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Loyalty in Financial Services - UK - February 2016

“Loyalty is a confusing concept for consumers. There is indecision as to how to best measure loyalty and how it should be rewarded. This causes challenges for providers as it is difficult for them to devise loyalty strategies which will be popular with customers.”

– Deborah Osguthorpe, Head of UK Financial Services Research

This report looks at the following issues:

  • Shopping around is a valued activity, but clear and tangible benefits are needed to make consumers switch
  • Consumers will embrace online service, but the bonds with brands will weaken
  • Consumers are confused about loyalty

Financial services companies have a poor reputation for rewarding their customers’ loyalty in comparison to other industries. This is, in part, linked to the lack of trust between consumers and finance providers as a result of the numerous malpractice and mis-selling scandals over the years.

The nature of certain financial services markets also affects the perception of loyalty in consumer finance. For example, new customer offers and bonuses such as those offered by current account, credit card and savings accounts providers can suggest that firms place a higher value on new customers than retaining loyal ones. At the same time, widespread use of tools such as price comparison websites makes consumers more likely to switch provider rather than show loyalty to a particular brand.

While consumers are showing less loyalty to brands, they still feel that product providers should show loyalty to them. Providers face a challenge in working out how to respond to changing consumer attitudes towards loyalty. Some companies have moved away from new customer benefits and incentives, instead choosing to adopt a more equal and consistent approach among their customer base. Others have sought to develop more profitable and loyal customer relationships by incentivising people to take out multiple products with an existing provider. The increased role of online interaction between consumers and providers, which tends to create less personal and deep-rooted customer relationships, is another growing challenge.

This report looks at the role of loyalty in financial services and consumer attitudes towards it. Mintel’s exclusive consumer research looks at how perceptions of rewarding loyalty differ between various industries, both in and outside of financial services. The report also looks at customer switching activity in various financial markets, before looking at the impact of online services on loyalty and consumer attitudes towards them. Finally, general consumer attitudes towards loyalty in financial services are examined.

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • Financial services companies have poor reputations for rewarding loyalty
          • Figure 1: Consumer perceptions of how well different firms reward loyalty, December 2015
        • Clear prompts and benefits are key to making people switch
          • Figure 2: Switching activity of financial services product holders, December 2015
        • Most consumers are ready to accept online-only services
          • Figure 3: Likelihood to switch provider if existing provider moved services online, December 2015
        • Face-to-face interaction creates stronger relationships than online channels
          • Figure 4: Attitudes towards loyalty and online services, December 2015
        • Shopping around is expected, but consumers are unsure how providers should respond to it
          • Figure 5: Agreement with attitudes towards loyalty in financial services, December 2015
        • Loyalty is a confusing concept for consumers to measure
          • Figure 6: Agreement with attitudes towards loyalty in financial services, December 2015
        • What we think
        • Issues and Insights

          • Shopping around is a valued activity, but clear and tangible benefits are needed to make consumers switch
            • The facts
              • The implications
                • Consumers will embrace online service, but the bonds with brands will weaken
                  • The facts
                    • The implications
                      • Consumers are confused about loyalty
                        • The facts
                          • The implications
                          • The Consumer – What You Need to Know

                            • Financial services companies have poor reputations for rewarding loyalty
                              • There must be a meaningful benefit to make people switch provider
                                • Most consumers are ready to accept online-only services
                                  • Face-to-face interaction creates stronger relationships than online channels
                                    • Shopping around is expected, but consumers are unsure how providers should respond to it
                                      • Loyalty is a confusing concept for consumers to measure
                                      • Loyalty across Different Industries

                                        • Financial services are seen as poor at rewarding customer loyalty
                                          • Insurers have the worst reputation for rewarding loyalty
                                            • Figure 7: Consumer perceptions of how well different firms reward loyalty, December 2015
                                          • There is little perceived difference between banks and building societies
                                            • Figure 8: Consumer perceptions of how well banks and building societies reward loyalty, by age, December 2015
                                          • Credit card companies perceived as failing those in difficulty
                                            • Figure 9: Consumer perceptions of how well credit card companies reward loyalty, by current financial situation, December 2015
                                        • Switching Activity

                                          • 43% of current account holders have never switched provider
                                            • Figure 10: Switching activity of financial services product holders, December 2015
                                          • Prompts are key to switching
                                            • Could savers be missing out?
                                              • There must be a material incentive to switch
                                                  • Figure 11: Switching activity of financial services product holders, by perception of how well providers reward loyalty, December 2015
                                              • Influence of Online Services

                                                • Most consumers would accept a switch to mostly online services
                                                  • Figure 12: Likelihood to switch provider if existing provider moved services online, December 2015
                                                • Older account holders are more likely to stay after an online transition
                                                  • Figure 13: Likelihood to switch current account if existing provider moved services online, by age, December 2015
                                                • Recent switchers are much more likely to change provider
                                                  • Figure 14: Percentage of product owners who would switch provider if existing provider moved services online, by time since they last switched their main product, December 2015
                                                • 18% would switch if documents were online only
                                                  • Figure 15: Choice of services which would make consumers switch providers if they were made online only, December 2015
                                              • Attitudes towards Loyalty and Online Services

                                                • Social media yet to help in building relationships with brands…
                                                  • Figure 16: Attitudes towards loyalty and online services, December 2015
                                                • …but younger consumers are more receptive
                                                  • Figure 17: Agreement with the statement “It is easier to build a relationship with a company that has a strong social media presence”, by age, December 2015
                                                • Online interaction creates more fluid relationships
                                                  • Providers must maintain a human element to convince the majority
                                                  • Attitudes towards Loyalty in Financial Services

                                                    • Most consumers believe people should regularly compare products…
                                                      • Figure 18: Agreement with attitudes towards loyalty in financial services, December 2015
                                                    • …but are split on how this should affect the way brands treat them
                                                      • A perception persists that new customers get the best deals
                                                      • Consumer Understanding of Loyalty

                                                        • Loyalty is not a clear-cut concept
                                                            • Figure 19: Agreement with attitudes towards loyalty in financial services, December 2015
                                                          • Service is important, but more than price?
                                                          • Appendix – Data Sources, Abbreviations and Supporting Information

                                                              • Abbreviations
                                                                • Consumer research methodology

                                                                Companies Covered

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

                                                                Loyalty in Financial Services - UK - February 2016

                                                                £1,995.00 (Excl.Tax)