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Current Accounts - UK - July 2015

“The current account market has always been labelled as being notoriously ‘sticky’. The launch of the CASS had as a primary goal the removing the barriers to switching and boosting competition. Even though the market has heated up with deals to lure switchers, activity remains split somewhat equally among switchers and non-switchers. Even dissatisfied customers fail to switch providers, revealing the prevailing power of customer inertia in the face of hassle avoidance.”
– Chryso Kolakkides, Senior Financial Services Analyst

This report discusses the following key issues:

  • Tailored packaged current accounts can better reflect consumers’ preferences
  • Even dissatisfied customers fail to switch

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Table of contents

  1. Introduction

      • Report scope and definitions
      • Executive Summary

          • The market
            • UK personal current account market has high and stable penetration
              • Figure 1: Estimated number of current accounts and current account holders – UK, 2015
            • Increasing margins on overdraft lending
              • More than 1.75 million current account switches since CASS launch
                • FOS reports an upsurge in current account complaints
                  • Digital banks set to enter the current account market
                    • Banks launch ‘MiData’ current account comparison tool
                      • Digital banking beats all channels
                        • Figure 2: Frequency of use of the following banking services, May 2015
                      • Key players
                        • Lloyds Banking Group is the largest current account provider in the UK
                          • Figure 3: Current account providers, by group share of main current account market, May 2015
                        • Halifax and Santander are the biggest winners of CASS
                          • Figure 4: Net gains of full account switches completed using CASS between Q3 2014 and Q3 2014 (1 October 2013 - 30 September 2014)
                        • While some providers continue offering switching incentives…
                          • …others have shifted towards big in-credit current account interest rates
                            • High-street providers look to inspire greater customer loyalty
                              • New student current account launches and promotion of financial education
                                • Increased competition from non-traditional entrants
                                  • High street players continue to develop their digital services…
                                    • …as well as their multi-channel capabilities
                                      • Barclays and others look to their customers with disabilities
                                        • The consumer
                                          • Almost every adult in the UK has a current account
                                            • Figure 5: Number of current accounts owned, May 2015
                                          • One in five adults owns a premium or packaged current account
                                            • Figure 6: Type of current account held, May 2015
                                          • Only 13% of current account holders own more than one type of current account
                                            • Figure 7: Number of type of current accounts held, May 2015
                                          • No fees are the most important deciding factor for consumers
                                            • Figure 8: Influential factors when choosing a new current account, May 2015
                                          • Convenient branches are head-to-head with easy-to-use websites
                                            • Current accounts which just do the basics are the desired product for the majority
                                              • Figure 9: Attitudes towards packaged and paid-for current accounts, May 2015
                                            • 82% of current account holders are satisfied with their main provider…
                                              • Figure 10: Satisfaction with main current account providers, May 2015
                                            • …rising to 90% among consumers with a premium or packaged current account
                                              • Nearly half of current account holders have never switched their main provider
                                                • Figure 11: Current account switching activity, May 2015
                                              • Just over 70% of current account holders are aware of the CASS
                                                • Figure 12: Awareness and use of the CASS, May 2015
                                              • More than four in five CASS users are satisfied with the service
                                                • Figure 13: Satisfaction with CASS, May 2015
                                              • 58% of adults would be interested in a current account comparison tool
                                                • Figure 14: Attitudes towards current account comparison tools, May 2015
                                            • Issues and Insights

                                              • Tailored packaged current accounts can better reflect consumers’ preferences
                                                • The facts
                                                  • The implications
                                                    • Even dissatisfied customers fail to switch
                                                      • The facts
                                                        • The implications
                                                        • The Market – What You Need to Know

                                                          • UK’s personal current account market has high and stable penetration
                                                            • Increasing margins on overdraft lending
                                                              • More than 1.75 million current account switches since CASS launch
                                                                • FOS reports an upsurge in current account complaints
                                                                  • Introduction of Paym pushes current account providers towards further digitalisation
                                                                    • Digital banks set to enter the current account market
                                                                      • Banks launch ‘MiData’ current account comparison tool
                                                                        • Digital banking beats all channels
                                                                          • In-branch services however, are still valued
                                                                            • Decline in the UK branch network continues
                                                                            • Market Size

                                                                              • UK’s personal current account market has high and stable penetration
                                                                                • Figure 15: Estimated number of current accounts and current account holders – UK, 2014 and 2015
                                                                            • Economic Environment and Market Conditions

                                                                              • Increasing margins on overdraft lending
                                                                                • Figure 16: Monthly interest rate of UK monetary financial institutions sterling overdraft for households – Not seasonally adjusted, January 2009-April15
                                                                              • More than 1.75 million current account switches since CASS launch
                                                                                • FOS reports an upsurge in current account complaints
                                                                                  • Figure 17: Number of new complaints about current accounts to the FOS, 2013/14-2014-15 (years ending on 31 March)
                                                                                • Introduction of Paym pushes current account providers towards further digitalisation
                                                                                  • Digital banks set to enter the current account market
                                                                                    • Banks launch ‘MiData’ current account comparison tool
                                                                                    • Channels to Market

                                                                                      • Digital banking beats all channels
                                                                                        • Figure 18: Frequency of use of the following banking services, May 2015
                                                                                      • Mobile banking has strongest potential among Millennials…
                                                                                        • Figure 19: Frequency of use of the following banking services, by generation, May 2015
                                                                                      • …but is likely to pick up across all age groups
                                                                                        • In-branch services however, are still valued
                                                                                          • Decline in the UK branch network continues
                                                                                            • Figure 20: UK retail bank and building society branch networks, 1997-2013
                                                                                        • Key Players – What You Need to Know

                                                                                          • Lloyds Banking Group is the largest current account provider in the UK
                                                                                            • Halifax and Santander are the biggest winners of CASS
                                                                                              • Packaged and premium accounts receive the greatest increase in adspend in 2014/15
                                                                                                • Top 10 advertisers account for over 90% of total adspend
                                                                                                  • While some providers continue offering switching incentives….
                                                                                                    • …others have shifted towards big in-credit current account interest rates
                                                                                                      • High-street providers look to inspire greater customer loyalty
                                                                                                        • New student current account launches and promotion of financial education
                                                                                                          • Increased competition from non-traditional entrants
                                                                                                            • High street players continue to develop their digital services…
                                                                                                              • …as well as their multi-channel capabilities
                                                                                                                • Barclays and others look to their customers with disabilities
                                                                                                                • Market Share

                                                                                                                  • Lloyds Banking Group is the largest current account provider in the UK
                                                                                                                    • Figure 21: Current account providers, by share of main and other current account market, May 2015
                                                                                                                  • Nationwide has a strong presence in the secondary market
                                                                                                                    • Halifax and Santander are the biggest winners of CASS
                                                                                                                      • Figure 22: Net gains of full account switches completed using CASS between Q3 2014 and Q3 2014 (1 October 2013-30 September 2014)
                                                                                                                    • Current account balances are taking over from savings accounts
                                                                                                                      • Figure 23: Big providers’ total retail savings balances, shown on a group basis – UK, 2013-14
                                                                                                                  • Advertising Spend

                                                                                                                    • Peak in advertising spend on current accounts in 2013/14
                                                                                                                      • Figure 24: Total advertising expenditure on current accounts and other related money-transmission services, 2010/11-2014/15 (12 months ending 31 March)
                                                                                                                    • Packaged and premium accounts receive the greatest increase in adspend in 2014/15
                                                                                                                      • Figure 25: Advertising expenditure on current accounts and other related money-transmission services, 2012/13-2014/15 (12 months to 31 March)
                                                                                                                    • Top 10 advertisers account for over 90% of total adspend
                                                                                                                      • Figure 26: Top ten advertisers of current accounts and related money-transmission services, 2012/13-2014/15 (12 months to 31 March)
                                                                                                                    • TV dominates adspend on current accounts
                                                                                                                      • Figure 27: Share of advertising expenditure on current accounts and related money-transmission services, by media type, 2014/15 (12 months to 31 March)
                                                                                                                    • A note on adspend
                                                                                                                    • Competitive Strategies – Product Development

                                                                                                                      • While some continue offering switching incentives….
                                                                                                                        • …others have shifted towards big in-credit current account interest rates
                                                                                                                          • High-street providers look to inspire greater customer loyalty
                                                                                                                            • Barclays: Blue Rewards
                                                                                                                              • Lloyds Bank: Club Lloyds, Everyday Offers and It’s On Us
                                                                                                                                • RBS and NatWest: Cashback Plus loyalty scheme
                                                                                                                                  • New student current account launches
                                                                                                                                    • Promotion of financial education among the younger customer base
                                                                                                                                      • Nationwide: Nationwide Education and The Big Money Movie Pitch
                                                                                                                                        • Lloyds Banking Group: Partnership with Newcastle University on digital banking innovation project
                                                                                                                                          • Halifax: Student bespoke online banking service
                                                                                                                                            • Santander: SmartBank, the new mobile app for students
                                                                                                                                            • Competitive Strategies – Non-traditional Entrants and Channel Evolution

                                                                                                                                              • Increased competition from non-traditional entrants
                                                                                                                                                • High street players continue to develop their digital services…
                                                                                                                                                  • NatWest: Trial for new ‘life events’ mobile apps
                                                                                                                                                    • Halifax: Nymi Band trials
                                                                                                                                                      • Barclays: Twitter payments through Pingit
                                                                                                                                                        • Barclays: App available through AppleWatch
                                                                                                                                                          • Barclays: Cheque imaging service
                                                                                                                                                            • Lloyds Banking Group: Electronic identification
                                                                                                                                                              • RBS/NatWest: Fingerprint login
                                                                                                                                                                • …as well as their multi-channel capabilities
                                                                                                                                                                  • TSB invests £250m in ‘bricks and clicks’
                                                                                                                                                                    • TSB and RBS: New branch design
                                                                                                                                                                      • RBS/NatWest: Bank holiday opening trial
                                                                                                                                                                        • Lloyds Bank: Online appointment booking system
                                                                                                                                                                          • Barclays: Video Banking
                                                                                                                                                                            • Nationwide NOW
                                                                                                                                                                              • Barclays and others look to their customers with disabilities
                                                                                                                                                                              • Brand Research

                                                                                                                                                                                • What you need to know
                                                                                                                                                                                  • Brand map
                                                                                                                                                                                    • Figure 28: Attitudes towards and usage of selected brands, May 2015
                                                                                                                                                                                  • Key brand metrics
                                                                                                                                                                                    • Figure 29: Key metrics for selected brands, May 2015
                                                                                                                                                                                  • Brand attitudes: Co-operative Bank maintains socially aware reputation
                                                                                                                                                                                    • Figure 30: Attitudes, by brand, May 2015
                                                                                                                                                                                  • Brand personality: Santander and Virgin Money use upbeat associations to boost standout
                                                                                                                                                                                    • Figure 31: Brand personality – Macro image, May 2015
                                                                                                                                                                                  • Negative press around HSBC creates more damaging connotations
                                                                                                                                                                                    • Figure 32: Brand personality – Micro image, May 2015
                                                                                                                                                                                  • Brand analysis
                                                                                                                                                                                    • Nationwide and First Direct most likely to enthuse customers
                                                                                                                                                                                      • Halifax remains most used brand, while Tesco Bank shows most potential
                                                                                                                                                                                        • Virgin Money and Santander use more vibrant brand images to stand out
                                                                                                                                                                                          • HSBC joins Barclays and Co-operative Bank towards misleading and irresponsible side of the market
                                                                                                                                                                                            • NatWest, Lloyds Bank and TSB occupy centre ground
                                                                                                                                                                                              • Clydesdale Bank, Metro Bank and Yorkshire Building Society’s lower usage results in a weaker brand image
                                                                                                                                                                                              • The Consumer – What You Need to Know

                                                                                                                                                                                                • Almost every adult in the UK has a current account
                                                                                                                                                                                                  • Nearly one third of consumers have multiple accounts
                                                                                                                                                                                                    • One in five adults own a premium or packaged current account
                                                                                                                                                                                                      • Higher earners are more likely to own premium or packaged current accounts
                                                                                                                                                                                                        • No fees are the most important deciding factor for consumers
                                                                                                                                                                                                          • Convenient branches are head-to-head with easy-to-use websites
                                                                                                                                                                                                            • Mobile apps are considered more important by Millennials
                                                                                                                                                                                                              • Financial situation influences desirable features
                                                                                                                                                                                                                • Current accounts which just do the basics are the desired product for the majority
                                                                                                                                                                                                                  • Customisation may be the key to success
                                                                                                                                                                                                                    • 82% of current account holders are satisfied with their main provider…
                                                                                                                                                                                                                      • …rising to 90% among consumers with a premium or packaged current account
                                                                                                                                                                                                                        • Nationwide and Santander customers are the most satisfied with their provider
                                                                                                                                                                                                                          • More than three fifths do not distinguish between current account providers
                                                                                                                                                                                                                            • Nearly half of current account holders have never switched their main provider
                                                                                                                                                                                                                              • Multiple account holders and paid-for current account holders are more likely to have switched
                                                                                                                                                                                                                                • Majority of current account holders do not consider one-off cash incentives as being worthwhile
                                                                                                                                                                                                                                  • Just over 70% of current account holders are aware of the CASS
                                                                                                                                                                                                                                    • More than four in five CASS users are satisfied with the service
                                                                                                                                                                                                                                      • 58% of adults would be interested in a current account comparison tool…
                                                                                                                                                                                                                                        • …but only just over one quarter would be happy to share their personal data for personalised information on deals
                                                                                                                                                                                                                                        • Current Account Ownership

                                                                                                                                                                                                                                          • Almost every adult in the UK has a current account
                                                                                                                                                                                                                                            • Figure 33: Number of current accounts owned, May 2015
                                                                                                                                                                                                                                          • Nearly one third of consumers have multiple accounts
                                                                                                                                                                                                                                            • Higher earners are more likely to have multiple current accounts
                                                                                                                                                                                                                                              • Figure 34: Number of current accounts held, by gross annual household income, May 2015
                                                                                                                                                                                                                                          • Ownership by Type of Current Account

                                                                                                                                                                                                                                            • One in five adults owns a premium or packaged current account
                                                                                                                                                                                                                                              • Figure 35: Type of current account held, May 2014 and 2015
                                                                                                                                                                                                                                            • Only 13% of current account holders own more than one type of current account
                                                                                                                                                                                                                                              • Figure 36: Number of type of current accounts held, May 2015
                                                                                                                                                                                                                                              • Figure 37: Type of current account held, by number of types owned, May 2015
                                                                                                                                                                                                                                            • Higher earners are more likely to own premium or packaged current accounts
                                                                                                                                                                                                                                              • Figure 38: Type of current account held, by gross annual household income, May 2015
                                                                                                                                                                                                                                            • Premium or packaged current account holders are more likely to be Santander customers
                                                                                                                                                                                                                                              • Figure 39: Main current account provider, by type of current account owned, May 2015
                                                                                                                                                                                                                                          • Influential Factors when Choosing a Current Account

                                                                                                                                                                                                                                            • No fees are the most important deciding factor for consumers
                                                                                                                                                                                                                                              • Figure 40: Influential factors when choosing a new current account, by rank, May 2015
                                                                                                                                                                                                                                            • Convenient branches are head-to-head with easy-to-use websites
                                                                                                                                                                                                                                              • Mobile apps are considered more important by Millennials
                                                                                                                                                                                                                                                • Figure 41: Any response to ‘Easy-to-use mobile app’, by age, May 2015
                                                                                                                                                                                                                                              • Financial situation influences desirable features
                                                                                                                                                                                                                                                • Figure 42: Influential factors when choosing a new current account, by current financial situation, May 2015
                                                                                                                                                                                                                                            • Attitudes towards Paid-for Packaged Current Accounts

                                                                                                                                                                                                                                              • Nearly three quarters of consumers are not prepared to pay for a current account
                                                                                                                                                                                                                                                • Figure 43: Attitudes towards packaged and paid-for current accounts, May 2015
                                                                                                                                                                                                                                              • Current accounts which just do the basics are the desired product for the majority
                                                                                                                                                                                                                                                • Customisation may be the key to success
                                                                                                                                                                                                                                                  • Just under two thirds of current account holders find additional offers irrelevant to them
                                                                                                                                                                                                                                                  • Satisfaction with Current Account Providers

                                                                                                                                                                                                                                                    • 82% of current account holders are satisfied with their main provider…
                                                                                                                                                                                                                                                      • Figure 44: Satisfaction with main current account providers, May 2015
                                                                                                                                                                                                                                                    • …rising to 90% among consumers with a premium or packaged current account
                                                                                                                                                                                                                                                      • Figure 45: Satisfaction with main current account provider, by main current account type owned, May 2015
                                                                                                                                                                                                                                                    • Nationwide and Santander customers are the most satisfied with their provider
                                                                                                                                                                                                                                                      • Figure 46: Satisfaction with main current account provider, by main current account provider, May 2015
                                                                                                                                                                                                                                                    • More than three fifths do not distinguish between current account providers
                                                                                                                                                                                                                                                      • Figure 47: Attitudes towards current account providers, May 2015
                                                                                                                                                                                                                                                  • Current Account Switching Activity

                                                                                                                                                                                                                                                    • Nearly half of current account holders have never switched their main provider
                                                                                                                                                                                                                                                      • Figure 48: Current account switching activity, May 2015
                                                                                                                                                                                                                                                    • Multiple account holders are more likely to have switched…
                                                                                                                                                                                                                                                      • Figure 49: Current account switching activity, by number of current accounts held, May 2015
                                                                                                                                                                                                                                                    • …as are paid-for premium or packaged current account holders
                                                                                                                                                                                                                                                      • Figure 50: Current account switching activity, by current account ownership, May 2015
                                                                                                                                                                                                                                                    • Santander, Nationwide and Halifax customers are more likely to have switched
                                                                                                                                                                                                                                                      • Figure 51: Current account switching activity, by main current account provider, May 2015
                                                                                                                                                                                                                                                    • Majority of current account holders do not consider one-off cash incentives as being worthwhile
                                                                                                                                                                                                                                                      • Figure 52: Attitudes towards introductory cash incentives, May 2015
                                                                                                                                                                                                                                                  • Awareness and Use of the CASS

                                                                                                                                                                                                                                                    • Just over 70% of current account holders are aware of the CASS
                                                                                                                                                                                                                                                      • Figure 53: Awareness and use of the CASS, May 2015
                                                                                                                                                                                                                                                    • Awareness is greater among the older age groups
                                                                                                                                                                                                                                                      • Figure 54: Awareness and use of the CASS, by age, May 2015
                                                                                                                                                                                                                                                    • Higher earners more likely to have used CASS
                                                                                                                                                                                                                                                      • Figure 55: ‘I had heard of this service before today, and I have already used it’, by gross annual household income, May 2015
                                                                                                                                                                                                                                                  • Satisfaction with CASS

                                                                                                                                                                                                                                                    • More than four in five CASS users are satisfied with the service
                                                                                                                                                                                                                                                      • Figure 56: Satisfaction with CASS, May 2015
                                                                                                                                                                                                                                                  • Attitudes towards Current Account Comparison Tools

                                                                                                                                                                                                                                                    • 58% of adults would be interested in a current account comparison tool…
                                                                                                                                                                                                                                                      • Figure 57: Attitudes towards current account comparison tools, May 2015
                                                                                                                                                                                                                                                    • …but only just over one quarter would be happy to share their personal data for personalised information on deals
                                                                                                                                                                                                                                                      • Figure 58: Attitudes towards current account comparison tools and deals, by generation, May 2015

                                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                                  To learn more about the companies covered in this report please contact us.

                                                                                                                                                                                                                                                  Current Accounts - UK - July 2015

                                                                                                                                                                                                                                                  £1,995.00 (Excl.Tax)