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Current Accounts - UK - July 2017

“Regulatory measures aim to increase competition in the market, ensuring established providers will have to work harder to attract and retain customers. Open Banking should make it easier for people to compare and identify products that are better suited to their needs. However, the biggest challenge will be encouraging people to review their arrangements in the first place.”
– Jessica Galletley, Financial Services Analyst

This report examines the following:

  • Changes to current account terms prompt people to review their arrangements
  • Consumers most likely to share data with their main bank
  • Open Banking will put pressure on providers to offer competitive overdraft charges

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Number of current accounts rises by 2.1%
              • Figure 1: Estimated number of current accounts, 2014-17
            • Latest switching figures suggest a slowdown
              • Figure 2: Number of switches per month since launch of CASS, September 2013-May 2017
            • ‘Making banks work harder for you’
              • Companies and brands
                • Lloyds Banking Group has largest share of the market
                  • Figure 3: Current account providers (banking groups), by share of main and other current account market, May 2017
                • Challengers lead the way in increasing transparency around overdrafts
                  • Advertising spend falls by 35%
                    • Figure 4: Total above-the line, online display and direct mail advertising expenditure on current accounts and other related money-transmission services, 2012/13-2016/17
                  • Nationwide continues to be seen as most trusted brand
                    • Figure 5: Attitudes towards and usage of selected brands, May 2017
                  • The consumer
                    • Most hold a standard current account
                      • Figure 6: Type of current account held, May 2017
                    • Fee changes most likely to prompt people to review their arrangements
                      • Figure 7: Prompts to review current account arrangements, May 2017
                    • One in four uses their overdraft regularly
                      • Figure 8: Agreement with the statement ‘I use a current account overdraft regularly (ie each month)’, May 2017
                    • Convenience drives cross-selling among current account holders
                      • Figure 9: Attitudes towards your main current account provider, May 2017
                    • Main banking relationships likely to remain intact with Open Banking
                      • Figure 10: Willingness towards sharing financial data with different providers, May 2017
                    • What we think
                    • Issues and Insights

                      • Changes to current account terms prompt people to review their arrangements
                        • The facts
                          • The implications
                            • Consumers most likely to share data with their main bank
                              • The facts
                                • The implications
                                  • Open Banking will put pressure on providers to offer competitive overdraft charges
                                    • The facts
                                      • The implications
                                      • The Market – What You Need to Know

                                        • Number of current accounts rises by 2.1%
                                          • Online banking is the most frequently used banking channel
                                            • Latest switching figures suggest a slowdown
                                              • ‘Making banks work harder for you’
                                              • Market Size

                                                • Current account market grows with population
                                                  • Figure 11: Estimated number of current accounts, 2014-17
                                              • Channels to Market

                                                • Online banking is the most frequently used banking channel
                                                  • Figure 12: Use of different retail banking channels, July 2016
                                                • Branches remain important despite declining regular use
                                                  • Online banking has increased customer engagement
                                                      • Figure 13: Number of customer instructions for personal banking, 2001-16
                                                  • Market Drivers

                                                    • UK population continues to rise
                                                      • Figure 14: United Kingdom population mid-year estimate, 2008-16
                                                    • Latest switching figures suggest a slowdown
                                                      • Figure 15: Number of switches per month since launch of CASS, September 2013-May 2017
                                                    • Overdraft rates continue to rise despite base rate remaining at record low
                                                      • Figure 16: Monthly interest rate of UK monetary financial institutions sterling overdraft for households – Not seasonally adjusted, January 2012-April 2017
                                                    • Current account complaints fall by 35%
                                                      • Figure 17: Number of new complaints about current accounts to the FOS, 2013/14-2016/17
                                                  • Regulatory and Legislative Changes

                                                    • ‘Making banks work harder for you’
                                                      • Open Banking
                                                        • Service quality statistics
                                                          • Account-related ‘prompts’
                                                            • Unarranged overdraft charges
                                                              • CMA measures build on PSD2
                                                                • Payment Account Regulations take effect
                                                                  • Bacs Direct Debit consultation
                                                                    • New package account rules raise standards
                                                                    • Companies and Brands – What You Need to Know

                                                                      • Lloyds Banking Group has largest share of the market
                                                                        • Challengers lead the way in increasing transparency around overdrafts
                                                                          • Advertising spend falls by 35%
                                                                            • Nationwide continues to be seen as the most trusted brand
                                                                            • Market Share

                                                                              • Lloyds Banking Group has largest share of the market
                                                                                • Figure 18: Current account providers (banking groups), by share of main and other current account market, May 2017
                                                                              • Barclays is the biggest individual provider
                                                                                • Figure 19: Current account providers, by share of main and other current account market, May 2017
                                                                              • Santander sees switching numbers drop significantly
                                                                                  • Figure 20: Net gains of full account switches completed using CASS between 2015 and 2016.
                                                                              • Competitive Strategies

                                                                                • Competitive context
                                                                                  • Responding to regulatory changes
                                                                                    • Increasing transparency around overdrafts…
                                                                                      • …with entrants taking a different approach
                                                                                        • Reacting to the market environment
                                                                                          • Cutting rewards and benefits...
                                                                                            • …but challengers buck the trend
                                                                                              • Switching deals remain prominent among challengers
                                                                                                • The competitive environment
                                                                                                  • Partnering with fintechs
                                                                                                    • Demand for personalisation drives niche market propositions
                                                                                                      • Ethical banking
                                                                                                        • Students remain a key target market
                                                                                                          • Money management
                                                                                                            • Open Banking clouds the future for Atom Bank
                                                                                                              • Recent and pending launches
                                                                                                              • Advertising and Marketing Activity

                                                                                                                • Spend falls by 35%
                                                                                                                  • Figure 21: Total above-the-line, online display and direct mail advertising expenditure on current accounts and other related money-transmission services, 2012/13-2016/17
                                                                                                                • Nationwide maintains spending levels despite widespread cuts
                                                                                                                  • Figure 22: Top ten advertisers of current accounts and related money-transmission services, 2014/15-2016/17
                                                                                                                • Added-value accounts see biggest fall in advertising
                                                                                                                  • Figure 23: Advertising expenditure on current accounts and other related money-transmission services, 2014/15-2016/17
                                                                                                                • TV advertising accounts for three fifths of all spend
                                                                                                                  • Figure 24: Share of advertising expenditure on current accounts and related money-transmission services, by media type, 2016/17 (12 months to 30 April)
                                                                                                                • Nielsen Ad Intel coverage
                                                                                                                • Brand Research

                                                                                                                    • What you need to know
                                                                                                                      • Brand map
                                                                                                                        • Figure 25: Attitudes towards and usage of selected banking brands, May 2017
                                                                                                                      • Key brand metrics
                                                                                                                        • Figure 26: Key metrics for selected banking brands, May 2017
                                                                                                                      • Brand attitudes: Metro Bank seen as offering something different
                                                                                                                        • Figure 27: Attitudes, by brand, May 2017
                                                                                                                      • Brand personality: Co-op struggling despite ethical association
                                                                                                                        • Figure 28: Brand personality – Macro image, May 2017
                                                                                                                      • HSBC seen as irresponsible and only caring about profits
                                                                                                                        • Figure 29: Brand personality – Micro image, May 2017
                                                                                                                      • Brand analysis
                                                                                                                        • High-street banks are seen as accessible and reassuring
                                                                                                                          • Nationwide wins on service
                                                                                                                            • Metro Bank and First Direct stand out as being progressive
                                                                                                                              • Tesco brand bounces back from cyber attack
                                                                                                                                • Co-operative bank is becoming tired
                                                                                                                                • The Consumer – What You Need to Know

                                                                                                                                  • Most hold a standard current account
                                                                                                                                    • Fee changes most likely to prompt people to review their arrangements
                                                                                                                                      • One in four uses their overdraft regularly
                                                                                                                                        • Main banking relationships likely to remain intact with Open Banking
                                                                                                                                        • Current Account Ownership

                                                                                                                                          • Majority own a single current account
                                                                                                                                            • Figure 30: Number of current accounts owned, 2013-17
                                                                                                                                          • A quarter have a joint account
                                                                                                                                              • Figure 31: Current accounts held jointly with someone else, May 2017
                                                                                                                                          • Ownership by Type of Current Account

                                                                                                                                            • Most hold a standard current account
                                                                                                                                              • Figure 32: Type of current account held, May 2017
                                                                                                                                            • Reward accounts grow in popularity
                                                                                                                                              • Equal split between packaged and reward accounts
                                                                                                                                                • Figure 33: Types of fee-paying/paid for account, May 2017
                                                                                                                                            • Prompts to Review Current Account Arrangements

                                                                                                                                              • Loyalty means people are likely to forgive account changes
                                                                                                                                                  • Figure 34: Prompts to review current account arrangements, May 2017
                                                                                                                                                • Fee changes most likely to prompt people to review their arrangements
                                                                                                                                                  • Less sensitivity to changes in rewards or discounts
                                                                                                                                                    • Multiple account holders more sensitive to changes
                                                                                                                                                      • Figure 35: Prompts to review current account arrangements, by number of current accounts, May 2017
                                                                                                                                                    • Young men are prime targets for current account advertising
                                                                                                                                                      • Figure 36: Prompts to review current account arrangements – ‘Seeing an advert for a more competitive product’, by age and gender, May 2017
                                                                                                                                                    • Nearly a third would be prompted by three or more reasons
                                                                                                                                                      • Figure 37: Repertoire of prompts to review current account arrangements, May 2017
                                                                                                                                                  • Use of and Attitudes towards Overdrafts

                                                                                                                                                    • One in four uses their overdraft regularly
                                                                                                                                                        • Figure 38: Agreement with the statement ‘I use a current account overdraft regularly (ie each month)’, May 2017
                                                                                                                                                      • Overdraft usage varies by provider
                                                                                                                                                        • Figure 39: Agreement with the statement ‘I use a current account overdraft regularly (ie each month)’, by main current account provider, May 2017
                                                                                                                                                      • 71% know their current account overdraft charges
                                                                                                                                                        • Four in five users think competitive charges are important
                                                                                                                                                          • Figure 40: Usage and attitudes towards current accounts, May 2017
                                                                                                                                                      • Attitudes towards Main Banking Relationship

                                                                                                                                                        • Convenience drives cross-selling among current account holders
                                                                                                                                                            • Figure 41: Attitudes towards your main current account provider, May 2017
                                                                                                                                                          • Two-thirds trust their bank over others
                                                                                                                                                            • Difficulty finding suitable products mean people turn to their bank
                                                                                                                                                              • Figure 42: Agreement with the statement – ‘I find it difficult to work out which banking products are most suitable for my needs’, by age, May 2017
                                                                                                                                                            • Younger parents more likely to go straight to their main bank
                                                                                                                                                              • Figure 43: Attitudes towards current accounts – CHAID – Tree output, May 2017
                                                                                                                                                            • Nationwide and HSBC customers are most likely to turn to their bank as first port of call
                                                                                                                                                              • Figure 44: Attitudes towards your main current account provider – All answering ‘Yes’, by main current account provider, May 2017
                                                                                                                                                          • Attitudes towards Data-sharing

                                                                                                                                                            • Three in four are happy to share their data with their main bank…
                                                                                                                                                              • … but one in five is concerned
                                                                                                                                                                • Figure 45: Willingness towards sharing financial data with different providers, May 2017
                                                                                                                                                              • New banks less trusted than other banks
                                                                                                                                                                • PCWs best placed for data-sharing
                                                                                                                                                                  • Millennials equally likely to share with a tech firm as a new bank
                                                                                                                                                                      • Figure 46: Willingness towards sharing financial data with different providers, May 2017
                                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                      • Abbreviations
                                                                                                                                                                        • Consumer research methodology
                                                                                                                                                                          • CHAID Methodology

                                                                                                                                                                          Current Accounts - UK - July 2017

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