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Packaged and Current Accounts - UK - June 2012

“The reality is that non-traditional current providers such as Tesco and M&S are indeed a threat to banks and building societies. Even if many consumers don’t yet recognise it, many may find it convenient to hold a current account with their supermarket.”

– George Zaborowski, Senior Financial Services Analyst

Some questions answered in this report include:

  • How much of a threat are non-traditional current account providers?
  • Why aren’t more consumers upgrading to packaged accounts?
  • Is mobile banking important to consumers?
  • Is the branch network still relevant?
  • How can providers ensure they attract younger age groups?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • 48 million current account holders
              • Figure 1: Number of active current account holders and number of current accounts, 2012
            • Online banking is most frequently used channel
              • 8 in 10 own a standard current account
                • Figure 2: Type of current account held – main account only, 2011
              • Market factors
                • Economic environment and changing population altering the competitive landscape
                  • The validity of the free-if-in-credit model has come under debate
                    • More restrictions being placed on the use of basic accounts
                      • Ongoing efforts to stoke competition in the market
                        • Companies, brands and innovation
                          • 87% of Britons’ main current accounts held with the top five providers
                            • Figure 3: Share of main current account holder customer base, by banking group, April 2012
                          • Lloyds Banking Group brands provide a third of packaged accounts
                            • Figure 4: Share of main packaged account holder customer base, by banking group, April 2012
                          • No brand has achieved significant levels of trust or differentiation
                            • Figure 5: Attitudes towards and usage of brands in the current account sector, January and March 2012
                          • The evolving competitive landscape
                            • Who’s innovating?
                              • The consumer
                                • Important factors when choosing a current account
                                  • Figure 6: Important Factors when choosing a current account, April 2012
                                • Use of current account benefits
                                  • Account usage and the top providers
                                    • Attitudes toward current accounts
                                      • What we think
                                      • Issues in the Market

                                          • How much of a threat are non-traditional current account providers?
                                            • Why aren’t more consumers upgrading to packaged accounts?
                                              • Is mobile banking important to consumers?
                                                • Is the branch network still relevant?
                                                  • How can providers ensure they attract younger age groups?
                                                  • Future Opportunities

                                                    • Supporting the youth with practical incentives
                                                      • Taking online banking to the next level
                                                        • A golden opportunity
                                                        • Internal Market Environment

                                                          • Key points
                                                            • The concept of free-if-in-credit banking is under threat…
                                                              • …but free banking will not go down easy
                                                                • Banks putting more restrictions on the use of basic accounts
                                                                  • On-going efforts to stoke competition in the market
                                                                    • FSA keeping vigilant about current account mis-selling
                                                                      • Despite low interest rates, overdraft rates have continued to move up
                                                                        • Figure 7: Official monthly bank and building society overdraft interest rate, UK Inter-bank, three-month rate, and official bank rate**, April 2007-April 2012
                                                                    • Broader Market Environment

                                                                      • Key points
                                                                        • Squeeze on household incomes yet to dissipate
                                                                          • Figure 8: Monthly change in RPI and average weekly earnings, January 2008-April 2012
                                                                        • Rate of unemployment hovering above 8%
                                                                          • Figure 9: UK unemployment rate, seasonally adjusted, January 2008-January 2012
                                                                        • Uncertainty preventing consumer confidence from rebounding
                                                                          • Figure 10: UK consumer confidence, March 1997-March 2012
                                                                        • Changing population dynamics unfavourable to new business growth
                                                                          • Figure 11: Size of the UK population, by age, 2001-20
                                                                        • Seeking alternative routes to growing new business
                                                                        • Competitive Landscape

                                                                          • Key points
                                                                            • The evolving competitive environment
                                                                              • Competition for 623 Lloyds branches
                                                                                • New and potential entrants
                                                                                  • Metro Bank
                                                                                    • M&S Bank
                                                                                      • Virgin Money
                                                                                        • Tesco Bank
                                                                                          • NBNK
                                                                                          • SWOT Analysis

                                                                                              • Figure 12: UK current account market – SWOT analysis, 2012
                                                                                          • Who’s Innovating?

                                                                                            • Key points
                                                                                              • 123 current account from Santander
                                                                                                • Barclays launches a DIY current account
                                                                                                  • Pingit from Barclays
                                                                                                    • Cash withdrawals now possible via RBS and NatWest mobile apps
                                                                                                    • Market Size

                                                                                                      • Key points
                                                                                                        • A well-established and slow moving market
                                                                                                          • Figure 13: Number of active current account holders and number of current accounts, 2009-12
                                                                                                        • Free-if-in-credit account has a stronghold on the market
                                                                                                          • Figure 14: Type of current account held – main account only, 2011
                                                                                                        • Just 16% own a packaged or premium account
                                                                                                        • Market Share

                                                                                                          • Key points
                                                                                                            • Barclays and NatWest close in on Lloyds TSB
                                                                                                              • Figure 15: Main current account provider, by individual brand, April 2012
                                                                                                            • The ‘big five’ provide 87% of Britons’ main current accounts
                                                                                                              • Figure 16: Share of main current account holder customer base, by banking group, April 2012
                                                                                                            • One in three packaged accounts provided by LBG
                                                                                                              • Figure 17: Share of main packaged account holder customer base, by banking group, April 2012
                                                                                                          • Companies and Products

                                                                                                            • Key players
                                                                                                              • Barclays
                                                                                                                  • Figure 18: Barclays’ current account range, June 2012
                                                                                                                  • Figure 19: Range of packs available for the Barclays bank account, June 2012
                                                                                                                  • Figure 20: Range of packs available for the Barclays Premier current account, June 2012
                                                                                                                  • Figure 21: Barclays’ current account range continued, June 2012
                                                                                                                  • Figure 22: Key financial data for Barclays Plc (UK Retail Banking Division), 2010-11
                                                                                                                • HSBC/First Direct
                                                                                                                    • Figure 23: HSBC’s current account range, April 2012
                                                                                                                    • Figure 24: First Direct’s current account range, April 2012
                                                                                                                    • Figure 25: Key financial data for HSBC (UK Retail Banking division), 2010-11
                                                                                                                  • Lloyds Banking Group
                                                                                                                      • Figure 26: Lloyds TSB current account range, April 2012
                                                                                                                      • Figure 27: Halifax/Bank of Scotland current account range, April 2012
                                                                                                                      • Figure 28: Key financial data for Lloyds Banking Group (Retail Division), 2010-11
                                                                                                                    • Nationwide
                                                                                                                        • Figure 29: Nationwide’s current account range, April 2012
                                                                                                                        • Figure 30: Key financial data for Nationwide, 2010-11
                                                                                                                      • RBS/Natwest
                                                                                                                          • Figure 31: RBS’ current account range, April 2012
                                                                                                                          • Figure 32: NatWest’s current account range, April 2012
                                                                                                                          • Figure 33: Key financial data for RBS Group (UK Retail Banking Division), 2009-11
                                                                                                                        • Santander
                                                                                                                            • Figure 34: Santander current account range, April 2012
                                                                                                                            • Figure 35: Key financial data for Santander UK (Retail Banking Division), 2009-11
                                                                                                                        • Brand Communication and Promotion

                                                                                                                          • Key points
                                                                                                                            • Total adspend up by 6% in the year to April 2012
                                                                                                                              • Figure 36: Advertising expenditure on current accounts and related services, by product sub-category, 2010-12
                                                                                                                            • Adspend highly concentrated among a handful of big name advertisers
                                                                                                                              • Figure 37: Top ten advertisers of current accounts and related services, 2010-12
                                                                                                                            • TV and press top advertising medium used
                                                                                                                              • Figure 38: Share of advertising expenditure on current accounts and related services, by media type, 2012
                                                                                                                            • Ordinary current account adspend dominated by Santander and Halifax
                                                                                                                              • Figure 39: Top ten advertisers of ordinary current accounts, 2010-12
                                                                                                                            • Barclays the main advertiser of packaged accounts
                                                                                                                              • Figure 40: Top five advertisers of packaged/premium accounts, 2010-12
                                                                                                                            • Current account ads found to be breaching FSA standards in 2011
                                                                                                                              • Note about NMR data
                                                                                                                              • Brand Research

                                                                                                                                  • Brand map
                                                                                                                                      • Figure 41: Attitudes towards and usage of brands in the current account sector, January and March 2012
                                                                                                                                    • Correspondence analysis
                                                                                                                                      • Brand attitudes
                                                                                                                                        • Figure 42: Attitudes towards brands in the current account sector, January and March 2012
                                                                                                                                      • Brand personality
                                                                                                                                        • Figure 43: Brand personality for providers in the current account market– macro image, January and March 2012
                                                                                                                                        • Figure 44: Brand personality for providers in the current account market– micro image, January and March 2012
                                                                                                                                      • Brand experience
                                                                                                                                        • Figure 45: Brand usage for providers in the current account market, January and March 2012
                                                                                                                                        • Figure 46: Satisfaction with brands in the current account market, January and March 2012
                                                                                                                                        • Figure 47: Consideration of brands in the current account market, January and March 2012
                                                                                                                                        • Figure 48: Consumer perceptions of current account brand performance, January and March 2012
                                                                                                                                        • Figure 49: Current account brand recommendation – Net Promoter Score, January and March 2012
                                                                                                                                      • Brand index
                                                                                                                                        • Figure 50: Current account brand index, January and March 2012
                                                                                                                                        • Figure 51: Current accounts brand index vs. recommendation, January and March 2012
                                                                                                                                      • Target group analysis
                                                                                                                                        • Figure 52: Target groups, January and March 2012
                                                                                                                                        • Figure 53: Current account brand usage, by target groups, January and March 2012
                                                                                                                                      • Group One – Conformists
                                                                                                                                        • Group Two – Simply the Best
                                                                                                                                          • Group Three – Shelf Stalkers
                                                                                                                                            • Group Four – Habitual Shoppers
                                                                                                                                              • Group Five – Individualists
                                                                                                                                              • Channels to Market

                                                                                                                                                • Key points
                                                                                                                                                  • The multi-channel approach to account distribution and administration
                                                                                                                                                    • Branch network is still highly relevant
                                                                                                                                                      • Figure 54: Number of branches belonging to the largest current account providers (shown on group basis), year-end 201
                                                                                                                                                    • ATM network helps to reinforce the brand
                                                                                                                                                      • Figure 55: Number of ATMs belonging to the largest current account providers (shown on group basis), 2010
                                                                                                                                                    • A third of Britons use online banking at least once a week
                                                                                                                                                      • Figure 56: Channels and frequency used to access banking services, 2011
                                                                                                                                                    • Use of online banking focused on simple daily account management
                                                                                                                                                      • Figure 57: Methods used to access banking services, 2007-11
                                                                                                                                                    • Use of mobile banking on the rise
                                                                                                                                                      • Figure 58: Use of mobile banking services, 2010 and 2011
                                                                                                                                                  • Current and Packaged Account Ownership

                                                                                                                                                    • Key points
                                                                                                                                                      • Large majority of adults own standard current accounts
                                                                                                                                                        • Figure 59: Type of current account held – main account only, 2011
                                                                                                                                                      • The consumer resistance to upgrading
                                                                                                                                                        • Emphasising the value proposition in challenging economic times
                                                                                                                                                          • Just over two fifths have two or more accounts
                                                                                                                                                            • Figure 60: Trends in current account ownership, 2007-11
                                                                                                                                                          • Fee-based packaged account ownership in detail
                                                                                                                                                            • Figure 61: Ownership of fee-based packaged and free/ordinary current accounts, April 2012
                                                                                                                                                          • 25 to 44-year-olds the most likely to own a packaged account
                                                                                                                                                            • Figure 62: Type of current account held, by gender and age, April 2012
                                                                                                                                                          • Packaged account ownership positively correlated with affluence
                                                                                                                                                            • Figure 63: Type of current account held, by socio-economic group, April 2012
                                                                                                                                                            • Figure 64: Type of current account held, by gross annual household income, April 2012
                                                                                                                                                        • Important Factors when Choosing a Current Account

                                                                                                                                                          • Key points
                                                                                                                                                            • Quality of online banking service is now a key selling point…
                                                                                                                                                              • Figure 65: Important Factors when choosing a current account, April 2012
                                                                                                                                                            • … but the branch is still relevant
                                                                                                                                                              • Most consumers take three or more factors into consideration
                                                                                                                                                                • Figure 66: Repertoire of important factors when choosing a current account, April 2012
                                                                                                                                                              • Packaged account holders expect to receive great deals
                                                                                                                                                                • Figure 67: Important factors when choosing a current account, by type of account owned, April 2012
                                                                                                                                                              • The influence of gender and age
                                                                                                                                                                • Figure 68: Important Factors when choosing a current account, by gender and age, April 2012
                                                                                                                                                              • Incentivising youngsters to spread the word
                                                                                                                                                                • Affluent less concerned about branch proximity
                                                                                                                                                                  • Figure 69: Important factors when choosing a current account, by socio-economic group, April 2012
                                                                                                                                                                  • Figure 70: Important factors when choosing a current account, by gross annual household income, April 2012
                                                                                                                                                              • Use of Current Account Benefits

                                                                                                                                                                • Key points
                                                                                                                                                                  • Access to account benefits by type of account owned
                                                                                                                                                                    • Figure 71: access to account benefits, by type of current account, April 2012
                                                                                                                                                                  • Packaged account benefit usage rates
                                                                                                                                                                    • Figure 72: Ownership and use of benefits – fee-charging packaged account customers only, April 2012
                                                                                                                                                                  • Positive correlation between use of benefits and cost of account
                                                                                                                                                                    • Figure 73: Benefits actually used, by type of current account, April 2012
                                                                                                                                                                  • Relevance of certain benefits varies with age
                                                                                                                                                                    • Figure 74: Account benefits actually used, by gender and age, April 2012
                                                                                                                                                                  • Impact of affluence is less significant
                                                                                                                                                                    • Figure 75: Account benefits actually used, by socio-economic group, April 2012
                                                                                                                                                                    • Figure 76: Account benefits actually used, by gross annual household income, April 2012
                                                                                                                                                                • Top Providers and Account Usage

                                                                                                                                                                  • Key points
                                                                                                                                                                    • Lloyds TSB customers have access to the most benefits
                                                                                                                                                                      • Figure 77: Access to current account benefits, by most popular main current account provider, April 2012
                                                                                                                                                                    • Benefit usage rates highest among Lloyds TSB and Barclays customers
                                                                                                                                                                      • Figure 78: Benefits actually used, by main current account provider (top seven only), April 2012
                                                                                                                                                                    • Top providers and important factors when choosing an account
                                                                                                                                                                      • Figure 79: Important factors when choosing a current account, by main current account provider (top seven only), April 2012
                                                                                                                                                                    • Nationwide customers most satisfied with their current account
                                                                                                                                                                      • Halifax customers most likely to feel loyalty is being rewarded
                                                                                                                                                                        • Figure 80: Agreement with statements about current accounts, by main current account provider (top seven only), April 2012
                                                                                                                                                                    • Attitudes towards Current Accounts

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Most are happy with existing account despite many feeling unrewarded
                                                                                                                                                                          • Figure 81: Agreement with statements about current accounts, April 2012
                                                                                                                                                                        • Packaged accounts give providers more opportunity to reward loyalty
                                                                                                                                                                          • Figure 82: Agreement with statements about current accounts, by type of account, April 2012
                                                                                                                                                                        • The young and affluent are most positive about their accounts
                                                                                                                                                                          • Two thirds would switch if their bank started to charge a monthly fee
                                                                                                                                                                            • Figure 83: Agreement with statements about current accounts, April 2012
                                                                                                                                                                          • Attitudes toward alternative providers of current accounts
                                                                                                                                                                            • Figure 84: Agreement with statements about current accounts, April 2012
                                                                                                                                                                            • Figure 85: Agreement with statements about current accounts, by type of account, April 2012
                                                                                                                                                                          • Affluent young men most open to branchless banking
                                                                                                                                                                            • Banks should remain wary of the threat from non-traditional providers
                                                                                                                                                                            • Targeting Opportunities

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Key target groups
                                                                                                                                                                                  • Figure 86: Key current and packaged account target groups, April 2012
                                                                                                                                                                                • Feel undervalued
                                                                                                                                                                                  • Passively loyal
                                                                                                                                                                                    • Branch access
                                                                                                                                                                                      • Happy but demanding
                                                                                                                                                                                        • Passively loyal the most likely to own a packaged account…
                                                                                                                                                                                          • Figure 87: Current and packaged account target groups, by type of account, April 2012
                                                                                                                                                                                        • … and the most likely to use its benefits
                                                                                                                                                                                          • Figure 88: Current and packaged account target groups, by use of current account benefits, April 2012
                                                                                                                                                                                        • The importance of keeping things fresh
                                                                                                                                                                                          • Target groups and what they look for in an account provider
                                                                                                                                                                                            • Figure 89: Current and packaged account target groups, by important factors when choosing a current account, April 2012
                                                                                                                                                                                          • Target groups and the major providers
                                                                                                                                                                                            • Figure 90: Current and packaged account target groups, by main current account provider, April 2012
                                                                                                                                                                                        • Appendix – Brand Research

                                                                                                                                                                                            • Figure 91: Brand usage, March 2012
                                                                                                                                                                                            • Figure 92: Brand usage, January 2012
                                                                                                                                                                                            • Figure 93: Brand commitment, January and March 2012
                                                                                                                                                                                            • Figure 94: Brand momentum, January and March 2012
                                                                                                                                                                                            • Figure 95: Brand diversity, January and March 2012
                                                                                                                                                                                            • Figure 96: Brand satisfaction, January and March 2012
                                                                                                                                                                                            • Figure 97: Brand recommendation, January and March 2012
                                                                                                                                                                                            • Figure 98: Brand attitude, January and March 2012
                                                                                                                                                                                            • Figure 99: Brand image – macro image, May 2012
                                                                                                                                                                                            • Figure 100: Brand image – micro image, January and March 2012
                                                                                                                                                                                            • Figure 101: Profile of target group, by demographic, January and March 2012
                                                                                                                                                                                            • Figure 102: Psychographic segmentation, by target groups, January and March 2012
                                                                                                                                                                                            • Figure 103: Brand usage, by target groups, January 2012
                                                                                                                                                                                            • Figure 104: Brand usage, by target group, March 2012
                                                                                                                                                                                          • Brand index
                                                                                                                                                                                            • Figure 105: Brand index, January 2012
                                                                                                                                                                                            • Figure 106: Brand index, March 2012
                                                                                                                                                                                        • Appendix – Market Share

                                                                                                                                                                                            • Figure 107: Type of current account held, by main account provider (top seven only), April 2012
                                                                                                                                                                                            • Figure 108: Most popular main current account provider, by demographics, April 2012
                                                                                                                                                                                            • Figure 109: Next most popular main current account provider, by demographics, April 2012
                                                                                                                                                                                        • Appendix – Current and Packaged Account Ownership

                                                                                                                                                                                            • Figure 110: Ownership of fee-based packaged and free/ordinary current accounts, by demographics, April 2012
                                                                                                                                                                                        • Appendix – Important Factors when Choosing a Current Account

                                                                                                                                                                                            • Figure 111: Most popular factors when choosing a current account, by demographics, April 2012
                                                                                                                                                                                            • Figure 112: Next most popular factors when choosing a current account, by demographics, April 2012
                                                                                                                                                                                            • Figure 113: Repertoire of important factors when choosing a current account, by demographics, April 2012
                                                                                                                                                                                        • Appendix – Use of Current Account Benefits

                                                                                                                                                                                            • Figure 114: Use of current account features, by demographics, April 2012
                                                                                                                                                                                            • Figure 115: Use of current account insurance and warranty cover, by demographics, continued, April 2012
                                                                                                                                                                                            • Figure 116: Use of current account security/protection features, by demographics,continued, April 2012
                                                                                                                                                                                            • Figure 117: Use of other current account benefits, by demographics, continued, April 2012
                                                                                                                                                                                            • Figure 118: Repertoire of use of current account benefits, by demographics, April 2012
                                                                                                                                                                                        • Appendix – Attitudes Towards Current Accounts

                                                                                                                                                                                            • Figure 119: Agreement with statements about current accounts, by type of account, April 2012
                                                                                                                                                                                            • Figure 120: Agreement with statements about current accounts, by main current account provider, April 2012
                                                                                                                                                                                            • Figure 121: Important factors when choosing a current account, agreement with statements about current accounts, April 2012
                                                                                                                                                                                            • Figure 122: Agreement with statements ‘I’d be happy to hold my current account with a bank with no high street branches’ and ‘All banks are pretty much the same as each other’, by demographics, April 2012
                                                                                                                                                                                            • Figure 123: Agreement with statements ‘I’m happy with my existing current account’ and ‘I feel that my bank rewards my loyalty’, by demographics, April 2012
                                                                                                                                                                                            • Figure 124: Agreement with statements ‘Non-traditional firms such as supermarkets would do a better job at running current accounts than banks’ and ‘I would switch current accounts if my bank introduced a monthly fee’, by demographics, April 2012
                                                                                                                                                                                        • Appendix – Targeting Opportunities

                                                                                                                                                                                            • Figure 125: Key current and packaged account target groups, April 2012
                                                                                                                                                                                            • Figure 126: Target groups, by demographics, April 2012

                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                        • Abbey
                                                                                                                                                                                        • Barclays Bank plc
                                                                                                                                                                                        • British Hospitality Association
                                                                                                                                                                                        • Channel 4
                                                                                                                                                                                        • Grupo Santander Central Hispano S.A.
                                                                                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                                                                                        • Lloyds Banking Group
                                                                                                                                                                                        • LOVEFiLM International Ltd
                                                                                                                                                                                        • Marks & Spencer Financial Services plc
                                                                                                                                                                                        • Nationwide Building Society
                                                                                                                                                                                        • NatWest
                                                                                                                                                                                        • Royal Bank of Scotland Group plc
                                                                                                                                                                                        • Twitter, Inc.
                                                                                                                                                                                        • Visa Europe

                                                                                                                                                                                        Packaged and Current Accounts - UK - June 2012

                                                                                                                                                                                        £1,995.00 (Excl.Tax)