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Current Accounts - UK - July 2016

“CASS switching levels reached a peak high in March 2016, indicating that competition in the current account market has improved. The growth in the proportion of new reward account openings in recent years shows that people now want more from a current account. The appetite for this type of account shows that there are opportunities to develop fee-paying accounts as long as the benefits are meaningful and relevant to key target groups. Attitudes towards fee-paying accounts appear to be softening to some extent, although the majority remain against the idea of paying for a current account.”

– Samantha Phillips, Financial Services Analyst

This report will cover the following areas:

  • Parents of under-16s are a key target for customisation
  • Lifestyle benefits have the potential to differentiate
  • The online and mobile-only concept for banking is now more accepted than not

This Report examines how the current account market is evolving in light of these changes. It provides an overview of the size and composition of the market and reviews competitive strategies, including recent product developments in the market. Mintel’s exclusively commissioned research looks at current account ownership, consumer attitudes towards providers, current account switching activity, account tenure, and consumer attitudes towards personalised comparison services.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Number of current accounts continues to rise
            • Figure 1: Estimated number of current accounts, 2014-16
          • Growth in UK population drives increase in current account ownership
            • Large margins on overdraft lending sustained in 2015
              • Current account switching reaches peak high in 2016
                • Figure 2: Number of switches per month since launch of CASS, September 2013-April 2016
              • CMA publishes findings of Retail Banking Market Investigation
                • Companies and brands
                  • Lloyds Banking Group is the largest current account provider in the UK
                    • Figure 3: Current account providers, by share of main and other current account market, May 2016
                  • Santander and Halifax continue to be biggest winners of CASS
                    • Competition heats up in the current accounts market
                      • Nationwide is most highly recommended and trusted brand
                        • Figure 4: Attitudes towards and usage of selected financial services brands, May 2016
                      • The consumer
                        • Current account ownership is near universal
                          • Figure 5: Number of current accounts owned, May 2016
                        • One in seven has a fee-paying/paid for account
                          • More than a third have switched their main current account provider
                            • Figure 6: Current account switching activity, May 2016
                          • Half of population have been with same provider for more than a decade
                            • Figure 7: Current account tenure, May 2016
                          • A better interest rate is the most persuasive incentive to switch
                            • Figure 8: Influential factors when switching current account provider, May 2016
                          • Two in five would be interested in a personalised account comparison service
                            • 83% are happy with their existing current account provider
                              • Figure 9: Attitudes towards current account providers, May 2016
                            • Consumers lack understanding of charges applied to current accounts
                              • Figure 10: Attitudes towards fees and charges
                            • What we think
                            • Issues and Insights

                              • Parents of under-16s are a key target for customisation
                                • The facts
                                  • The implications
                                    • Lifestyle benefits have the potential to differentiate
                                      • The facts
                                        • The implications
                                          • The online and mobile-only concept for banking is now more accepted than not
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • Number of current accounts continues to rise
                                                  • UK population continues to escalate in 2015
                                                    • Large margins on overdraft lending sustained in 2015
                                                      • Current account switching reaches peak high in 2016
                                                        • More than half show acceptance for digital-only banking services
                                                          • CMA publishes findings of Retail Banking Market Investigation
                                                          • Market Size

                                                            • Number of current accounts continues to rise
                                                              • Figure 11: Estimated number of current accounts, 2014-16
                                                          • Channels to Market

                                                            • Almost 50/50 split between online and in-person for account opening
                                                                • Figure 12: Method used to arrange current accounts in the last three years, April 2015
                                                              • Consultations with branch staff are still valued by many
                                                                  • Figure 13: Information sources used to research current accounts before purchase, April 2015
                                                                • More than half show acceptance for digital-only banking services
                                                                    • Figure 14: Consumer appetite for online and mobile-only banking, May 2016
                                                                • Market Drivers

                                                                  • UK population continues to escalate in 2015
                                                                    • Figure 15: United Kingdom population mid-year estimate, 2008-15
                                                                  • Large margins on overdraft lending sustained in 2015
                                                                      • Figure 16: Monthly interest rate of UK monetary financial institutions sterling overdraft for households – Not seasonally adjusted, January 2010-March 2016
                                                                    • Current account switching reaches peak high in 2016
                                                                      • Figure 17: Number of switches per month since launch of CASS, September 2013-April 2016
                                                                    • Complaints about current accounts continue to mount
                                                                        • Figure 18: Number of new complaints about current accounts to the FOS, 2013/14-2015/16
                                                                    • Regulatory and Legislative Environment

                                                                        • Competition and Markets Authority (CMA) publishes findings of Retail Banking Market Investigation
                                                                          • Open Application Programming Interface (API) plans
                                                                            • Interest earnt on current account balances comes under the new PSA
                                                                              • European Commission launches consultation on retail financial services
                                                                                • The EU’s new Payment Services Directive (PSD2)
                                                                                  • Announcement of a Joint Fraud Taskforce in February 2016
                                                                                    • Online fraud strategies considered
                                                                                      • New bereavement code of practice
                                                                                        • EU-wide legislation on cybersecurity
                                                                                        • Companies and Brands – What You Need to Know

                                                                                          • Lloyds Banking Group is the largest current account provider in the UK
                                                                                            • Santander and Halifax continue to be biggest winners of CASS
                                                                                              • Fintech challengers
                                                                                                • Nationwide is most highly recommended and trusted brand
                                                                                                • Market Share

                                                                                                  • Lloyds Banking Group is the largest current account provider in the UK
                                                                                                    • Figure 19: Current account providers, by share of main and other current account market, May 2016
                                                                                                  • Major banking groups retain dominance despite slight decline in share
                                                                                                    • Newer entrants more likely to have a bigger market share of secondary current accounts
                                                                                                      • Figure 20: Current account providers, by share of main and other current account market, May 2016
                                                                                                    • Santander and Halifax continue to be biggest winners of CASS
                                                                                                      • Figure 21: Net gains of full account switches completed using CASS between Q4 2014 and Q3 2015 (1 October 2014-30 September 2015)
                                                                                                  • Competitive Strategies

                                                                                                    • Competition heats up in the current accounts market
                                                                                                      • Switching deals
                                                                                                        • Reward schemes
                                                                                                          • Cash incentives
                                                                                                            • High interest rates on balances in-credit
                                                                                                              • Greater transparency and simplified payment structures
                                                                                                                • Overdraft fees
                                                                                                                  • International payments
                                                                                                                    • Fee hikes
                                                                                                                      • Metro Bank increases international card charges
                                                                                                                        • Santander hikes everyday banking charges for popular 123 Account
                                                                                                                          • Simplifying package deals
                                                                                                                            • Midata Winners
                                                                                                                              • Smaller banks react to CMA investigation
                                                                                                                              • Launch Activity and Innovation

                                                                                                                                • Nationwide launches FlexBasic current account
                                                                                                                                  • Mobile developments
                                                                                                                                    • Mobile banking improvements
                                                                                                                                      • App-based accounts
                                                                                                                                        • Cheque pay-in technology
                                                                                                                                          • Demand for greater transparency
                                                                                                                                            • Tesco Bank shows customers ‘lost interest’
                                                                                                                                              • Lloyds Bank develops a new way to compare current accounts
                                                                                                                                                • Fintech challengers
                                                                                                                                                  • Blockchain and cryptocurrencies
                                                                                                                                                  • Advertising and Marketing Activity

                                                                                                                                                    • Advertising spend on current accounts decreases in 2015/16
                                                                                                                                                      • Figure 22: Total above-the line, online display and direct mail advertising expenditure on current accounts and other related money-transmission services, 2011/12 - 2015/16
                                                                                                                                                    • Top ten advertisers account for vast majority of spend
                                                                                                                                                      • Figure 23: Top ten advertisers of current accounts and related money-transmission services, 2013/14-2015/16
                                                                                                                                                    • Advertising expenditure shifts towards brand building for current accounts
                                                                                                                                                      • Figure 24: Advertising expenditure on current accounts and other related money-transmission services, 2013/14-2015/16
                                                                                                                                                    • TV is dominant channel for advertising expenditure on current accounts
                                                                                                                                                      • Figure 25: Share of advertising expenditure on current accounts and related money-transmission services, by media type, 2015/16 (12 months to 30 April)
                                                                                                                                                    • Nielsen Ad Intel coverage
                                                                                                                                                    • Brand Research

                                                                                                                                                        • What you need to know
                                                                                                                                                          • Brand map
                                                                                                                                                            • Figure 26: Attitudes towards and usage of selected financial services brands, May 2016
                                                                                                                                                          • Key brand metrics
                                                                                                                                                            • Figure 27: Key metrics for selected financial services brands, May 2016
                                                                                                                                                          • Brand attitudes: Tesco Bank most associated with rewarding loyalty
                                                                                                                                                            • Figure 28: Attitudes, by financial services brand, May 2016
                                                                                                                                                          • Brand personality: The Co-operative Bank is most likely to be described as tired and boring
                                                                                                                                                            • Figure 29: Brand personality – macro image, May 2016
                                                                                                                                                          • Metro Bank, Virgin Money and First Direct seen as most progressive
                                                                                                                                                            • Figure 30: Brand personality – micro image, May 2016
                                                                                                                                                          • Brand analysis
                                                                                                                                                            • Nationwide is most highly recommended and trusted brand
                                                                                                                                                              • First Direct delivers on customer experience
                                                                                                                                                                • Halifax and Barclays top awareness and usage
                                                                                                                                                                  • Tesco Bank most associated with rewarding loyalty
                                                                                                                                                                    • HSBC and the Co-operative Bank suffer from recent negative press
                                                                                                                                                                    • The Consumer – What You Need to Know

                                                                                                                                                                      • One in seven has a fee-paying/paid for account
                                                                                                                                                                        • More than a third have switched their main current account provider
                                                                                                                                                                          • Half of population have been with same provider for more than a decade
                                                                                                                                                                            • A better interest rate is the most persuasive incentive to switch
                                                                                                                                                                              • Two in five would be interested in a personalised account comparison service
                                                                                                                                                                                • Consumers lack understanding of charges applied to current accounts
                                                                                                                                                                                • Current Account Ownership

                                                                                                                                                                                  • 99% of adult online population have a current account
                                                                                                                                                                                    • Figure 31: Number of current accounts owned, May 2016
                                                                                                                                                                                  • Nearly one third of adults have multiple current accounts
                                                                                                                                                                                    • Higher earners are more likely to own multiple current accounts
                                                                                                                                                                                      • Figure 32: Number of current accounts held, by gross annual household income, May 2016
                                                                                                                                                                                    • 28% of people hold current accounts jointly with someone else
                                                                                                                                                                                      • Figure 33: Current accounts held jointly with someone else, May 2016
                                                                                                                                                                                  • Ownership by Type of Current Account

                                                                                                                                                                                    • One in seven has a fee-paying/paid for account
                                                                                                                                                                                      • Figure 34: Type of current account held, May 2016
                                                                                                                                                                                    • Packaged accounts on a par with reward accounts
                                                                                                                                                                                      • Figure 35: Types of fee-paying/paid for account, May 2016
                                                                                                                                                                                    • Added-value accounts are more popular with higher income earners
                                                                                                                                                                                    • Current Account Switching Activity

                                                                                                                                                                                      • More than a third have switched their main current account provider
                                                                                                                                                                                        • Figure 36: Current account switching activity, May 2016
                                                                                                                                                                                      • Multiple account ownership improves likelihood to switch
                                                                                                                                                                                      • Current Account Tenure and Attitudes towards Switching

                                                                                                                                                                                        • Half of population have been with same provider for more than a decade
                                                                                                                                                                                          • Figure 37: Current account tenure, May 2016
                                                                                                                                                                                        • 43% think switching is not worth the hassle
                                                                                                                                                                                            • Figure 38: Attitudes towards current account switching, May 2016
                                                                                                                                                                                        • Influential Factors when Switching Current Account Provider

                                                                                                                                                                                          • A better interest rate is the most persuasive incentive to switch
                                                                                                                                                                                            • Figure 39: Influential factors when switching current account provider, May 2016
                                                                                                                                                                                          • Cashback on purchases are on par with one-off cash incentives
                                                                                                                                                                                            • Nearly one in five would be influenced by lifestyle benefits
                                                                                                                                                                                            • Attitudes towards Personalised Current Account Comparison Services

                                                                                                                                                                                              • Only one in ten has heard of the Midata scheme
                                                                                                                                                                                                  • Figure 40: Consumer awareness of the Midata scheme, May 2016
                                                                                                                                                                                                • Two in five would be interested in a personalised account comparison service
                                                                                                                                                                                                    • Figure 41: Attitudes towards a personalised current account comparison services, May 2016
                                                                                                                                                                                                  • Majority would be concerned about security of their data
                                                                                                                                                                                                  • Attitudes towards Current Account Providers

                                                                                                                                                                                                    • 83% are happy with their existing current account provider
                                                                                                                                                                                                        • Figure 42: Attitudes towards current account providers, May 2016
                                                                                                                                                                                                      • 68% say current account provider is first port of call for other banking products
                                                                                                                                                                                                      • Attitudes towards Fees and Charges

                                                                                                                                                                                                        • Consumers lack understanding about charges applied to current accounts
                                                                                                                                                                                                            • Figure 43: Attitudes towards fees and charges
                                                                                                                                                                                                          • Opportunity exists to charge set monthly fee in exchange for rewards
                                                                                                                                                                                                            • Parents of under-18s most likely to take advantage of loyalty rewards and overdraft facilities
                                                                                                                                                                                                              • Figure 44: Attitudes to current accounts – CHAID – Table output, May 2016
                                                                                                                                                                                                          • Appendix – CHAID analysis

                                                                                                                                                                                                            • Methodology
                                                                                                                                                                                                              • Figure 45: Attitudes to current accounts– CHAID – Tree output, May 2016
                                                                                                                                                                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                              • Products covered in this Report
                                                                                                                                                                                                                • Abbreviations
                                                                                                                                                                                                                  • Consumer research methodology

                                                                                                                                                                                                                  Companies Covered

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

                                                                                                                                                                                                                  Current Accounts - UK - July 2016

                                                                                                                                                                                                                  £1,995.00 (Excl.Tax)