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UK Loyalty in Financial Services market report

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

- Deborah Osguthorpe, Head of UK Financial Services Research

This report looks at the following issues:

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

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

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

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

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

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • Companies and brands
          • Overt efforts to give something extra create loyalty perception
            • Banking brands retain customers most effectively
              • Almost half have at least one favourite credit card or current account brand
                • Favouritism is rarer in insurance
                  • The consumer
                    • Only utility firms are seen as worse than insurers at rewarding loyalty
                      • Figure 1: Financial services loyalty in context, August 2017
                    • Almost half of people show loyalty through a long-standing relationship
                      • Figure 2: How finance consumers show loyalty, August 2017
                    • Customers expect financial rewards for showing loyalty
                      • Figure 3: How finance providers are expected to show loyalty, August 2017
                    • Discounts and scheme affiliations could encourage loyalty
                      • Figure 4: Interest in aspects of reward schemes, August 2017
                    • Few people feel encouraged to hold multiple products with one provider
                      • Figure 5: Attitudes and experiences with multiple product holdings and management, August 2017
                    • The instinct to research the market may undermine loyalty
                      • Figure 6: Attitudes towards loyalty in financial services, August 2017
                    • What we think
                    • Issues and Insights

                      • Open Banking could redefine loyalty and rewards in financial services
                        • The facts
                          • The implications
                            • Cross-selling rewards have the power to cement customer loyalty
                              • The facts
                                • The implications
                                • Companies and Brands – What You Need to Know

                                  • Overt efforts to give something extra create loyalty perception
                                    • Banking brands retain customers most effectively
                                      • Nearly half describe at least one current account or credit card brand as a favourite
                                        • Insurance brands less likely to build connection
                                        • Brands and Loyalty Rewards

                                          • Overt efforts to give something extra create loyalty perception
                                            • Figure 7: Agreement with “A brand that rewards loyalty” in the financial services sector, May 2015-July 2017
                                          • Users of brands more likely to describe them as rewarding loyalty
                                            • Figure 8: Agreement with “A brand that rewards loyalty” among users of brands in the financial services sector, May 2015-July 2017
                                          • Users likely to tell non-users
                                            • Even most loyalty-rewarding brands get caught by attrition
                                            • Brand Favouritism and Preference

                                              • Banking brands retain customers most effectively…
                                                • Figure 9: Ranking of brands in the financial services sector with the lowest proportion of lapsed users (total users who have not used in the last year), May 2015-July 2017
                                              • …and are most likely to become favoured brands
                                                • Figure 10: Agreement with “This is a favourite brand” in the financial services sector, May 2015-July 2017
                                              • Post Office is a preferred brand despite lack of reputation for reward
                                                • Figure 11: Agreement with “I prefer this brand over others” in the financial services sector, May 2015-July 2017
                                            • Current Account and Credit Card Brand Focus

                                                • Nearly half describe at least one brand as a favourite
                                                  • Figure 12: Repertoire analysis of agreement with “This is a favourite brand” across current account and credit card categories, May 2017
                                                • Preference more widely proffered
                                                  • Figure 13: Repertoire analysis of agreement with “I prefer this brand over others” across motor insurance and travel insurance categories, December 2016
                                                • Using brands with no affinity
                                                  • Figure 14: Usage repertoire analysis of brands in the current accounts and credit cards categories, May 2017
                                              • Insurance Brand Focus

                                                  • Favourite insurance brands a less common occurrence
                                                    • Figure 15: Repertoire analysis of agreement with “This is a favourite brand” across motor insurance and travel insurance categories, December 2016
                                                  • Insurance brands less likely to build connection
                                                    • Churn means differentiation is more crucial
                                                      • Figure 16: Repertoire analysis of agreement with “I prefer this brand over others” across motor insurance and travel insurance categories, December 2016
                                                    • Usage of insurance brands
                                                      • Figure 17: Usage repertoire analysis of brands in the current accounts and credit cards categories, May 2017
                                                  • The Consumer – What You Need to Know

                                                    • Only utility firms are seen as worse than insurers at rewarding loyalty
                                                      • Long-standing relationships are difficult to interpret
                                                        • Customers expect financial rewards for showing loyalty
                                                          • Discounts and scheme affiliations could encourage loyalty
                                                            • 58% of people hold more than one product with the same provider
                                                              • The instinct to research the market may undermine loyalty
                                                              • Financial Services Loyalty in Context

                                                                • Only utility firms are seen as worse than insurers at rewarding loyalty
                                                                  • Banks and building societies fare marginally better
                                                                    • Figure 18: Financial services loyalty in context, August 2017
                                                                  • Building societies trail behind banks among under-35s
                                                                    • Figure 19: Different types of financial services provider rated ‘good’ at rewarding loyalty, by age, August 2017
                                                                  • Lower exposure to financial services impacts on affinity
                                                                    • Figure 20: Average agreement with “I prefer this brand over others” and “This is a favourite brand” across brands, by sector, January 2015-June 2017
                                                                • How Consumers Show Loyalty

                                                                  • Almost half of people show loyalty through a long-standing relationship…
                                                                    • …but long-standing relationships are difficult to interpret
                                                                        • Figure 21: How finance consumers show loyalty, August 2017
                                                                        • Figure 22: How finance consumers show loyalty, loyalty shown versus no loyalty shown, August 2017
                                                                      • Almost a third show loyalty through multiple product holdings…
                                                                        • …and the same proportion show loyalty through preferential treatment
                                                                          • Millennials most likely to show loyalty by going direct to the provider
                                                                              • Figure 23: How finance consumers show loyalty, by generation, August 2017
                                                                            • Those with higher incomes show stronger provider preferences
                                                                                • Figure 24: How finance consumers show loyalty, by gross annual household income, August 2017
                                                                            • How Providers are Expected to Reward Loyalty

                                                                              • Customers expect financial rewards for showing loyalty
                                                                                • More than half want a higher standard of customer service
                                                                                    • Figure 25: How finance providers are expected to show loyalty, August 2017
                                                                                    • Figure 26: How finance providers are expected to show loyalty, August 2017
                                                                                  • Multiple product holders are sensitive to the gap in financial rewards
                                                                                    • Figure 27: How finance consumers show loyalty, by how finance providers are expected to show loyalty, August 2017
                                                                                  • Older generations expect superior customer service in exchange for loyalty
                                                                                    • Figure 28: How finance providers are expected to show loyalty, by generation, August 2017
                                                                                • Interest in Reward Scheme Benefits

                                                                                  • Discounts and scheme affiliations could encourage loyalty
                                                                                    • Figure 29: Interest in aspects of reward schemes, August 2017
                                                                                  • Voucher rewards may clash with other financial rewards
                                                                                    • Figure 30: Paid-for Co-op Insurance advert on Twitter, September 2017
                                                                                  • A wide choice could improve perception as a rewarding provider …
                                                                                      • Figure 31: Interest in Aspects of Reward Schemes, August 2017
                                                                                      • Figure 32: Number of reward scheme aspects highlighted as interesting, August 2017
                                                                                    • Providers can improve relationships with customers that give them preferential status
                                                                                        • Figure 33: How finance consumers show loyalty, by interest in aspects of reward schemes, August 2017
                                                                                      • Millennials would be receptive to financial advice in exchange for loyalty
                                                                                        • Figure 34: Interest in Aspects of Reward Schemes, by generation, August 2017
                                                                                    • Impact of Multiple Product Holdings on Loyalty

                                                                                      • 58% of people hold more than one product with the same provider …
                                                                                        • Figure 35: Multiple product holdings with same provider, August 2017
                                                                                      • …and older people are the most likely to do so
                                                                                          • Figure 36: Multiple product holdings with same provider, by age, August 2017
                                                                                        • Few people feel encouraged to hold multiple products with one provider
                                                                                          • Figure 37: Attitudes and experiences with multiple product holdings and management, August 2017
                                                                                        • Half of those who don’t hold multiple products with the same provider say they would consider it
                                                                                            • Figure 38: Interest in multiple product holdings with the same provider, August 2017
                                                                                          • People holding multiple products with one provider may be frustrated with lack of rewards
                                                                                            • Figure 39: Multiple product holdings, by attitudes and experiences with multiple product holdings and management, August 2017
                                                                                        • Attitudes towards Loyalty in Financial Services

                                                                                          • The instinct to research the market may undermine loyalty
                                                                                            • Figure 40: Attitudes towards loyalty in financial services, August 2017
                                                                                          • People are sceptical about providers’ interest in their loyalty
                                                                                            • For certain products, customer service can be an important driver for switching
                                                                                              • Open Banking could make customers question their loyalty
                                                                                                • Figure 41: Interest in open banking-related services, August 2017
                                                                                              • Different approaches to research may shape customer loyalty
                                                                                                • Figure 42: How finance consumers show loyalty, by agreement with attitudes towards loyalty in financial services, August 2017
                                                                                            • Appendix – Current Accounts and Credit Card Brand Focus

                                                                                              • Appendix – Insurance Brand Focus

                                                                                                • Appendix – Cross-selling to Existing Customers

                                                                                                    • Figure 43: Santander email cross-selling offer, September 2017
                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                    • Abbreviations
                                                                                                      • Consumer research methodology