2020
9
UK Consumers and Retail Banking Market Report 2020
2020-10-03T04:17:25+01:00
OX989026
2195
125390
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Report
en_GB
“COVID-19 presents an enormous challenge to retail banks in terms of profitability, but it has also been an opportunity for providers to refresh their image and demonstrate their support for…

UK Consumers and Retail Banking Market Report 2020

£ 2,195 (Excl.Tax)

Report Summary

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Consumers and Retail Banking: Inc Impact of COVID-19 – UK market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Covered in this report

Social isolation and home working have resulted in people of all ages exploring technology such as video conferencing and online chat. Beyond basic everyday transactions, consumer willingness to engage with these channels for everyday activities can result in opportunities for financial services providers. This could include cheaper and more efficient distribution channels for more complex products such as mortgages as well as financial advice.

Expert analysis from a specialist in the field

Written by Irene Salazar, a leading analyst in the Finance sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

COVID-19 presents an enormous challenge to retail banks in terms of profitability, but it has also been an opportunity for providers to refresh their image and demonstrate their support for consumers. Mintel’s research shows there is a clear opportunity for banks to forge a positive lasting impression on younger generations, who are most supportive of the actions taken by industry to support people through the crisis. The outbreak has also accelerated the move towards online and digital channels, which will create opportunities for cost-efficiencies and innovation Irene Salazar
Senior Finance Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • COVID-19: Market context
    • Economic and other assumptions
    • Products covered in this Report
  2. Executive Summary

    • Impact of COVID-19 on retail banking
      • Figure 1: Short-, medium- and long-term impact of COVID-19 on retail banking, 10 September 2020
    • The market
    • Unemployment is set to more than double during 2020
      • Figure 2: Unemployment rate, 2015-24 (central forecast)
    • COVID-19 severely restricts branch access
    • Not a credit crunch…
    • …but consumer borrowing will be dented by falling appetite for big-ticket purchases
    • Increase in deposits and savings likely to be only temporary
    • Companies and brands
    • 65% of main current accounts are held with the ‘Big Four’ providers
      • Figure 3: Main current account providers, July 2020
    • COVID-19 leads to dramatic fall in switching activity
      • Figure 4: Number of switches per month using the CASS, October 2013-July 2020
    • Banks’ activities that supported the nation
    • But significant losses on the horizon…
    • …due to an expected spike in bad debts
    • But true extent of the crisis remains unclear
    • Sector faces an uncertain period as providers look to recover losses
    • FinTechs at risk of funding shortages
    • Advertising expenditure increases
      • Figure 5: Above-the-line, online display and direct mail advertising expenditure on retail banking, by top 10 highest-spending retail banks/building societies, 2015/16-2019/20
    • Marketing in the recovery phase
    • ‘Big Five’ leverage their reputation to be seen as reliable
      • Figure 6: Brand personality – micro image of selected brands operating in the retail banking sector, August 2020
    • The consumer
    • Multiple current account ownership is becoming more common
      • Figure 7: Current account ownership, by number of accounts held, 2018 and 2020
    • Only 3% are very likely to switch in the next 12 months…
      • Figure 8: Likelihood to switch main current account, 2019 and 2020
    • Most consumers need a trigger to leave their main bank
      • Figure 9: Reasons for not switching main current account, July 2020
    • Digital banking gains ground at the expense of branch and telephone
      • Figure 10: Channel preference in retail banking, by activity, 2018 and 2020
    • COVID-19 dramatically affects use of cash
      • Figure 11: Impact of COVID-19 on consumer behaviours, July 2020
    • An opportunity for banks to refocus their image
      • Figure 12: Consumer attitudes towards retail banking, July 2020
  3. The Impact of COVID-19 on the Retail Banking Sector

    • Impact on the market
    • A serious shock to market conditions
    • Interest rates to remain at record low
    • Not a credit crunch
    • Impact on consumers
    • People are looking for stability and reassurance
    • A more conscious approach to finances
    • Accelerated move towards online and mobile channels
    • Widespread impact on cash usage…
    • …but long term and lasting effect on behaviours likely to be limited
    • Impact on companies and brands
    • Banks tasked with supporting consumers and keeping things going
    • Opportunities
    • Banks get to refresh their image and cement their position
    • A potential boost for digital finance tools, including via Open Banking
    • Threats
    • Banks are anticipating reduced cashflow and an increase in bad debts
    • The downturn can force unpopular decisions
    • FinTechs at risk due to funding difficulties
  4. Issues and Insights

    • A once-in-a-lifetime chance to improve the image of big banks
    • An irreversible preference for online channels will widen their scope and reach
    • Long-term behavioural changes remain unlikely
  5. The Market – Key Takeaways

    • Providers will face difficult choices in the coming months
    • Credit will be available…but not for all
    • Changing borrowing trends will highlight sustainable lending practices
    • Opportunity to make the most of temporary increase in savings activity
    • Increased public and regulatory scrutiny of treatment of vulnerable customers
    • COVID-19 forces a change in channel preferences
  6. Market Drivers

    • Economic recovery expected by late 2021 at the earliest
      • Figure 13: GDP growth, 2015-24 (central forecast)
    • Unemployment is set to more than double during 2020
      • Figure 14: Unemployment rate, 2015-24 (central forecast)
    • Incomes squeezed as inflation overtakes wage growth
      • Figure 15: CPI and average weekly earnings growth, June 2015-June 2020
    • Interest rates hit record lows…
      • Figure 16: Consumer deposits quoted interest rates to households, July 2015-July 2020
    • …but lockdown and uncertainty boost saving activity
    • Consumer credit rates fail to reflect a lower base rate
      • Figure 17: Consumer credit quoted interest rates to households, July 2015-July 2020
  7. Market Environment

    • COVID-19 severely restricts branch access
    • Not a credit crunch…
    • …but consumer borrowing will be dented by falling appetite for big-ticket purchases
    • Increase in deposits and savings likely to be only temporary
      • Figure 18: Household savings ratio, 2006-19
  8. Regulatory and Legislative Changes

    • COVID-19: FCA introduces temporary guidelines to support customers
    • Consumer credit
    • Mortgages
    • Insurance
    • Contactless payment limit increased to £45 in response to COVID-19…
    • …but access to cash will be protected
    • Overhaul to overdraft market takes effect amid emergency measures
    • Stamp duty holiday introduced to boost the housing market
    • LBG fined for overcharging struggling mortgage customers
  9. Companies and Brands – Key Takeaways

    • Significant losses on the horizon will focus attention on treating customers fairly
    • Changes likely as sector seeks to address 2020 challenges
    • FinTechs at risk of funding shortages
    • Challengers continue to struggle to gain account primacy
    • Marketing in the recovery phase
  10. Market Share

    • 65% of main current accounts are held with the ‘Big Four’ providers
      • Figure 19: Main current account providers, July 2020
    • Lloyds Banking Group accounts for 25% of main current accounts
      • Figure 20: Main current account providers, by banking group, July 2020
    • COVID-19 leads to dramatic fall in switching activity
      • Figure 21: Number of switches per month using the CASS, October 2013-July 2020
    • HSBC Group gains the most customers through the CASS
    • Challengers show impressive gains
    • Santander sees heavy losses
      • Figure 22: Net gains and losses of full account switches using CASS, selected brands, Q1 2020
  11. Competitive Strategies

    • Banks focus on supporting the nation
    • Keeping things running
    • The ultimate test for remote banking and digital services
    • But significant losses on the horizon…
    • …due to an expected spike in bad debts
    • But true extent of the crisis remains unclear
    • And long-term pursuit of profitability will be intensified
    • FinTechs at risk of funding shortages
  12. Advertising and Marketing Activity

    • Advertising expenditure increases
    • Marketing in the recovery phase
      • Figure 23: Above-the-line, online display and direct mail advertising expenditure on retail banking, by top 10 highest-spending retail banks/building societies, 2015/16-2019/20
    • Nationwide is the largest spender
    • Lloyds highlights its focus on mental health issues
    • Barclays and NatWest reassure customers by promoting online services
    • Starling Bank invests heavily, including in its first TV ads
      • Figure 24: Top 10 highest-spending retail banks/building societies for recorded above-the-line, online display and direct mail advertising expenditure on retail banking, 2019/20
    • Brand building accounts for 41% advertising
      • Figure 25: Top 10 highest-spending retail banks/building societies for recorded above-the-line, online display and direct mail advertising expenditure on retail banking, by product category, 2019/20
    • TV is the main channel for retail banking advertising
      • Figure 26: Top 10 highest-spending retail banks/building societies for recorded above-the-line, online display and direct mail advertising expenditure on retail banking, by media type, 2019/20
    • Nielsen Ad Intel coverage
  13. Brand Research

    • Brand map
      • Figure 27: Attitudes towards and usage of selected brands operating in the retail banking sector, August 2020
    • Key brand metrics
      • Figure 28: Key metrics for selected brands, August 2020
    • Brand attitudes: ‘Big Four’ score highly on trust and reputation
      • Figure 29: Attitudes, by brand, August 2020
    • Brand personality: Online banks associated with being fun
      • Figure 30: Brand personality – macro image, August 2020
    • Challengers are seen as progressive
      • Figure 31: Brand personality – micro image, August 2020
    • Brand analysis
    • ‘Big Five’ leverage their reputation to be seen as reliable
    • Nationwide stands out from the crowd
    • Digital banks enjoy high levels of differentiation
    • Virgin Money evokes mixed feelings
  14. The Consumer – Key Takeaways

    • Switching intentions reflect ongoing consumer inertia
    • 26% don’t switch because they feel actively supported
    • Accelerated move towards online and mobile channels
    • An opportunity for banks to refresh their image
    • Beyond cash and channel usage, effect on behaviours likely to be limited
  15. Impact of COVID-19 on Consumer Behaviour

    • Confidence recovers some lost ground …
      • Figure 32: The financial confidence index, January 2015-August 2020
    • … as households feel relatively comfortable about their finances
      • Figure 33: The financial wellbeing index, January 2015-August 2020
  16. Current Account Ownership

    • 99% of consumers have a current account
      • Figure 34: Current account ownership, by number of accounts held, July 2020
    • Multiple current account ownership is becoming more common…
      • Figure 35: Current account ownership, by number of accounts held, 2018 and 2020
    • …with multi-banking also on the increase
      • Figure 36: Proportion of secondary current accounts held with main current account provider, 2018 and 2020
    • But majority of people still prefer to hold most products with the same provider
      • Figure 37: Preference for holding most products with the same provider, July 2020
  17. Switching Activity and Intentions

    • Only 14% have switched in the last three years
      • Figure 38: Switching activity, July 2020
    • Younger people are more likely to have switched…
      • Figure 39: Switching activity, by age, July 2020
    • Only 3% are very likely to switch in the next 12 months…
      • Figure 40: Likelihood to switch main current account, July 2020
      • Figure 41: Likelihood to switch main current account, 2019 and 2020
    • …but likelihood to switch is higher among younger generations
      • Figure 42: Likelihood to switch main current account, July 2020
  18. Why People Don’t Switch their Main Current Account

    • Most consumers would need a trigger to leave their main bank…
    • …as more than one in four feels actively supported
      • Figure 43: Reasons to not switch main current account, July 2020
    • Consumer inertia plays an important role…
    • …as does a lack of awareness of the perceived benefits
  19. Channel Preferences

    • Online continues to be the most preferred channel
      • Figure 44: Channel preference in retail banking, by activity, 2018 and 2020
    • Mobile apps gain ground…
    • … but third-party aggregators still not on consumers’ radars
      • Figure 45: Attitudes towards banking channels, July 2020
    • Preference for branches falls…
    • …with telephone banking an adequate alternative to less than half
      • Figure 46: Telephone banking vs in-branch staff, July 2020
  20. Impact of COVID-19 on Consumer Behaviours

    • Clearest impact is on cash usage
      • Figure 47: Impact of COVID-19 on consumer behaviours, July 2020
    • A more conscious approach to finances
      • Figure 48: Impact of COVID-19 on financial worries, by age, July 2020
    • Accelerated shift towards online channels
    • But overall effect of the crisis on behaviours remains limited
  21. COVID-19 and Changing Consumer Attitudes

    • An opportunity for banks to refresh their image…
    • …and cement their position
      • Figure 49: Consumer attitudes towards retail banking, July 2020
    • Concerns about sustainability will gradually return to the spotlight
  22. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Consumer research methodology

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

Market reports provide appendices of data to support the research and insight produced. Our databooks* are easily manipulated and downloadable to support your research needs and covers factors from consumer attitudes to market forecasts.

*databooks not available with UK B2B Industry reports.

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