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Packaged and Current Accounts - UK - June 2011

  • What impact will changing population dynamics have on the market?
  • Who’s most likely to switch their current account, and to where?
  • Are supermarkets and current accounts really a good fit?
  • Are providers making the most of cross-selling opportunities?

With a final report due to be published at the end of 2011, one of the key goals of the Independent Commission on Banking is to help foster a more competitive UK current account environment. At the moment proposals include the introduction of portable account numbers to help make switching easier for consumers and requiring the Lloyds Banking Group to sell off more branches than the 600 it is already being forced to divest under state aid rules.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Figure 1: Number of active current account holders and number of current accounts, 2010
          • Channels to market
            • 85% of consumers hold standard accounts
              • Figure 2: Type of current account held – main account only, 2010
            • Market factors
              • Present economic and demographic conditions unfavourable
                • Overdrafts rates have continued to get more expensive
                  • FSA warns about the potential for current account mis-selling
                    • ICB working to create a more competitive marketplace
                      • Companies, brands and innovation
                        • A lack of differentiation among the major players
                          • Figure 3: Attitudes towards and usage of current account brands, April 2011
                        • Led by LBG, top five banking groups control 85% of main accounts
                          • Figure 4: Share of main current account holder customer base, by banking group, April 2011
                        • LBG and Barclays control nearly three fifths of packaged accounts
                          • Figure 5: Share of main packaged account holder customer base, by banking group, April 2011
                        • Who’s innovating?
                          • The consumer
                            • Attitudes towards current accounts
                              • Popularity of packaged account benefits
                                • Usage of current account benefits
                                  • Attitudes towards potential challengers
                                    • What we think
                                    • Issues in the Market

                                        • What impact will changing population dynamics have on the market?
                                          • Who’s most likely to switch their current account, and to where?
                                            • Are supermarkets and current accounts really a good fit?
                                              • Are providers making the most of cross-selling opportunities?
                                              • Future Opportunities

                                                • The freedom to personalise
                                                  • Food and finance
                                                  • Internal Market Environment

                                                    • Key points
                                                      • Overdraft rates have continued to drift upwards
                                                        • Figure 6: Official monthly bank and building society overdraft interest rate, UK Inter-bank, three-month rate, and official bank rate** April 2006-April 2011
                                                      • New minimum standards introduced for overdrafts by LSB
                                                        • Consumer apathy and dominance of a few hurt market competitiveness
                                                          • ICB working to create a more competitive marketplace
                                                            • FSA continues to warn about packaged account mis-selling
                                                            • Broader Market Environment

                                                              • Key points
                                                                • Challenging economic conditions persist
                                                                  • Incomes being squeezed by inflation
                                                                    • Figure 7: Monthly change in RPI and average weekly earnings, 2005- April 2011
                                                                  • Consumer confidence remains subdued
                                                                    • Figure 8: GFK NOP Consumer Confidence Index, May 2005 - May 2011
                                                                  • Premium accounts a tough sell in current environment
                                                                    • Population dynamics could hurt new account growth
                                                                      • Figure 9: Size of the UK population, by age, 2001-20
                                                                  • Loyalty and Cross-selling

                                                                    • Key points
                                                                      • Nearly three fifths have been with their main bank for at least a decade
                                                                        • Figure 10: Length of time with main bank, march 2011
                                                                      • Loyalty by provider
                                                                        • Figure 11: Length of time with main bank, by main bank, March 2011
                                                                      • Most products not held with main provider…
                                                                        • Figure 12: Product ownership, March 2011
                                                                      • … but having an existing relationship is still advantageous
                                                                        • The push for cross-sales
                                                                          • Lloyds TSB best at increasing product holdings
                                                                            • Figure 13: Repertoire of product ownership with main bank, by main bank, March 2011
                                                                        • SWOT Analysis

                                                                            • Figure 14: UK current account market – SWOT analysis, 2011
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • Lloyds TSB enhances online banking experience with ‘Money Manager’
                                                                              • Lloyds, Visa and Samsung collaborating on mobile payment technology
                                                                                • First Direct iPhone App with ‘banking on the go’ technology
                                                                                  • ‘Act Now’ alerts from NatWest and RBS
                                                                                    • Co-operative free packaged account trial
                                                                                      • Co-op current account for premier league football supporters
                                                                                        • Nationwide now offering main account holders free travel insurance
                                                                                          • Barclays, Halifax and the Co-op helping prisoners open bank accounts
                                                                                          • Market Size

                                                                                            • Key points
                                                                                              • Market growth has stalled in 2010
                                                                                                • Figure 15: Number of active current account holders and number of current accounts, 2008-11(est)
                                                                                              • 85% of consumers hold standard/basic, fee-free accounts
                                                                                                • Figure 16: Type of current account held – main account only, 2010
                                                                                              • One in seven accounts are premium/packaged accounts
                                                                                              • Market Share

                                                                                                • Key points
                                                                                                  • One in six hold their main current account with Lloyds TSB
                                                                                                    • Figure 17: Main current account provider, by individual brand, April 2011
                                                                                                  • Led by LBG, top five banking groups control 85% of main accounts
                                                                                                    • Figure 18: Share of main current account holder customer base, by banking group, April 2011
                                                                                                  • LBG and Barclays control nearly three fifths of packaged accounts
                                                                                                    • Figure 19: Share of main packaged account holder customer base, by banking group, April 2011
                                                                                                • Companies and Products

                                                                                                  • Key players
                                                                                                    • Barclays
                                                                                                        • Figure 20: Barclays’ current account range, April 2011
                                                                                                        • Figure 21: Key financial data for Barclays Plc (UK Retail Banking Division), 2009-10
                                                                                                      • HSBC/First Direct
                                                                                                          • Figure 22: HSBC’s current account range, April 2011
                                                                                                          • Figure 23: First Direct’s current account range, April 2011
                                                                                                          • Figure 24: Key financial data for HSBC (UK Retail Banking division), 2009-10
                                                                                                        • Lloyds Banking Group
                                                                                                            • Figure 25: Current account range of Lloyds TSB
                                                                                                            • Figure 26: Halifax/Bank of Scotland current account range, April 2011
                                                                                                            • Figure 27: Key financial data for Lloyds Banking Group (Retail Division), 2009-10
                                                                                                          • Nationwide
                                                                                                              • Figure 28: Nationwide’s current account range, April 2011
                                                                                                              • Figure 29: Key financial data for Nationwide, 2009-10
                                                                                                            • RBS/NatWest
                                                                                                                • Figure 30: RBS’ current account range, April 2011
                                                                                                                • Figure 31: NatWest’s current account range, April 2011
                                                                                                                • Figure 32: Key financial data for RBS Group (UK Retail Banking Division), 2009-10
                                                                                                              • Santander
                                                                                                                  • Figure 33: Santander’s current account range, April 2011
                                                                                                                  • Figure 34: Key financial data for Santander UK (Retail Banking Division), 2009-10
                                                                                                              • Competitor Landscape

                                                                                                                • Key points
                                                                                                                  • Forced divestment for recipients of heavy government aid
                                                                                                                    • Lloyds Banking Group:
                                                                                                                      • RBS
                                                                                                                        • New and Potential Entrants
                                                                                                                          • Metro Bank
                                                                                                                            • Virgin Money
                                                                                                                              • Tesco Bank
                                                                                                                                • NBNK
                                                                                                                                • Brand Communication and Promotion

                                                                                                                                  • Key points
                                                                                                                                    • Overall adspend up by a quarter in year to April 2011
                                                                                                                                      • Figure 35: Advertising expenditure on current accounts and related services, by sub-product category, 2009-11
                                                                                                                                    • Top four account for over four fifths of total industry adspend
                                                                                                                                      • Figure 36: Top ten advertisers of current accounts and related services, 2009-11
                                                                                                                                    • Most money spent on TV and press advertising
                                                                                                                                      • Figure 37: Share of advertising expenditure on current accounts and related services, by media type, 2011
                                                                                                                                    • Halifax holds its position as top advertiser of ordinary accounts
                                                                                                                                      • Figure 38: Top five advertisers of ordinary current accounts, 2009-11
                                                                                                                                    • HSBC leading advertiser of premium accounts
                                                                                                                                      • Figure 39: Top five advertisers of packaged/premium accounts, 2009-11
                                                                                                                                    • Note about NMR data
                                                                                                                                    • Brand Research

                                                                                                                                      • Brand map
                                                                                                                                          • Figure 40: Attitudes towards and usage of current account brands, April 2011
                                                                                                                                        • Brand attitudes
                                                                                                                                          • Figure 41: Attitudes, by current account brand, April 2011
                                                                                                                                        • Brand personality
                                                                                                                                          • Figure 42: Current account brand personality – macro image, April 2011
                                                                                                                                          • Figure 43: Current account brand personality – micro image, April 2011
                                                                                                                                        • Correspondence analysis
                                                                                                                                          • Brand experience
                                                                                                                                            • Figure 44: Current account brand usage, April 2011
                                                                                                                                            • Figure 45: Satisfaction with various current account brands, April 2011
                                                                                                                                            • Figure 46: Consideration of current account brands, April 2011
                                                                                                                                            • Figure 47: Consumer perceptions of current account brand performance, April 2011
                                                                                                                                            • Figure 48: Current account brand recommendation – Net Promoter Score, April 2011
                                                                                                                                          • Brand index
                                                                                                                                            • Figure 49: Current account brand index, April 2011
                                                                                                                                            • Figure 50: Current account brand index vs. recommendation, April 2011
                                                                                                                                          • Target group analysis
                                                                                                                                            • Figure 51: Target groups, April 2011
                                                                                                                                            • Figure 52: current account brand usage, by target groups, April 2011
                                                                                                                                          • Group One – The Conformists
                                                                                                                                            • Group Two – Simply the Best
                                                                                                                                              • Group Three – Shelf Stalkers
                                                                                                                                                • Group Four – Habitual Shoppers
                                                                                                                                                  • Group Five – The Individualists
                                                                                                                                                  • Channels to Market

                                                                                                                                                    • Key points
                                                                                                                                                      • The multi-channel approach to distribution and administration
                                                                                                                                                        • Branch network remains vital
                                                                                                                                                          • Figure 53: Number of branches belonging to the largest current account providers (shown on group basis), year-end 2010
                                                                                                                                                        • ATM network helps to strengthen brand presence
                                                                                                                                                          • Figure 54: Number of ATMs belonging to the largest current account providers (shown on group basis), 2009
                                                                                                                                                        • The most frequent point of contact with a bank is online
                                                                                                                                                          • Figure 55: Use of banking channels, April 2011
                                                                                                                                                        • Mobile online banking channel still in early stages but growing
                                                                                                                                                          • Rapid growth in the number of online banking transactions continues
                                                                                                                                                            • Figure 56: Number of registered telephone and online banking customers and number of transactions (MBBGs only), 2002 and 2009
                                                                                                                                                        • Current and Packaged Account Ownership

                                                                                                                                                          • Key points
                                                                                                                                                            • 85% hold standard/basic current accounts
                                                                                                                                                              • Figure 57: Type of current account held – main account only, 2010
                                                                                                                                                            • One in seven own a packaged account
                                                                                                                                                              • Slight decline in multiple account ownership
                                                                                                                                                                • Figure 58: Trends in current account ownership, 2006-10
                                                                                                                                                              • Fee-based packaged account ownership in detail
                                                                                                                                                                • Figure 59: Ownership of fee-based packaged and free/ordinary current accounts, April 2011
                                                                                                                                                              • Packaged account ownership highest among 25 to 54s
                                                                                                                                                                • Figure 60: Type of current account held, by gender and age, April 2011
                                                                                                                                                              • Room to increase ownership levels among over-55s
                                                                                                                                                                • Annual income more relevant than socio-economic status
                                                                                                                                                                  • Figure 61: Type of current account held, by socio-economic group, April 2011
                                                                                                                                                                  • Figure 62: Type of current account held, by gross annual household income, April 2011
                                                                                                                                                              • Consumer Attitudes Towards Current Accounts

                                                                                                                                                                • Key points
                                                                                                                                                                  • Most happy with existing account
                                                                                                                                                                    • Figure 63: Agreement with statements about current accounts, April 2011
                                                                                                                                                                  • Many lukewarm about supermarket-based current accounts
                                                                                                                                                                    • NatWest and Nationwide customers most positive
                                                                                                                                                                      • Figure 64: Agreement with statements about current accounts, by main current account provider, April 2011
                                                                                                                                                                    • Packaged account holders expect more
                                                                                                                                                                      • Figure 65: Agreement with statements about current accounts, by type of account, April 2011
                                                                                                                                                                    • Young affluent men most open to ‘branchless’ banking
                                                                                                                                                                      • Figure 66: Agreement with statements about current accounts by demographics, April 2011
                                                                                                                                                                  • Popularity of Packaged Account Benefits

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Account benefits available by amount paid
                                                                                                                                                                        • Figure 67: Benefits have access to, by type of account, April 2011
                                                                                                                                                                      • Travel insurance and roadside assistance most used packaged benefits
                                                                                                                                                                        • Figure 68: Benefits actually used, by type account, April 2011
                                                                                                                                                                      • There is a difference between valued benefits and ‘nice to haves’
                                                                                                                                                                        • Figure 69: Ownership and use of benefits – fee-charging packaged account customers only, April 2011
                                                                                                                                                                      • Impact of age on account benefits used
                                                                                                                                                                        • Figure 70: Benefits actually used, by gender and age, April 2011
                                                                                                                                                                      • Positive link with income and use of benefits
                                                                                                                                                                        • Figure 71: Benefits actually used, by socio-economic status, April 2011
                                                                                                                                                                        • Figure 72: Benefits actually used, by type gross annual household income, April 2011
                                                                                                                                                                    • Top Providers and Usage of Current Account Benefits

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Packaged account ownership at major providers
                                                                                                                                                                          • Figure 73: Type of current account held, by main account provider (top seven only), April 2011
                                                                                                                                                                        • Above-average access to benefits at Lloyds TSB
                                                                                                                                                                          • Figure 74: Benefits have access to, by main current account provider (top seven only), April 2011
                                                                                                                                                                        • Lloyds TSB and NatWest customers making use of benefits
                                                                                                                                                                          • Figure 75: Benefits actually used, by main current account provider (top seven only), April 2011
                                                                                                                                                                      • Attitudes Towards Potential Challengers

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Awareness of potential challenger brands
                                                                                                                                                                            • Figure 76: Awareness of select financial services providers, April 2011
                                                                                                                                                                          • A fifth willing to switch main account to Tesco or Virgin Money
                                                                                                                                                                            • Figure 77: Willingness to switch main current account to a select financial services provider, April 2011
                                                                                                                                                                          • Over two fifths of Santander customers willing to switch to new brand
                                                                                                                                                                            • Figure 78: Willingness to switch to the listed brands, by main current provider, April 2011
                                                                                                                                                                          • Two in five packaged account holders willing to switch
                                                                                                                                                                            • Figure 79: Willingness to switch to selected brands, by type of account held, April 2011
                                                                                                                                                                          • Willingness to switch provider and attitudes towards current accounts
                                                                                                                                                                            • Figure 80: Agreement with statements about current accounts, by willingness to switch main current account to select financial services provider, April 2011
                                                                                                                                                                          • Men and 25 to 34s most open to switching
                                                                                                                                                                            • Figure 81: Willingness to switch to the listed brands, by gender and age, April 2011
                                                                                                                                                                          • The more one earns the more likely they may be willing to switch
                                                                                                                                                                            • Figure 82: Willingness to switch to the listed brands, by socio-economic group, April 2011
                                                                                                                                                                            • Figure 83: Willingness to switch to the listed brands, by gross annual household income, April 2011
                                                                                                                                                                        • Targeting Opportunities

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Key target groups
                                                                                                                                                                              • Figure 84: Key current and packaged account target groups, April 2011
                                                                                                                                                                            • Supermarkets superior
                                                                                                                                                                              • Current account content
                                                                                                                                                                                • Defection risk
                                                                                                                                                                                  • Branchless banking
                                                                                                                                                                                    • Target groups and ownership of fee-based packaged accounts
                                                                                                                                                                                      • Figure 85: Ownership of fee-based packaged and free/ordinary current accounts, by target groups, April 2011
                                                                                                                                                                                    • Target groups and account benefits used
                                                                                                                                                                                      • Figure 86: Account benefits used, by target groups, April 2011
                                                                                                                                                                                    • Target groups by main current account provider
                                                                                                                                                                                      • Figure 87: Target groups by main current account provider, April 2011
                                                                                                                                                                                    • Target groups and potential challenger brands
                                                                                                                                                                                      • Figure 88: Willingness to switch main current account to select financial services provider, by target groups, April 2011
                                                                                                                                                                                  • Appendix – Broader Market Environment

                                                                                                                                                                                      • Figure 89: Employment and unemployment, by gender, 2006-16
                                                                                                                                                                                  • Appendix – Market Share

                                                                                                                                                                                      • Figure 90: Main current account provider, by type of account, April 2011
                                                                                                                                                                                  • Appendix – Brand Research

                                                                                                                                                                                      • Figure 91: Brand usage, April 2011
                                                                                                                                                                                      • Figure 92: Brand commitment, April 2011
                                                                                                                                                                                      • Figure 93: Brand momentum, April 2011
                                                                                                                                                                                      • Figure 94: Brand diversity, April 2011
                                                                                                                                                                                      • Figure 95: Brand satisfaction, April 2011
                                                                                                                                                                                      • Figure 96: Brand recommendation, April 2011
                                                                                                                                                                                      • Figure 97: Brand attitude, April 2011
                                                                                                                                                                                      • Figure 98: Brand image - Macro image, April 2011
                                                                                                                                                                                      • Figure 99: Brand image - Micro image, April 2011
                                                                                                                                                                                      • Figure 100: Profile of target groups, by demographics, April 2011
                                                                                                                                                                                      • Figure 101: Psychographic segmentation, by Target groups, April 2011
                                                                                                                                                                                      • Figure 102: Brand usage by Target groups, April 2011
                                                                                                                                                                                      • Figure 103: Brand index, April 2011
                                                                                                                                                                                  • Appendix – Channels to Market

                                                                                                                                                                                      • Figure 104: Use of banking channels, by main current account provider, April 2011
                                                                                                                                                                                      • Figure 105: Current account type, by use of banking channel, April 2011
                                                                                                                                                                                      • Figure 106: Use of banking channel, by type of current account, April 2011
                                                                                                                                                                                      • Figure 107: Account benefits used, by use of banking channel, April 2011
                                                                                                                                                                                  • Appendix – Current and Packaged Account Ownership

                                                                                                                                                                                      • Figure 108: Breakdown of current account holders, 2010
                                                                                                                                                                                      • Figure 109: Ownership of fee-based packaged and free/ordinary current accounts, by demographics, April 2011
                                                                                                                                                                                  • Appendix – Consumer Attitudes Towards Current Accounts

                                                                                                                                                                                      • Figure 110: Agreement with statements about current accounts, by demographics, April 2011
                                                                                                                                                                                      • Figure 111: Agreement with selected statements about current accounts, by use of banking channel, April 2011
                                                                                                                                                                                  • Appendix – Popularity of Packaged Account Benefits

                                                                                                                                                                                      • Figure 112: Most popular account benefits used, by demographics, April 2011
                                                                                                                                                                                      • Figure 113: Next most popular account benefits used, by demographics, April 2011
                                                                                                                                                                                  • Appendix – Attitudes Towards Potential Challengers

                                                                                                                                                                                      • Figure 114: Willingness to switch main current account to select financial services provider, by demographics, April 2011
                                                                                                                                                                                      • Figure 115: Willingness to switch main current account to select financial services provider, by demographics (continued), April 2011
                                                                                                                                                                                      • Figure 116: Willingness to switch main current account to select financial services provider, by use of banking channel, April 2011
                                                                                                                                                                                  • Appendix – Targeting Opportunities

                                                                                                                                                                                      • Figure 117: Agreement with select statements about current accounts, by target groups, April 2011
                                                                                                                                                                                      • Figure 118: Account benefits available, by target groups April 2011
                                                                                                                                                                                      • Figure 119: Use of banking channel, by target groups, April 2011
                                                                                                                                                                                      • Figure 120: Target groups, by demographics, April 2011

                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                  • Abbey
                                                                                                                                                                                  • Alliance & Leicester
                                                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                                                  • Bradford & Bingley plc
                                                                                                                                                                                  • Britannia Building Society
                                                                                                                                                                                  • British Bankers' Association (BBA)
                                                                                                                                                                                  • Cater Allen Ltd
                                                                                                                                                                                  • Citigroup Inc.
                                                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                                                  • Co-operative Group
                                                                                                                                                                                  • Direct Line Group Limited
                                                                                                                                                                                  • F&C Asset Management plc
                                                                                                                                                                                  • Financial Ombudsman Service
                                                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                                                  • Football Association (The)
                                                                                                                                                                                  • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                  • HSBC Holdings plc
                                                                                                                                                                                  • ING Direct
                                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                                  • National Australia Bank
                                                                                                                                                                                  • Nationwide Building Society
                                                                                                                                                                                  • NatWest
                                                                                                                                                                                  • Northern Rock plc
                                                                                                                                                                                  • NUS [National Union of Students]
                                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                                  • Tesco Personal Finance Limited
                                                                                                                                                                                  • Virgin Money
                                                                                                                                                                                  • Yorkshire Bank PLC

                                                                                                                                                                                  Packaged and Current Accounts - UK - June 2011

                                                                                                                                                                                  £1,750.00 (Excl.Tax)