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Loyalty in Financial Services - UK - September 2012

Some questions answered in the 'Loyalty in Financial Services' report include:

  • Who is most likely to have switched accounts?
  • How cynical are people about banks’ claims to reward loyal customers?
  • Do people think that loyalty has a non-financial payoff?
  • How can financial services firms sidestep the price wars?
  • How can banks give people an excuse to stay put?

In the financial services industry, loyalty is a huge issue. Motor insurance has long struggled to cope with the growing commoditisation of the product, and the expansion of price comparison sites has exacerbated the problem. Other general insurance markets are following suit. A sizeable group of consumers are taking a similar approach to savings products, particularly in the cash ISA market. They keep careful tabs on the best-buy tables and the price comparison sites, and show little hesitation in changing accounts if they can get a better deal elsewhere.

Financial services providers might mutter about ‘rate tarts’, but the truth is that they have played a huge part in fostering this mentality. The focus on new customer acquisition has meant that rather than feel that their loyalty is valued, longstanding customers often feel that they’re being taken for granted. When many deals are only open to new customers, it’s no wonder that 43% of respondents to Mintel’s consumer research feel that ‘if you show loyalty to a financial services firm, they'll only ever take advantage of it’.

This report investigates consumers’ attitudes towards loyalty in financial services. It looks at perceptions of how financial services firms compare with other types of company when it comes to rewarding loyal customers, and how this feeds through into consumer behaviour. Loyalty is compared across a range of financial services products, and among those who have switched, Mintel has attempted to discover what prompted them to move accounts.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Financial services in context
            • Financial services firms are seen as being particularly bad at rewarding loyal customers
              • Figure 1: Consumer perceptions of how well different industries reward their loyal customers, May 2012
            • Some variation across bank brands
              • Nine in ten belong to at least one kind of loyalty scheme
                • Figure 2: Loyalty scheme membership, May 2012
              • Financial account switching
                • A third of people have stuck with their main bank for more than 20 years
                  • Figure 3: Account switching in financial services, May 2012
                • Frequency of switching is highest in the motor insurance market
                  • Figure 4: Financial account switching, May 2012
                • Reasons for switching accounts
                  • Price is the biggest reason for switching in all but the current account market
                    • Figure 5: Reasons for switching financial services account, May 2012
                  • Older and more affluent respondents focus on price
                    • Attitudes towards loyalty in financial services
                      • Worrying levels of negativity among consumers
                        • Figure 6: Attitudes towards the way in which financial services firms reward loyal customers, May 2012
                      • Cynicism again strongest among older respondents
                        • Are people loyal? Or just lazy?
                          • Figure 7: Attitudes towards account switching, May 2012
                        • What we think
                        • Issues in the Market

                            • Who is most likely to have switched accounts?
                              • How cynical are people about banks’ claims to reward loyal customers?
                                • Do people think that loyalty has a non-financial payoff?
                                  • How can financial services firms sidestep the price wars?
                                    • How can banks give people an excuse to stay put?
                                    • Trend Application

                                      • Carnivore, Herbivore...Locavore
                                        • Extend my Brand
                                          • 2015: Brand Intervention
                                          • Financial Services in Context

                                            • Key points
                                              • Loyal customers don’t feel valued by their financial services providers
                                                • Figure 8: Consumer perceptions of how well different industries reward their loyal customers, May 2012
                                              • Does loyalty stem from people, or from prices?
                                                • Building an emotional bond
                                                  • Older people recognise the benefits of local firms
                                                    • Are your perceptions affected by who you bank with?
                                                      • Figure 9: Consumer perceptions of how good banks are at rewarding loyal customers, by respondent’s main bank, May 2012
                                                    • The mutual effect
                                                      • Youthful idealism? Or gratitude for an interest-free overdraft?
                                                        • Graduate accounts: the ultimate in ‘new customer’ offers
                                                        • Loyalty Scheme Membership

                                                          • Key points
                                                            • Supermarkets lead the way…
                                                              • Figure 10: Loyalty scheme membership, May 2012
                                                            • …but some are extremely sceptical
                                                              • Financial services and loyalty schemes
                                                                • The wrong kind of loyalty?
                                                                  • Is loyalty an outdated concept?
                                                                  • Loyalty in the Current Account Market

                                                                    • Key points
                                                                      • Does the average current account really last longer than the average marriage?
                                                                        • Figure 11: Length of time with main bank, May 2012
                                                                      • When is it time to break childhood habits?
                                                                        • Figure 12: Proportion of internet users who have been with their main bank for at least 20 years, by age, May 2012
                                                                      • The student account and customer loyalty
                                                                        • Long-serving Lloyds TSB customers
                                                                          • Figure 13: Main bank, by length of time with main bank, May 2012
                                                                      • Financial Account Switching

                                                                        • Key points
                                                                          • Relatively few people remain loyal to a single provider
                                                                            • Figure 14: Account switching in financial services, May 2012
                                                                          • Loyalty – a function of age, affluence and experience
                                                                            • Car insurance pays the price of commoditisation…
                                                                              • Figure 15: Financial account switching, May 2012
                                                                            • …and cash ISAs are going the same way
                                                                              • The financial crisis and mortgage switching
                                                                                • A hidden benefit to the new market environment?
                                                                                • Reason for Switching Financial Accounts

                                                                                  • Key points
                                                                                    • Current accounts
                                                                                      • Current account switchers stand apart…
                                                                                        • Figure 16: Reasons for switching current account, May 2012
                                                                                      • …highlighting the difficulty of creating competition in the market
                                                                                        • Push, not pull
                                                                                          • Savings accounts and cash ISAs
                                                                                            • Market dynamics promote a switching mentality among savers
                                                                                              • Three fifths move because of better rates elsewhere
                                                                                                  • Figure 17: Reasons for switching savings account/cash ISA, May 2012
                                                                                                • Age and financial health increase the emphasis on price
                                                                                                  • General insurance
                                                                                                    • The logical endpoint for a market devoid of loyalty
                                                                                                      • Focus on price undermines the core benefit of general insurance
                                                                                                          • Figure 18: Reasons for switching car or home insurance, May 2012
                                                                                                        • A more flexible product to build loyalty among younger people?
                                                                                                          • Mortgages
                                                                                                            • Circumstance, or cost?
                                                                                                              • Figure 19: Reasons for switching mortgage, May 2012
                                                                                                            • Credit cards
                                                                                                              • Continued emphasis on price in the credit card market
                                                                                                                • Figure 20: Reasons for switching credit card, May 2012
                                                                                                            • Attitudes Towards Loyalty in Financial Services

                                                                                                              • Key points
                                                                                                                • The rewards go to the new customers...
                                                                                                                  • Figure 21: Attitudes towards the way in which financial services firms reward loyal customers, May 2012
                                                                                                                • …with costs for both provider and customer…
                                                                                                                  • ...and there’s little faith that there’ll be a non-financial reward for loyalty
                                                                                                                    • Cynicism again strongest among older respondents
                                                                                                                    • Attitudes towards Account Switching

                                                                                                                      • Key points
                                                                                                                        • The loyalty paradox
                                                                                                                          • Figure 22: Attitudes towards account switching, May 2012
                                                                                                                        • Taking responsibility for your own finances…
                                                                                                                          • …especially when you’ve got the most to gain
                                                                                                                          • Identifying Key Consumer Segments

                                                                                                                            • Key points
                                                                                                                              • Most are cynical – what differs is how they act on that cynicism
                                                                                                                                  • Figure 23: Attitudes towards switching and loyalty, by target groups, May 2012
                                                                                                                                • Who are the Cynics?
                                                                                                                                  • ..And who do they bank with?
                                                                                                                                      • Figure 24: Main bank, by target groups, May 2012
                                                                                                                                  • Key Consumer Segments and Account Switching

                                                                                                                                    • Key points
                                                                                                                                      • If my financial services providers won’t reward my loyalty, why should I stay loyal?
                                                                                                                                        • Figure 25: Account switching in financial services, by target groups, May 2012
                                                                                                                                      • Can you make money from the Cynics?
                                                                                                                                          • Figure 26: Proportion of switchers who had moved their account within the last year, by target groups, May 2012
                                                                                                                                        • The Self-reliant – finding the middle ground
                                                                                                                                        • Key Consumer Segments and Switching Motivation

                                                                                                                                          • Key points
                                                                                                                                            • Cynics even rely on price when moving current accounts
                                                                                                                                                • Figure 27: Reasons for switching current account, by target groups, May 2012
                                                                                                                                              • Selling to the Disengaged and the Disenchanted on service, not price
                                                                                                                                                • How can providers reach people who only switch because of changing personal circumstances?
                                                                                                                                                  • Finding the middle ground between high margins and winning new business
                                                                                                                                                      • Figure 28: Reasons for switching savings account/cash ISA, by target groups, May 2012
                                                                                                                                                      • Figure 29: Reasons for switching car or home insurance, by target groups, May 2012
                                                                                                                                                      • Figure 30: Reasons for switching credit card, by target groups, May 2012
                                                                                                                                                  • Appendix – Financial Services in Context

                                                                                                                                                    • Supermarkets
                                                                                                                                                      • Figure 31: Consumer perceptions of how well supermarkets reward their customers, by demographics, May 2012
                                                                                                                                                    • Local shops
                                                                                                                                                      • Figure 32: Consumer perceptions of how well local shops reward their customers, by demographics, May 2012
                                                                                                                                                    • Airlines
                                                                                                                                                      • Figure 33: Consumer perceptions of how well airlines reward their customers, by demographics, May 2012
                                                                                                                                                    • Coffee shops and restaurants
                                                                                                                                                      • Figure 34: Consumer perceptions of how well coffee shops/restaurants reward their customers, by demographics, May 2012
                                                                                                                                                    • Banks
                                                                                                                                                      • Figure 35: Consumer perceptions of how well banks reward their customers, by demographics, May 2012
                                                                                                                                                    • Credit card companies
                                                                                                                                                      • Figure 36: Consumer perceptions of how well credit card companies reward their customers, by demographics, May 2012
                                                                                                                                                    • Insurers
                                                                                                                                                      • Figure 37: Consumer perceptions of how well insurers reward their customers, by demographics, May 2012
                                                                                                                                                    • Mobile phone companies
                                                                                                                                                      • Figure 38: Consumer perceptions of how well mobile phone companies reward their customers, by demographics, May 2012
                                                                                                                                                    • Pubs
                                                                                                                                                      • Figure 39: Consumer perceptions of how well pubs reward their customers, by demographics, May 2012
                                                                                                                                                    • Travel firms
                                                                                                                                                      • Figure 40: Consumer perceptions of how well travel firms reward their customers, by demographics, May 2012
                                                                                                                                                  • Appendix – Loyalty Scheme Membership

                                                                                                                                                      • Figure 41: Most popular loyalty scheme membership, by demographics, May 2012
                                                                                                                                                      • Figure 42: Next most popular loyalty scheme membership, by demographics, May 2012
                                                                                                                                                      • Figure 43: Other loyalty scheme membership, by demographics, May 2012
                                                                                                                                                  • Appendix – Loyalty in the Current Account Market

                                                                                                                                                      • Figure 44: Length of time with main bank, by demographics, May 2012
                                                                                                                                                  • Appendix – Financial Account Switching

                                                                                                                                                      • Figure 45: Most popular account switching in financial services, by demographics, May 2012
                                                                                                                                                      • Figure 46: Next most popular account switching in financial services, by demographics, May 2012
                                                                                                                                                  • Appendix – Reason for Switching Financial Accounts

                                                                                                                                                      • Figure 47: Reasons for switching current account, by demographics, May 2012
                                                                                                                                                      • Figure 48: Reasons for switching savings account/cash ISA, by demographics, May 2012
                                                                                                                                                      • Figure 49: Reasons for switching car or home insurance, by demographics, May 2012
                                                                                                                                                      • Figure 50: Reasons for switching credit cards, by demographics, May 2012
                                                                                                                                                  • Appendix – Attitudes Towards Loyalty in Financial Services

                                                                                                                                                      • Figure 51: Agreement with the statements ‘Financial services firms usually save their best deals for new customers’ and ‘There's no reward for loyalty in the financial services industry’, by demographics, May 2012
                                                                                                                                                      • Figure 52: Agreement with the statements ‘If you show loyalty to a financial services firm, they'll only ever take advantage of it’ and ‘You often get a non-financial payoff for staying loyal’, by demographics, May 2012
                                                                                                                                                  • Appendix – Attitudes Towards Account Switching

                                                                                                                                                      • Figure 53: Agreement with the statements ‘I'm a little bit lazy when it comes to making sure I'm getting the best deals’ and ‘It's their own fault if people lose out because they haven't bothered to track down the best deals’, by demographics, May 2012
                                                                                                                                                      • Figure 54: Agreement with the statements ‘When it comes to my bank, I'd describe myself as a loyal customer’ and ‘Banks are all pretty much the same’, by demographics, May 2012
                                                                                                                                                      • Figure 55: Agreement with the statement ‘When it comes to moving accounts, the financial payoff doesn't usually justify the hassle’, by demographics, May 2012
                                                                                                                                                  • Appendix – Identifying Key Consumer Segments

                                                                                                                                                      • Figure 56: Target groups, by demographics, May 2012

                                                                                                                                                  Companies Covered

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

                                                                                                                                                  Loyalty in Financial Services - UK - September 2012

                                                                                                                                                  £1,995.00 (Excl.Tax)