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Current Accounts - UK - July 2019

Covered in this report

The focus of this report is on retail current accounts, including packaged accounts for mass-market customers. The report does not cover premium or private bank accounts targeted at the mass affluent to high-net-worth customers.

The predominant type of pricing model for current accounts in the UK is the free-if-in-credit (or ‘free banking’) model. This is where the customer does not pay any direct fees for having the account if in credit, or for core services such as direct debits and cheques. Interest is usually charged on any money borrowed via an overdraft, which can be either ‘authorised’ or ‘unauthorised’.

“Although current account providers continue to scale down benefits, competition is high when it comes to innovation. People are increasingly banking with more than one provider, and many are willing to pay for the right products and services for their needs. But providers must get the basics right first, starting with mobile banking, while regulation is focusing on extending the benefits of competition and protecting those vulnerable and left behind.”
– Irene Salazar, Senior Financial Services Analyst

This report looks at the following areas:

  • Multi-banking only likely to increase further
  • Opportunity for a provider to offer a meaningfully better deal

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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 continues to grow
              • Figure 1: Estimated number of current accounts and account holders, 2016-19
            • 58% apply or switch online
              • Figure 2: Current account purchase channels, March 2019
            • Almost 1 million switches completed in 2018/19
              • Figure 3: Number of switches per month using the CASS, October 2013-May 2019
            • ‘Dysfunctional’ overdraft market to be overhauled
              • Official bank service league ranking launched
                • Companies and brands
                  • Barclays is the largest individual provider of main current accounts
                    • Figure 4: Current account providers, by share of main and other current accounts, May 2019
                  • Nationwide continues to gain customers through the CASS
                    • LBG adds extra functionality to its apps
                      • NatWest takes the lead in tech innovations
                        • CYBG starts rebranding to Virgin Money
                          • Monzo Plus: testing the waters
                            • Starling Bank: new accounts, features and partners
                              • The consumer
                                • 34% of people have more than one current account
                                  • 17% pay for their banking
                                    • Figure 5: Type of current account owned, May 2019
                                  • Majority could be persuaded to pay for their banking
                                    • Figure 6: Reasons to pay for a current account, May 2019
                                  • People like to compartmentalise their banking
                                    • Figure 7: Reasons for owning more than one current account, May 2019
                                  • Regular overdraft users more interested in innovative features
                                    • Figure 8: Attitudes towards overdrafts, May 2019
                                  • 58% of account holders use mobile banking regularly
                                    • Figure 9: Regular usage of mobile banking, May 2019
                                  • 60% are open to increasing their use of mobile banking
                                    • Figure 10: Reasons to increase usage of mobile banking, May 2019
                                  • Younger generations want banks to play an active role
                                    • Figure 11: Attitudes towards current accounts and retail banking, May 2019
                                  • What we think
                                  • Issues and Insights

                                    • Multi-banking only likely to increase further
                                      • The facts
                                        • The implications
                                          • Opportunity for a provider to offer a meaningfully better deal
                                            • The facts
                                              • The implications
                                              • The Market – What You Need to Know

                                                • Number of current accounts continues to grow
                                                  • 58% apply or switch online
                                                    • Almost 1 million switches completed in 2018/19
                                                      • ‘Dysfunctional’ overdraft market to be overhauled
                                                        • Official bank service league ranking launched
                                                        • Market Size

                                                          • Number of current accounts continues to grow
                                                            • Figure 12: Estimated number of current accounts, 2016-19
                                                        • Channels to Market

                                                            • Price comparison sites are the first step…
                                                              • …but the provider’s own channels eventually take precedence
                                                                • Figure 13: Current account research channels, March 2019
                                                              • 58% apply or switch online
                                                                • Figure 14: Current account purchase channels, March 2019
                                                            • Market Drivers

                                                              • UK population surpasses 66.4 million
                                                                • Figure 15: United Kingdom population mid-year estimate, 2001-18
                                                              • Almost 1 million switches completed in 2018/19
                                                                • Figure 16: Number of switches per month using the CASS, October 2013-May 2019
                                                              • Overdraft rates fall in 2019
                                                                • Figure 17: Monthly interest rate of UK monetary financial institutions Sterling overdraft for households, May 2014-May 2019
                                                              • Current account interest rates remain low
                                                                • Figure 18: Monthly average of UK resident banks' Sterling weighted average interest rate – interest-bearing current account deposits from individuals and individual trusts, April 2016-April 2019
                                                            • Regulatory and Legislative Changes

                                                              • ‘Dysfunctional’ overdraft market to be overhauled
                                                                • Open Banking: regulation and compliance
                                                                  • Official bank service league ranking launched
                                                                    • Mandated and voluntary information of current account services
                                                                      • New voluntary code to protect victims of fraud
                                                                        • PPI deadline looms
                                                                          • Figure 19: FCA’s ad on London Underground, June 2019
                                                                      • Companies and Brands – What You Need to Know

                                                                        • Barclays is the largest individual provider of main current accounts
                                                                          • Nationwide continues to gain customers through the CASS
                                                                            • LBG adds extra functionality to its apps
                                                                              • NatWest takes the tech lead
                                                                                • CYBG starts rebranding to Virgin Money
                                                                                  • Monzo Plus: testing the waters
                                                                                    • Starling Bank: new accounts, features and partners
                                                                                      • ATL adspend falls by 49%
                                                                                      • Market Share

                                                                                        • Barclays is the largest individual provider of main current accounts
                                                                                          • Figure 20: Current account providers, by share of main and other current accounts, May 2019
                                                                                        • Amongst the multi-banked:
                                                                                          • App-only brands are more common
                                                                                            • Competitive offers show their double edge
                                                                                              • Figure 21: Current account providers, by share of other current accounts, May 2019
                                                                                            • LBG, the largest group, provides one in four main accounts
                                                                                              • Figure 22: Current account providers (banking groups), by share of main current account market, May 2018 and May 2019
                                                                                          • Switching Activity

                                                                                            • Nationwide continues to gain customers through the CASS
                                                                                              • Challengers show impressive gains
                                                                                                • TSB sees heavy losses
                                                                                                  • Figure 23: Net gains and losses of full account switches using CASS, selected brands, Q4 2018
                                                                                              • Competitive Strategies & Launch Activity

                                                                                                • LBG adds extra functionality to its apps
                                                                                                  • NatWest & Tech: taking the lead among the large banks?
                                                                                                    • Barclays increases the fee for its Blue Rewards
                                                                                                      • TSB cuts down its interest rates on balances
                                                                                                        • CYBG starts rebranding to Virgin Money
                                                                                                          • Post Office Money closes its current account
                                                                                                          • Challengers & Disruption

                                                                                                            • Monzo
                                                                                                              • Monzo Plus: testing the waters
                                                                                                                • Monzo’s marketplace: expanding into savings
                                                                                                                  • First major ad campaign
                                                                                                                    • Starling Bank
                                                                                                                      • New features: overdrafts and loans
                                                                                                                        • New products: joint, teen and euro accounts
                                                                                                                          • New partners
                                                                                                                            • Dozens: new current account provider
                                                                                                                              • Monese launches current account linked with Avios in ‘world’s first’
                                                                                                                                • Current accounts in the FCA’s regulatory sandbox
                                                                                                                                  • FinecoBank offers access to global currency platform
                                                                                                                                    • Beyond current accounts
                                                                                                                                    • Advertising and Marketing Activity

                                                                                                                                      • ATL adspend falls by 49%
                                                                                                                                        • Figure 24: Total above-the-line, online display and direct mail advertising expenditure on current accounts, 2014/15-2018/19
                                                                                                                                      • Majority of adspend on brand building
                                                                                                                                        • Figure 25: Advertising expenditure on current accounts, by category, 2014/15-2018/19
                                                                                                                                      • Nationwide remains the top advertiser
                                                                                                                                        • Figure 26: Top 10 advertisers of current accounts, 2016/17-2018/19
                                                                                                                                      • TV advertising accounts for 83% all spend
                                                                                                                                        • Figure 27: Advertising expenditure on current accounts, by media type, 2018/19
                                                                                                                                      • Nielsen Ad Intel coverage
                                                                                                                                      • The Consumer – What You Need to Know

                                                                                                                                        • 34% of people have more than one current account
                                                                                                                                          • 17% pay for their banking
                                                                                                                                            • Majority could be persuaded to pay for their banking
                                                                                                                                              • People like to compartmentalise their banking
                                                                                                                                                • Regular overdraft users more interested in innovative features
                                                                                                                                                  • 58% of account holders use mobile banking regularly
                                                                                                                                                    • Younger generations want banks to play an active role
                                                                                                                                                    • Current Account Ownership

                                                                                                                                                      • Account ownership is almost universal among online population
                                                                                                                                                        • Figure 28: Current account ownership, May 2019
                                                                                                                                                      • 34% have more than one current account
                                                                                                                                                        • Figure 29: Multiple current account ownership, 2014-19
                                                                                                                                                      • 29% have a joint account
                                                                                                                                                        • Figure 30: Joint account ownership, May 2019
                                                                                                                                                    • Ownership by Type of Current Account

                                                                                                                                                      • 71% of account holders own a standard account
                                                                                                                                                        • Figure 31: Type of current account owned, May 2019
                                                                                                                                                      • 17% pay for their banking
                                                                                                                                                        • Figure 32: Ownership of fee-paying current accounts, by age, May 2019
                                                                                                                                                    • Reasons to Pay for a Current Account

                                                                                                                                                      • Majority could be persuaded to pay for their banking
                                                                                                                                                        • People prefer easy-to-access benefits
                                                                                                                                                          • Loyalty schemes sound appealing
                                                                                                                                                            • Figure 33: Reasons to pay for a current account, May 2019
                                                                                                                                                          • There’s room for competition
                                                                                                                                                            • Figure 34: Repertoire of reasons to pay for a current account, May 2019
                                                                                                                                                          • Overseas benefits may not be enough
                                                                                                                                                              • Figure 35: Monzo’s ad on the London Underground, May 2019
                                                                                                                                                          • Reasons for Owning More Than One Current Account

                                                                                                                                                            • People like to compartmentalise their banking…
                                                                                                                                                              • …and benefit from a competitive market
                                                                                                                                                                • Extra current accounts are also a backup
                                                                                                                                                                  • Figure 36: Reasons for owning more than one current account, May 2019
                                                                                                                                                                • Younger consumers more likely to make the most of it
                                                                                                                                                                  • Figure 37: Repertoire of reasons for owning more than one current account, by age, May 2019
                                                                                                                                                              • Usage of and Attitudes towards Overdrafts

                                                                                                                                                                • One in four account holders use their overdraft
                                                                                                                                                                  • Figure 38: Access to and usage of overdrafts, May 2019
                                                                                                                                                                • Vast majority would like to have a free buffer
                                                                                                                                                                  • Figure 39: Attitudes towards overdrafts, May 2019
                                                                                                                                                                • Turning an overdraft into a loan is appealing to regular users
                                                                                                                                                                  • Figure 40: Interest in loan option for overdrafts, by overdraft access and usage, May 2019
                                                                                                                                                                • Taking back control (of overdraft limits)
                                                                                                                                                                  • Figure 41: Current Accounts – CHAID – Tree output, May 2019
                                                                                                                                                              • Mobile Banking: Usage and Motivators

                                                                                                                                                                • 58% of account holders use mobile banking regularly
                                                                                                                                                                  • Figure 42: Regular usage of mobile banking, by age, May 2019
                                                                                                                                                                • 60% are open to increasing their usage
                                                                                                                                                                  • Seamless online and mobile banking
                                                                                                                                                                    • Simple features can help people feel in control
                                                                                                                                                                      • Figure 43: Reasons to increase usage of mobile banking, by current usage, May 2019
                                                                                                                                                                    • Simplicity and getting the basics right are key
                                                                                                                                                                      • Figure 44: TURF Analysis – mobile banking motivators, May 2019
                                                                                                                                                                    • Small improvements can have an impact
                                                                                                                                                                      • Figure 45: Repertoire of motivators to increase use of mobile banking, May 2019
                                                                                                                                                                  • Attitudes towards Current Accounts and Retail Banking

                                                                                                                                                                    • Younger generations want banks to play an active role…
                                                                                                                                                                      • Figure 46: Interest in money management help from banks, by age, May 2019
                                                                                                                                                                    • …while older generations are more sceptical…
                                                                                                                                                                        • Figure 47: Interest in spending controls on transactions, by age, May 2019
                                                                                                                                                                      • …and less open to biometric debit cards
                                                                                                                                                                        • Figure 48: Interest in biometric debit cards, by age, May 2019
                                                                                                                                                                      • Response to IT failures needs to be decisive
                                                                                                                                                                        • Figure 49: Account holders who have been affected by an IT failure at their bank, by age, May 2019
                                                                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                        • Abbreviations
                                                                                                                                                                          • Consumer research methodology
                                                                                                                                                                            • CHAID analysis methodology
                                                                                                                                                                              • Figure 50: Current Accounts CHAID analysis – Table output, Attitudes towards overdrafts, May 2019
                                                                                                                                                                              • Figure 51: Current Accounts CHAID analysis – Table output, Attitudes towards current accounts and retail banking, May 2019
                                                                                                                                                                              • Figure 52: Current Accounts CHAID analysis – Table output, reasons to increase usage of mobile banking, May 2019
                                                                                                                                                                            • TURF analysis methodology
                                                                                                                                                                              • Figure 53: TURF analysis – table output, May 2019

                                                                                                                                                                          Current Accounts - UK - July 2019

                                                                                                                                                                          £1,995.00 (Excl.Tax)