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Consumers and Retail Banking - UK - September 2014

“UK retail banking is not a sector that is traditionally used to large-scale disruption. However, it is entering a period of upheaval as a result of a number of factors ranging from polarised demographics and digital disruption, to increased regulatory pressure and a constant wave of reputation-damaging scandals. Perhaps the only constant has been the level of inertia among consumers. Even this can’t be relied on, though. Other markets have shown the way in which technology has enabled rapid transformation. The incumbents can’t afford to be complacent.”
- Jessica Morley, Financial Services Analyst
This report looks at the following issues:

  • As long as people still believe that banks are “all the same”, the Current Account Switch Service will have minimal impact
  • Challenging demographics: how to impress Generation Y
  • Are we looking at a future of branchless banks?
  • Adapting the branch to fit diverse consumer requirements

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Market share
            • Top five banking groups account for 85% market share
              • Figure 1: Main current account provider, by banking group, May 2014
            • Product ownership and channel use
              • Product ownership and cross-sales
                • Incumbents increasingly at risk of losing wallet share
                  • Figure 2: Products held and cross-sales, May 2014
                • Frequency of use of main banking channels
                  • Online and mobile banking integrate banking into everyday life
                    • Figure 3: Frequency of banking channel use, May 2014
                  • Perceived value of banking channels
                    • Online banking leads the way
                      • Figure 4: Importance of banking services, May 2014
                    • Attitudes towards retail banking
                      • Bargain hunting increasingly important to consumers
                        • Figure 5: Consumer attitudes towards banking, May 2014
                      • Account switching
                        • Consumer intentions in using the Current Account Switch Service
                          • Inertia reigns supreme
                            • Figure 6: Consumer intentions in using the Current Account Switch Service, May 2014
                          • Awareness of the current account switch service
                            • Three quarters of consumers aware of the Current Account Switch Service
                              • Figure 7: Awareness of the Current Account Switch Service, May 2014
                            • Features/services appealing to potential switchers
                              • Banks face a difficult decision when it comes to channel prioritisation
                                • Figure 8: Features/services appealing to potential switchers, May 2014
                              • Consideration of switching to various banking providers
                                • Challengers start to appeal to consumers
                                  • Figure 9: Consideration of switching to various banking providers, May 2014
                                • What we think
                                • Issues and Insights

                                    • As long as people still believe that banks are “all the same”, the Current Account Switch Service will have minimal impact
                                      • The facts
                                        • The implications
                                          • Challenging demographics: how to impress Generation Y
                                            • The facts
                                              • The implications
                                                • Are we looking at a future of branchless banks?
                                                  • The facts
                                                    • The implications
                                                      • Adapting the branch to fit diverse consumer requirements
                                                        • The facts
                                                          • The implications
                                                          • Trend Application

                                                            • Inter-generational Knowledge Exchange
                                                              • Predictive financial advice at your fingertips
                                                                • Access Anything, Anywhere
                                                                • Market Developments

                                                                  • Key points
                                                                    • The economic recovery is feeding through into retail banking results
                                                                      • Figure 10: Retail banking profits, by provider, 2013 and 2014
                                                                    • Digital disruption has raised consumer expectations
                                                                      • Analysis of big data can help incumbents maintain their advantage in a changing environment
                                                                        • Developments in FinTech challenge banks’ ownership of consumer data
                                                                          • Competition in the industry is slowly increasing
                                                                            • Regulation is holding back innovation
                                                                              • Talking ‘bout my reputation
                                                                                • Figure 11: Results for first quarter of Current Account Switch Service
                                                                            • Retail Banking Providers: Market Share

                                                                              • Key points
                                                                                • Decreasing dominance?
                                                                                  • Figure 12: Main current account provider, May 2014
                                                                                • Simple, personal and fair leads the way
                                                                                  • Lloyds’ market share reflects the spin-off of TSB branches
                                                                                    • Figure 13: Market share, May 2014
                                                                                  • TSB is the exception, not the rule
                                                                                  • Company Profiles

                                                                                    • Barclays
                                                                                        • Figure 14: Key financial data for Barclays plc, 2011-13
                                                                                        • Figure 15: Key financial data for Barclays plc, 2013 and 2014
                                                                                        • Figure 16: Key data for Barclays PLC, 2012 and 2013
                                                                                      • HSBC
                                                                                          • Figure 17: Key financial data for HSBC, 2011-13
                                                                                          • Figure 18: Key financial data for HSBC, 2012 and 2013
                                                                                          • Figure 19: Key data for HSBC, 2012 and 2013
                                                                                        • Lloyds Banking Group
                                                                                            • Figure 20: Key financial data for Lloyds Banking Group, 2011-13
                                                                                            • Figure 21: Key financial data for Lloyds Banking Group, 2013 and 2014
                                                                                            • Figure 22: Key financial data for Lloyds Banking Group, 2012 and 2013
                                                                                            • Figure 23: Key financial data TSB, 2013 and 2014
                                                                                            • Figure 24: Key data for TSB, 2013 and 2014
                                                                                          • Nationwide
                                                                                              • Figure 25: Key financial data for Nationwide, 2013 and 2014
                                                                                              • Figure 26: Key data for Nationwide, 2013 and 2014
                                                                                            • RBS
                                                                                                • Figure 27: Key financial data for RBS Group, 2011-13
                                                                                                • Figure 28: Key financial data for RBS Group, 2013 and 2014
                                                                                                • Figure 29: Key financial information for RBS Bank, 2012 and 2013
                                                                                                • Figure 30: Key data for RBS Group (UK Retail Banking Division), 2011-13
                                                                                              • Santander
                                                                                                  • Figure 31: Key financial data for Santander UK, 2011-13
                                                                                                  • Figure 32: Key financial data for Santander UK, 2013 and 2014
                                                                                                  • Figure 33: Key data for Santander Group, 2012 and 2013
                                                                                                • The Co-operative Bank
                                                                                                    • Figure 34: Key financial data for The Co-operative Bank, 2012 and 2013
                                                                                                    • Figure 35: Key data for the Co-operative Bank, 2012 and 2013
                                                                                                  • Virgin Money
                                                                                                      • Figure 36: Key financial data for Virgin Money, 2012 and 2013
                                                                                                      • Figure 37: Key data for Virgin Money, 2012 and 2013
                                                                                                  • Brand Communication and Promotion

                                                                                                    • Key points
                                                                                                      • Adspend grew by 10% over the course of 2014
                                                                                                        • Figure 38: Advertising expenditure by retail banking providers, 2012-14
                                                                                                        • Figure 39: Retail banking advertising expenditure, by advertiser, 2012-14
                                                                                                      • £67 million spent on brand building
                                                                                                        • Figure 40: Retail banking expenditure, by advertiser, 2013 and 2014
                                                                                                      • Television is the key marketing channel
                                                                                                        • Figure 41: Retail banking advertising expenditure, by media type, 2014
                                                                                                      • A note on adspend
                                                                                                      • Product Ownership and Cross-sales

                                                                                                        • Key points
                                                                                                          • Cross-selling opportunities
                                                                                                            • Figure 42: Financial services product ownership and cross-sales, May 2014
                                                                                                          • Technology will erode the “one-stop shop” appeal of the industry giants
                                                                                                            • Figure 43: Financial services product ownership and cross-sales, by number of products held with main current account provider, May 2014
                                                                                                          • Keeping up with the Joneses…or with Nationwide and Barclays
                                                                                                            • Figure 44: Savings account and credit card ownership, by provider, May 2014
                                                                                                          • Disintermediation dilemma
                                                                                                            • Figure 45: Number of products held with main current account provider, May 2014
                                                                                                          • Capturing Generation Y
                                                                                                            • Figure 46: Number of products held, by age, May 2014
                                                                                                        • Importance of Banking Channels

                                                                                                          • Key points
                                                                                                            • Online (almost) every time
                                                                                                              • Figure 47: Relative perceived importance of banking channels as rated the most important, May 2014
                                                                                                            • Mobile banking yet to go mainstream
                                                                                                              • Figure 48: Frequency of mobile and online banking channel usage, by age, May 2014
                                                                                                            • NatWest and Barclays ‘get’ Mobile Banking
                                                                                                              • Figure 49: Most important banking channel, by provider, May 2014
                                                                                                            • Differences in ownership drive differences in opinion
                                                                                                              • Figure 50: Most important banking channel, by product ownership, May 2014
                                                                                                              • Figure 51: Those who never use in-branch counter services, May 2014
                                                                                                              • Figure 52: Those who never use in-branch advice services, by product ownership, May 2014
                                                                                                            • I want what I want, when I want it
                                                                                                              • Figure 53: Frequency of banking channel use, May 2014
                                                                                                            • Differences in ownership drive differences in opinion
                                                                                                              • Figure 54: Most important banking channel, by product ownership, May 2014
                                                                                                              • Figure 55: Frequency of channel use, by product type, May 2014
                                                                                                          • Attitudes towards Retail Banking

                                                                                                            • Key points
                                                                                                              • Majority of consumers believe it is important to shop around
                                                                                                                • Figure 56: Consumer attitudes towards banking, May 2014
                                                                                                              • Most people think banks take their customers for granted
                                                                                                                • Figure 57: Consumer attitudes about the concept of loyalty in retail banking, May 2014
                                                                                                              • Aligning bank and consumer definitions of loyalty
                                                                                                                • 69% agree that “banking is never really free”
                                                                                                                  • Figure 58: Belief that “banking is never really free”, by age and financial situation, May 2014
                                                                                                                • Free banking: The triumph of hope over experience?
                                                                                                                  • Attitudes towards cashback highlight the challenge faced by banks
                                                                                                                    • Figure 59: Attitudes towards current account rewards, May 2014
                                                                                                                  • Beware of generalisations
                                                                                                                    • Figure 60: Concern about branch closures compared with the belief that digital services are more important than branch services, by age, May 2014
                                                                                                                • Intended Use of Current Account Switch Service

                                                                                                                  • Key points
                                                                                                                    • Irreversible inertia?
                                                                                                                      • Figure 61: Consumer intentions to use the Current Account Switch Service, may 204
                                                                                                                      • Figure 62: Intention to switch current account provider, May 2014 compared to June 2013
                                                                                                                    • Consumers find it difficult to see the point in switching
                                                                                                                      • Figure 63: Attitude towards banking, by attitude towards switching, May 2014
                                                                                                                    • Confusion over the differences between products acts as a barrier to competition
                                                                                                                      • Figure 64: Likelihood to switch, by product ownership, May 2014
                                                                                                                      • Figure 65: Potential movers, by products held with main current account provider and with alternative provider, May 2014
                                                                                                                    • Awareness of the Current Account Switch Service
                                                                                                                      • Message received, but not translated
                                                                                                                        • Figure 66: Awareness of the Current Account Switch Service, May 2014
                                                                                                                      • Awareness varies widely across demographic groups
                                                                                                                        • Figure 67: Awareness of the Current Account Switch Service, by age, May 2014
                                                                                                                        • Figure 68: Proportion of each age group classed as a potential mover, May 2014
                                                                                                                    • Current Account Switching – Consideration of Retail Banking Services and Features

                                                                                                                      • Key points
                                                                                                                        • Banks face a tough decision when it comes to prioritising channels for development
                                                                                                                          • Figure 69: Features/services appealing to potential account switchers, May 2014
                                                                                                                        • Channel hopping
                                                                                                                          • Figure 70: Use of banking channel once a month or more, by likelihood to switch, May 2014
                                                                                                                        • Push or Pull?
                                                                                                                            • Figure 71: Factors motivating the desire to switch among potential account switchers, May 2014
                                                                                                                            • Figure 72: Features appealing to current account switchers, by age, May 2014
                                                                                                                        • Current Account Switching – Consideration of Retail Banking Brands

                                                                                                                          • Key points
                                                                                                                            • Most potential switchers are still looking at the industry giants
                                                                                                                              • Figure 73: Consideration of different banking providers – potential switchers, May 2014
                                                                                                                            • Rise of the challengers
                                                                                                                              • No two are alike
                                                                                                                                • Figure 74: Intention to switch to specific provider, by age, May 2014
                                                                                                                                • Figure 75: Intention to switch to specific provider, by age, May 2014 (continued)
                                                                                                                            • Appendix – Product Ownership and Cross-sales

                                                                                                                                • Figure 76: Product ownership and cross-sales – Savings account, by demographics, May 2014
                                                                                                                                • Figure 77: Product ownership and cross-sales – Cash ISA, by demographics, May 2014
                                                                                                                                • Figure 78: Product ownership and cross-sales – Any stock market-based investment product, by demographics, May 2014
                                                                                                                                • Figure 79: Product ownership and cross-sales – Credit card, by demographics, May 2014
                                                                                                                                • Figure 80: Product ownership and cross-sales – Personal loan, by demographics, May 2014
                                                                                                                                • Figure 81: Product ownership and cross-sales – Business loan, by demographics, May 2014
                                                                                                                                • Figure 82: Product ownership and cross-sales – Mortgage, by demographics, May 2014
                                                                                                                                • Figure 83: Product ownership and cross-sales – Life insurance, by demographics, May 2014
                                                                                                                                • Figure 84: Product ownership and cross-sales – Home insurance, by demographics, May 2014
                                                                                                                                • Figure 85: Product ownership and cross-sales – Car insurance, by demographics, May 2014
                                                                                                                                • Figure 86: Product ownership and cross-sales – Income protection/critical illness cover, by demographics, May 2014
                                                                                                                                • Figure 87: Product ownership and cross-sales – Business bank account, by demographics, May 2014
                                                                                                                                • Figure 88: Product ownership and cross-sales, by demographics, May 2014
                                                                                                                            • Appendix – Importance of Banking Channels

                                                                                                                                • Figure 89: Importance of banking services – In-branch counter services, by demographics, May 2014
                                                                                                                                • Figure 90: Importance of banking services – In-branch advice services, by demographics, May 2014
                                                                                                                                • Figure 91: Importance of banking services – Online banking, by demographics, May 2014
                                                                                                                                • Figure 92: Importance of banking services – Telephone banking, by demographics, May 2014
                                                                                                                                • Figure 93: Importance of banking services – Mobile banking, by demographics, May 2014
                                                                                                                                • Figure 94: Frequency of use of various retail banking channels – In-branch counter services, by demographics, May 2014
                                                                                                                                • Figure 95: Frequency of use of various retail banking channels – In-branch advice services, by demographics, May 2014
                                                                                                                                • Figure 96: Frequency of use of various retail banking channels – Online banking, by demographics, May 2014
                                                                                                                                • Figure 97: Frequency of use of various retail banking channels – Telephone banking, by demographics, May 2014
                                                                                                                                • Figure 98: Frequency of use of various retail banking channels – Mobile banking, by demographics, May 2014
                                                                                                                                • Figure 99: Frequency of mobile and branch banking channels, by product ownership, May 2014
                                                                                                                            • Appendix – Attitudes towards Retail Banking

                                                                                                                                • Figure 100: Agreement with the statement ‘I don’t believe banking is ever really free’, by demographics, May 2014
                                                                                                                                • Figure 101: Agreement with the statement ‘The number of bank branches that are closing worries me’, by demographics, May 2014
                                                                                                                                • Figure 102: Agreement with the statement ‘It is a good idea for banks to offer services in different locations’, by demographics, May 2014
                                                                                                                                • Figure 103: Agreement with the statement ‘Online/mobile services are more important to me than branch services’, by demographics, May 2014
                                                                                                                                • Figure 104: Agreement with the statement ‘Building societies are better at rewarding loyalty than banks’, by demographics, May 2014
                                                                                                                                • Figure 105: Agreement with the statement ‘Banks take their customers for granted’, by demographics, May 2014
                                                                                                                                • Figure 106: Agreement with the statement ‘It is important to look for the best deals on the market yourself’, by demographics, May 2014
                                                                                                                                • Figure 107: Agreement with the statement ‘I am lazy when it comes to making sure I am getting the best deals’, by demographics, May 2014
                                                                                                                                • Figure 108: Agreement with the statement ‘Some banks are better than others at looking after their customers’, by demographics, May 2014
                                                                                                                                • Figure 109: Agreement with the statement ‘Current accounts that offer cashback and other rewards are a good idea’, by demographics, May 2014
                                                                                                                                • Figure 110: Agreement with the statement ‘I would like to have a current account that offers cashback or other rewards’, by demographics, May 2014
                                                                                                                                • Figure 111: Agreement with the statement ‘It would be worth paying for a current account if it offered cashback/rewards on spending and purchases’, by demographics, May 2014
                                                                                                                                • Figure 112: Positive attitudes towards banking, by provider, May 2014
                                                                                                                                • Figure 113: Attitudes towards banking, by age, May 2014
                                                                                                                            • Appendix – Intended Use of Current Account Switch Service

                                                                                                                                • Figure 114: Consumer intentions of using the Current Account Switch Service, by demographics, May 2014
                                                                                                                            • Appendix – Awareness of the Current Account Switch Service

                                                                                                                                • Figure 115: Consumer awareness of the Current Account Switch Service, by demographics, May 2014
                                                                                                                            • Appendix – Current Account Switching – Consideration of Retail Banking Services and Features

                                                                                                                                • Figure 116: Most popular features/services appealing to potential account switchers, by demographics, May 2014
                                                                                                                                • Figure 117: Next most popular features/services appealing to potential account switchers, by demographics, May 2014
                                                                                                                            • Appendix – Current Account Switching – Consideration of Retail Banking Brands

                                                                                                                                • Figure 118: Most popular consideration of switching to various retail banking brands, by demographics, May 2014
                                                                                                                                • Figure 119: Next most popular consideration of switching to various retail banking brands, by demographics, May 2014
                                                                                                                                • Figure 120: Popular consideration of switching to various retail banking brands, by demographics, May 2014
                                                                                                                                • Figure 121: Other consideration of switching to various retail banking brands, by demographics, May 2014
                                                                                                                                • Figure 122: Least popular consideration of switching to various retail banking brands, by demographics, May 2014
                                                                                                                            • Appendix – Market Share

                                                                                                                                • Figure 123: Most popular main account provider, by demographics, May 2014
                                                                                                                                • Figure 124: Next most popular main account provider, by demographics, May 2014
                                                                                                                                • Figure 125: Other main account provider, by demographics, May 2014
                                                                                                                                • Figure 126: Least popular main account provider, by demographics, May 2014

                                                                                                                            Companies Covered

                                                                                                                            • Barclaycard
                                                                                                                            • Barclays Bank plc
                                                                                                                            • British Airways Plc
                                                                                                                            • Co-operative Group
                                                                                                                            • First Direct
                                                                                                                            • Grupo Santander Central Hispano S.A.
                                                                                                                            • Grupo Santander UK
                                                                                                                            • HBOS plc (Halifax Bank of Scotland)
                                                                                                                            • HSBC Investments (UK) Limited
                                                                                                                            • Lloyds Banking Group
                                                                                                                            • Marks & Spencer
                                                                                                                            • Nationwide Building Society
                                                                                                                            • NatWest
                                                                                                                            • Northern Rock plc
                                                                                                                            • Portman Building Society
                                                                                                                            • Post Office Limited
                                                                                                                            • Royal Bank of Scotland Group plc
                                                                                                                            • Smile
                                                                                                                            • Ulster Bank Ltd
                                                                                                                            • Virgin Money

                                                                                                                            Consumers and Retail Banking - UK - September 2014

                                                                                                                            £2,195.00 (Excl.Tax)