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Consumers and Banking Innovation - UK - December 2018

“The launch of Open Banking has transformed the retail banking landscape for providers looking to attract customers with innovative services. However, the limited participation of the biggest banking brands and consumers’ cautious approach towards new services has resulted in a muted impact so far. Open Banking needs clear support from high street brands before consumers can be expected to buy into it en masse.”
– Rich Shepherd, Senior Financial Services Analyst

This report looks at the following areas:

  • Innovation cannot be allowed to threaten financial inclusion
  • Security is still the key barrier to adopting new services...
  • ...but innovation is generally seen to be positive

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this report
      • Executive Summary

          • The market
            • Open Banking and GDPR combine to create new data sharing environment
              • The consumer
                • Current accounts are the primary point of interaction with providers
                  • Figure 1: Retail banking product ownership, September 2018
                • 37% consider banks to be at least somewhat innovative
                  • Figure 2: Ranking of how innovative firms are in different sectors, September 2018
                • Most use contactless cards but are cold to further payment innovation
                  • Figure 3: Banking innovations used in the last 12 months, September 2018
                • Most consumers are slow to pick up new services
                  • Figure 4: Approach to new banking innovations, September 2018
                • Half want to see improved security
                  • Figure 5: Interest in future banking innovations, September 2018
                • Open Banking still hamstrung by attitudes towards data sharing
                  • Figure 6: Attitudes towards banking innovation, September 2018
                • What we think
                • Issues and Insights

                  • Innovation cannot be allowed to threaten financial inclusion
                    • The facts
                      • The implications
                        • Security is still the key barrier to adopting new services ...
                          • The facts
                            • The implications
                              • …but innovation is generally seen to be positive
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Open Banking and GDPR combine to create new data sharing environment
                                      • HSBC leads the way on the high street
                                      • Market Environment

                                        • Regulatory context
                                          • Open Banking and PSD2 come into force
                                            • GDPR provides consumers with greater control and protection over data
                                              • Payments
                                                • Cash is far from falling out of favour
                                                  • Figure 7: Use of payment methods, February 2018
                                                • Channel preferences
                                                  • Online platforms are favoured for almost all banking needs…
                                                      • Figure 8: Channel preference in retail banking, by activity, June 2018
                                                    • …but branches remain highly valued
                                                    • Recent Developments

                                                      • FCA welcomes the fourth cohort of regulatory sandbox participants
                                                        • Open Banking launches
                                                          • HSBC leads the way on the high street
                                                            • Marketplaces point towards a fully realised Open Banking environment
                                                              • Other major brands have been slow to develop new services
                                                              • The Consumer – What You Need to Know

                                                                • Current accounts are the primary point of interaction with providers
                                                                  • 37% consider banks to be at least somewhat innovative…
                                                                    • Most use contactless cards but are cold to further payment innovation
                                                                      • Most consumers are slow to pick up new services
                                                                        • Half want to see improved security
                                                                          • Open Banking still hamstrung by attitudes towards data sharing
                                                                          • Retail Banking Product Ownership

                                                                            • Current accounts are the primary point of interaction with providers
                                                                              • Figure 9: Retail banking product ownership, September 2018
                                                                            • Consumers acquire more products with age
                                                                              • Figure 10: Number of surveyed retail banking products owned, September 2018
                                                                              • Figure 11: Number of surveyed retail banking products owned, by age, September 2018
                                                                          • Banking Innovation in Context

                                                                            • 37% consider banks to be at least somewhat innovative…
                                                                                • Figure 12: Ranking of how innovative firms are in different sectors, September 2018
                                                                              • …rising to half of under-25s
                                                                                • Figure 13: Agreement that banks are quite innovative or very innovative, by age, September 2018
                                                                              • Access influences perceptions of innovation
                                                                                • Figure 14: Ranking of how innovative credit card companies are, by gross annual household income, September 2018
                                                                              • Borrowers more likely to see banks and building societies as innovative
                                                                                • Figure 15: Agreement that banks and building societies are quite innovative or very innovative, by retail banking product ownership, September 2018
                                                                            • Innovative Banking Activities

                                                                              • Opposition to payment innovation is entrenched
                                                                                • Figure 16: Payment innovations used in the last 12 months, September 2018
                                                                              • Younger consumers more likely to use payment innovations
                                                                                • Figure 17: Payment innovations used in the last 12 months, by age, September 2018
                                                                              • Has mobile banking reached a plateau?
                                                                                • Figure 18: Banking innovations used in the last 12 months, September 2018
                                                                              • Analytic tools have space to grow
                                                                              • Approach to Banking Innovations

                                                                                • Most consumers are slow to pick up new services
                                                                                    • Figure 19: Approach to new banking innovations, September 2018
                                                                                  • Millennials are the key innovation trialists
                                                                                    • Figure 20: Approach to new banking innovations, by generation, September 2018
                                                                                  • Contactless cards are a must-use technology…
                                                                                    • Figure 21: Banking innovations used in the last 12 months, by approach to new banking innovations, September 2018
                                                                                  • …while Early Adopters are starting to get on board with Open Banking
                                                                                  • Interest in Banking Innovations

                                                                                    • Most can identify areas for improvement …
                                                                                      • …but not always areas for innovation
                                                                                          • Figure 22: Interest in future banking innovations, September 2018
                                                                                        • Early Adopters and Early Mainstreamers show healthy interest in most innovations
                                                                                          • Figure 23: Interest in future banking innovations, by approach to new banking innovations (Early Adopters and Early Mainstreamers), September 2018
                                                                                        • Laggards can be tempted with security innovations
                                                                                          • Figure 24: Interest in future banking innovations, by approach to new banking innovations (Late Mainstreamers and Laggards), September 2018
                                                                                      • Attitudes towards Banking Innovation

                                                                                        • Open Banking still hamstrung by attitudes towards data sharing
                                                                                          • Two thirds think banks should walk before they run
                                                                                            • Figure 25: Attitudes towards banking innovation, September 2018
                                                                                          • Innovation is appreciated, but concerns abound
                                                                                            • Even Early Adopters doubt the potential of digital services
                                                                                              • Figure 26: Attitudes towards banking innovation, by approach to new banking innovations, September 2018
                                                                                            • Half say innovative brands have a competitive edge
                                                                                            • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                              • Abbreviations
                                                                                                • Consumer research methodology

                                                                                                Consumers and Banking Innovation - UK - December 2018

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