                                                                                  • Key driver methodology
                                                                                                                                                    • Nationwide stands out in offering a strong in-branch advice service
                                                                                                                                                      • Figure 76: Correspondence analysis – satisfaction with retail banking channels at main current account providers, August 2012
                                                                                                                                                    • Methodology
                                                                                                                                                    • The Role of the Branch – The Consumer Perspective

                                                                                                                                                      • Key points
                                                                                                                                                        • Debate over the future of branch-based banking
                                                                                                                                                          • Staff are the most important aspect of branch-based banking
                                                                                                                                                            • Figure 77: Importance of in-branch products and services, August 2012
                                                                                                                                                          • Short queues are lower down the list of priorities
                                                                                                                                                            • Branch appearance is a consideration, but not a priority
                                                                                                                                                              • Mobile banking users are more likely to value little extras
                                                                                                                                                                • Figure 78: Importance of in-branch products and services, by usage of retail banking channels, August 2012
                                                                                                                                                              • NatWest and HSBC customers are more likely to appreciate extended opening hours
                                                                                                                                                                • Figure 79: Importance of in-branch products and services, by most popular main current account provider, August 2012
                                                                                                                                                              • Multi-product holders are more likely to look for a comfortable setting
                                                                                                                                                                • Figure 80: Importance of in-branch products and services, by most number of products held with main banking provider, August 2012
                                                                                                                                                            • Appendix – Retail Banking Providers

                                                                                                                                                                • Figure 81: Most popular main current account provider, by demographics, August 2012
                                                                                                                                                                • Figure 82: Next most popular main current account provider, by demographics, August 2012
                                                                                                                                                            • Appendix – Brand Research

                                                                                                                                                              • Brand usage
                                                                                                                                                                • Figure 83: Brand usage, July 2012
                                                                                                                                                              • Brand commitment
                                                                                                                                                                • Figure 84: Brand commitment, July 2012
                                                                                                                                                              • Brand momentum
                                                                                                                                                                • Figure 85: Brand momentum, July 2012
                                                                                                                                                              • Brand diversity
                                                                                                                                                                • Figure 86: Brand diversity, July 2012
                                                                                                                                                              • Brand satisfaction
                                                                                                                                                                • Figure 87: Brand satisfaction, July 2012
                                                                                                                                                              • Brand recommendation
                                                                                                                                                                • Figure 88: Brand recommendation, July 2012
                                                                                                                                                              • Brand attitude
                                                                                                                                                                • Figure 89: Brand attitude, July 2012
                                                                                                                                                              • Brand image
                                                                                                                                                                • Figure 90: Brand image – Macro image, July 2012
                                                                                                                                                                • Figure 91: Brand image – Micro image, July 2012
                                                                                                                                                              • Target groups
                                                                                                                                                                • Figure 92: Profile of target groups, by demographics, July 2012
                                                                                                                                                                • Figure 93: Psychographic segmentation, by target groups, July 2012
                                                                                                                                                                • Figure 94: Brand usage, by target groups, July 2012
                                                                                                                                                              • Brand index
                                                                                                                                                                • Figure 95: Brand index, July 2012
                                                                                                                                                            • Appendix – Product Ownership and Cross-Selling

                                                                                                                                                                • Figure 96: Product holding and cross-sales with main current account provider, by main current account provider, August 2012
                                                                                                                                                                • Figure 97: Most popular own/arranged this product with my (main) current account provider, by demographics, August 2012
                                                                                                                                                                • Figure 98: Next most popular own/arranged this product with my (main) current account provider, by demographics, August 2012
                                                                                                                                                                • Figure 99: Most popular own/arranged this product with another provider, by demographics, August 2012
                                                                                                                                                                • Figure 100: Next most popular own/arranged this product with another provider, by demographics, August 2012
                                                                                                                                                                • Figure 101: Repertoire of product holding and cross-sales, by demographics, August 2012
                                                                                                                                                            • Appendix – Satisfaction with Banking Providers

                                                                                                                                                                • Figure 102: Satisfaction with existing banking provider, by demographics, August 2012
                                                                                                                                                                • Figure 103: Satisfaction with existing banking provider (continued), by demographics, August 2012
                                                                                                                                                            • Appendix – Appetite and Motivation for Switching Banking Providers

                                                                                                                                                                • Figure 104: Appetite for switching retail banking providers, by demographics, August 2012
                                                                                                                                                                • Figure 105: Appetite for switching retail banking providers (continued), by demographics, August 2012
                                                                                                                                                                • Figure 106: Reasons for switching retail banking providers, by demographics, August 2012
                                                                                                                                                            • Appendix – Attitudes Towards Retail Banking Providers

                                                                                                                                                                • Figure 107: Agreement with the statements ‘Most high street banks are pretty much the same as each other’ and ‘Banks are more concerned about their profits than their customers’, by demographics, August 2012
                                                                                                                                                                • Figure 108: Agreement with the statements ‘I would only use a bank which has branches that are near to where I live or work’ and ‘I like the idea of being able to access banking services at shops/stores that I use regularly’, by demographics, August 2012
                                                                                                                                                                • Figure 109: Agreement with the statements ‘I would only consider using a bank which has a proven track record in financial services’ and ‘I would be happy to use a new banking brand’, by demographics, August 2012
                                                                                                                                                            • Appendix – Usage of Retail Banking Channels

                                                                                                                                                                • Figure 110: Usage of in branch – counter services, by demographics, August 2012
                                                                                                                                                                • Figure 111: Usage of in branch – advice services, by demographics, August 2012
                                                                                                                                                                • Figure 112: Usage of online banking services, by demographics, August 2012
                                                                                                                                                                • Figure 113: Usage of telephone banking services, by demographics, August 2012
                                                                                                                                                                • Figure 114: Usage of mobile banking services, by demographics, August 2012
                                                                                                                                                            • Appendix – The Role of the Branch – The Consumer Perspective

                                                                                                                                                                • Figure 115: Importance of short queues, by demographics, August 2012
                                                                                                                                                                • Figure 116: Importance of private areas for meetings/discussions with staff, by demographics, August 2012
                                                                                                                                                                • Figure 117: Importance of knowledgeable staff, by demographics, August 2012
                                                                                                                                                                • Figure 118: Importance of friendly and helpful staff, by demographics, August 2012
                                                                                                                                                                • Figure 119: Importance of comfortable seating area, by demographics, August 2012
                                                                                                                                                                • Figure 120: Importance of quick deposit facilities, by demographics, August 2012
                                                                                                                                                                • Figure 121: Importance of internet access (in branch), by demographics, August 2012
                                                                                                                                                                • Figure 122: Importance of clean and bright décor, by demographics, August 2012
                                                                                                                                                                • Figure 123: Importance of tea/coffee facilities, by demographics, August 2012
                                                                                                                                                                • Figure 124: Importance of coin-counting machines, by demographics, August 2012
                                                                                                                                                                • Figure 125: Importance of extended opening hours, by demographics, August 2012

                                                                                                                                                            Companies Covered

                                                                                                                                                            • Alliance & Leicester
                                                                                                                                                            • Barclays Bank plc
                                                                                                                                                            • Bradford & Bingley plc
                                                                                                                                                            • Britannia Building Society
                                                                                                                                                            • Financial Services Authority (The)
                                                                                                                                                            • First Direct
                                                                                                                                                            • Firstplus Financial Group
                                                                                                                                                            • Grupo Santander UK
                                                                                                                                                            • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                            • HSBC Holdings plc
                                                                                                                                                            • ING Direct
                                                                                                                                                            • Lloyds Banking Group
                                                                                                                                                            • Marks & Spencer
                                                                                                                                                            • Nationwide Building Society
                                                                                                                                                            • NatWest
                                                                                                                                                            • Royal Bank of Scotland Group plc
                                                                                                                                                            • Twitter, Inc.

                                                                                                                                                            Consumers and Retail Banking - UK - October 2012

                                                                                                                                                            £2,195.00 (Excl.Tax)