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Current Accounts - UK - July 2018

"The Open Banking initiative, which launched in January 2018, has the potential to massively increase competition in the market. To realise this, however, providers and regulators need to convince consumers of the benefits of opting-in, while product innovation needs to be developed with customer needs in mind."
- Douglas Kitchen, Financial Services Analyst

This Report looks at the following areas:

  • Mobile banking set to grow and grow, but may not benefit new challengers
  • Open Banking can drive reduction in overdraft fees
  • Developments required for chatbots to be a success

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Table of contents

  1. Overview

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

          • The market
            • Number of current accounts increases by 2%
              • Figure 1: Estimated number of current accounts in the UK, 2015-18
            • Mobile banking usage rising rapidly
              • Figure 2: Adults using online, mobile and telephone banking (millions), 2007-17
            • Recent activity indicates an increase in switching
              • Figure 3: Number of switches per month using the CASS, August 2014-April 2018
            • Companies and brands
              • Lloyds Banking Group remains dominant
                • Figure 4: Current account providers (banking groups), by share of main and other current accounts, may 2018
              • Total adspend increased by 21% in the last 12 months
                • Figure 5: Total above-the-line, online display and direct mail advertising expenditure on current accounts and other related money-transmission services, 2013/14-2017/18
              • The consumer
                • 98% own a current account
                  • Figure 6: Number of current accounts owned, May 2018
                • Large majority of consumers own a standard current account
                  • Figure 7: Type of current account owned, May 2018
                • Almost 70% haven’t switched in the last five years
                  • Figure 8: Current account switching activity, by age, May 2018
                • 18% say they are likely to switch in the next year
                  • Figure 9: Likelihood to switch current account in the next 12 months, May 2018
                • 72% are confident that they have the right account
                  • Figure 10: Agreement with the statement “I am confident that I have the best current account(s) for my needs”, May 2018
                • Less than a third interested in automated chat services
                  • Figure 11: Attitudes towards current accounts, May 2018
                • What we think
                • Issues and Insights

                  • Mobile banking set to grow and grow, but may not benefit new challengers
                    • The facts
                      • The implications
                        • Open Banking can drive reduction in overdraft fees
                          • The facts
                            • The implications
                              • Developments required for chatbots to be a success
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Number of current accounts increases by 2%
                                      • Online banking the most popular channel
                                        • Recent activity indicates an increase in switching
                                          • Open Banking era begins
                                            • FCA refrains from capping overdraft fees
                                            • Market Size

                                              • Current account market increases with population
                                                • Figure 12: Estimated number of current accounts in the UK, 2015-18
                                            • Channels to Market

                                              • Online banking the favoured channel
                                                • Figure 13: Preferred channels for different banking activities, May 2018
                                              • Branch services still have role to play…
                                                • ...particularly for the older generation
                                                  • Figure 14: Preferred method of opening a current account, by generation, May 2018
                                                • Use of mobile banking more than doubled between 2013 and 2017
                                                  • Figure 15: Adults using online, mobile and telephone banking (millions), 2007-17
                                              • Market Drivers

                                                • UK population continues to grow
                                                  • Figure 16: United Kingdom population mid-year estimate, 2009-17
                                                • Current account switches peak at highest level since March 2016
                                                  • Figure 17: Number of switches per month using the CASS, August 2014-April 2018
                                                • Overdraft rates remain steady over the past 12 months
                                                  • Figure 18: Monthly interest rate of UK monetary financial institutions sterling overdraft for households – Not seasonally adjusted, January 2013-April 2018
                                                • Current account interest rates continue to fall
                                                  • Figure 19: Monthly average of UK resident banks' sterling weighted average interest rate – Interest bearing current account deposits from individuals and individual trusts, not seasonally adjusted, January 2016-April 2018
                                              • Regulatory and Legislative Changes

                                                • Open Banking comes into force
                                                  • System functionality the issue for major banks
                                                    • FCA publishes new services standards
                                                      • Current account immigration checks reduced by Home Office
                                                        • FCA conducts review of retail banking business models
                                                          • FCA stops short of capping overdraft fees
                                                            • Ring-fencing initiative to isolate individual and small business operations
                                                            • Companies and Brands – What You Need to Know

                                                              • Lloyds Banking Group remains dominant
                                                                • First Open Banking solutions hit the market
                                                                  • Total adspend increased by 21% in last 12 months
                                                                  • Market Share

                                                                    • Lloyds Banking Group continues to dominate current account market
                                                                      • Figure 20: Current account providers (banking groups), by share of main and other current accounts, May 2018
                                                                    • CYBG acquires Virgin Money
                                                                      • Barclays remains the biggest individual provider
                                                                        • Digital challengers remain niche providers
                                                                          • Figure 21: Current account providers, by share of main and other current accounts, may 2018
                                                                        • Nationwide gained the most customers through the CASS in 2017
                                                                          • Figure 22: Net gains of full account switches using CASS between 2016 and 2017*, selected brands
                                                                      • Competitive Strategies

                                                                        • First Open Banking solutions hit the market
                                                                          • HSBC launches first Open Banking app
                                                                            • Yolt integrates with RBS Group
                                                                              • Current account interest rates remain low
                                                                                • Nationwide and TSB the anomalies in the market
                                                                                  • Brands take differing approaches to switching incentives
                                                                                    • Cash bonuses the selling point for HSBC, NatWest and RBS
                                                                                      • Rewards the key for Barclays
                                                                                        • Free gifts the motivation for First Direct
                                                                                          • New challengers continue to push boundaries
                                                                                            • Monzo looking to expand its reach
                                                                                              • Foreign exchange specialist Revolut launches current account
                                                                                                • Use of chatbots set to increase
                                                                                                • Advertising and Marketing Activity

                                                                                                  • Total adspend increased by 21% in the last 12 months
                                                                                                    • Figure 23: Total above-the-line, online display and direct mail advertising expenditure on current accounts and other related money transmission services, 2013/14-2017/18
                                                                                                  • Nationwide is the biggest spender on advertising
                                                                                                    • Figure 24: Top 10 advertisers of current accounts and related money transmission services, 2015/16-2017/18
                                                                                                  • Brand building accounts for over 50% of total adspend
                                                                                                    • Figure 25: Advertising expenditure on current accounts and other related money transmission services, 2015/16-2017/18
                                                                                                  • TV advertising increases to 70% of total adspend
                                                                                                    • Figure 26: Share of advertising expenditure on current accounts and related money transmission services, by media type, 2017/18
                                                                                                  • Nielsen Ad Intel coverage
                                                                                                  • The Consumer – What You Need to Know

                                                                                                    • 98% own a current account
                                                                                                      • Large majority of consumers own a standard current account
                                                                                                        • Almost 70% haven’t switched in the last five years
                                                                                                          • 18% say they are likely to switch in the next year
                                                                                                            • 72% are confident that they have the right account
                                                                                                              • Less than a third interested in automated chat services
                                                                                                                • Likely switchers more receptive to Open Banking features
                                                                                                                • Current Account Ownership

                                                                                                                  • Vast majority own at least one current account
                                                                                                                    • Figure 27: Number of current accounts owned, 2014-18
                                                                                                                  • Over 70% hold all accounts in their name only
                                                                                                                    • Figure 28: Joint account ownership, May 2018
                                                                                                                • Ownership by Type of Current Account

                                                                                                                  • Three quarters of consumers own a standard current account
                                                                                                                    • Number of reward accounts continues to increase
                                                                                                                      • Figure 29: Type of current account owned, May 2018
                                                                                                                    • Half of those who pay for banking own a reward account
                                                                                                                      • Figure 30: Type of fee-paying account owned, May 2018
                                                                                                                  • Switching Activity

                                                                                                                    • Almost 70% have had the same current account for at least five years
                                                                                                                      • Under-25s are more likely to have switched…
                                                                                                                        • Figure 31: Current account switching activity, by age, May 2018
                                                                                                                      • …along with multiple account holders
                                                                                                                        • Figure 32: Switching activity, by number of current accounts held, May 2018
                                                                                                                    • Likelihood to Switch

                                                                                                                      • 18% say they are likely to switch in the next year
                                                                                                                        • Figure 33: Likelihood to switch current account in the next 12 months, May 2018
                                                                                                                      • Recent switchers more likely to switch again
                                                                                                                        • Figure 34: Likelihood to switch current account in the next 12 months, by time since last current account holders last switched provider, May 2018
                                                                                                                    • Confidence in Current Account Selection

                                                                                                                      • 72% are confident that they have the right account
                                                                                                                        • Figure 35: Agreement with the statement ‘I am confident that I have the best current account(s) for my needs’, May 2018
                                                                                                                      • Recent switchers have more confidence that their account is suitable
                                                                                                                        • Figure 36: Agreement with the statement ‘I am confident that I have the best current account(s) for my needs’, by switching activity, May 2018
                                                                                                                    • Attitudes towards Current Accounts

                                                                                                                      • Less than a third interested in automated chat services
                                                                                                                        • Figure 37: Attitudes towards current accounts, May 2018
                                                                                                                      • City-based Millennials most receptive to automated customer service
                                                                                                                        • Figure 38: Current account behaviours – CHAID – Tree output, May 2018
                                                                                                                      • Likely switchers are more receptive to Open Banking features
                                                                                                                        • Figure 39: Attitudes towards current accounts, by likelihood to switch current accounts in the next 12 months, May 2018”
                                                                                                                      • …and competitive overdrafts
                                                                                                                        • Figure 40: Response to the statement ‘It's important for me to have a current account with competitive overdraft charges’, by likelihood to switch, May 2018
                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                        • Abbreviations
                                                                                                                          • Consumer research methodology
                                                                                                                            • CHAID Methodology

                                                                                                                            Current Accounts - UK - July 2018

                                                                                                                            US $2,693.85 (Excl.Tax)