UK Sustainability in Retail Banking Market Report 2024
Sustainability is already playing a role in how people choose new banks, and this is likely to grow as climate change progresses.
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EXECUTIVE SUMMARY
- Opportunities for sustainability in banking
- Major banks must lead the way on sustainable investments or risk losing younger customers
- Deliver the tools for boosting sustainable living
- Digital banks should promote their sustainability credentials and expand green rewards and perks
- Market dynamics
- The majority of consumers express concern over climate change
- Graph 1: agreement with environmental statements, 2024
- Fragile consumer confidence will leave many struggling to prioritise sustainability
- Graph 2: financial wellbeing index, 2020-24
- Graph 3: financial confidence index, 2020-24
- Traditional high street banks continue to dominate the main current account market
- Graph 4: current account market share, 2024
- What consumers want and why
- Banks are viewed more positively than many industries but consumers lack information and clarity
- Graph 5: perceptions of organisations’ environmental impact, 2024
- Younger generations are researching green credentials and more confident in understanding banking sustainability
- Graph 6: confidence in understanding banks’ environmental impact, by generation, 2024
- People are split on responsibility but governments will need to lead the way on net zero
- Younger customers will ensure banks cannot be complacent on sustainability
- Graph 7: importance of sustainability when choosing a new main bank, by generation, 2024
- Rewards on green spending lead the way but banks must take a holistic approach to sustainability
- Graph 8: attractive sustainability factors when choosing a new main bank account, by generation, 2024
- Digital banks should showcase sustainability and roll out innovative tools and rewards
- Innovation and marketing
- Barclays announces end to fossil fuel financing as banks come under scrutiny on investments
- Banks make moves to support consumers improve home energy efficiency
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MARKET DYNAMICS
- Market background
- Worries about climate change will grow as more extreme weather events dominate the news
- Consumer sentiment on climate change is fairly split
- Graph 9: agreement with environmental statements, 2024
- Extreme weather events in the news will intensify climate change debates
- Climate change denial is fairly low but will still limit the numbers taking action
- COP29 in Azerbaijan receives criticism for insufficient resolutions
- New Labour government will impact the pathway to net zero
- The environmental cost of AI could see increased regulation on use
- Market drivers
- Consumer confidence remains fragile and many will be cautious on discretionary spending
- Graph 10: financial confidence index, 2020-24
- Graph 11: financial wellbeing index, 2020-24
- Inflation has come down but many are still feeling the impact of higher prices and will struggle to prioritise sustainability
- Graph 12: CPI inflation rate, 2021-24
- Retail banks continue to dominate the main current account market
- Graph 13: current account market share, 2024
- Younger generations are more readily switching their main account
- Graph 14: switched main current account in the last two years, 2024
- FCA looks to tackle greenwashing in financial services
- The Consumer Duty focuses on four key outcomes
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WHAT CONSUMERS WANT AND WHY
- Perceptions of sustainability
- Banks are viewed more positively than negatively when it comes to environmental impact
- Graph 15: perceptions of organisations’ environmental impact, 2024
- Perception of banking sustainability are more positive than negative
- Most people lack clarity on the impact of high street banks
- Younger customers have a more positive perception of banking sustainability
- Graph 16: perceptions of retail banks’ environmental impact, NET, by generation, 2024
- Graph 17: perceptions of digital banks’ environmental impact, NET, by generation, 2024
- Gen Z deem digital banks more sustainable than building societies
- Younger people are far more confident in understanding the impact of banks on the environment
- Graph 18: confidence in understanding banks’ environmental impact, by generation, 2024
- Climate change responsibility
- Few rely on banks to improve sustainability but a poor record will still be off-putting
- Many are looking to government action but people are extremely split on environmental responsibility
- Graph 19: perceived responsibility for improving sustainability, 2024
- Governments will have to lead the way on climate change
- Eco-measures that can save consumers money will be key to widespread adoption
- Younger people have greater expectations of banks but are still unlikely to deem them most responsible for sustainability
- Graph 20: proportion saying retail banks are most responsible for improving sustainability, by generation, 2024
- Importance of sustainability in banking
- Sustainability has become a real consideration for younger banking customers
- Graph 21: importance of sustainability when choosing a new main bank, by generation, 2024
- Gen Z and Millennials ensure banks can’t rest on their laurels
- Living location continues to shape attitudes and priorities
- Graph 22: importance of sustainability when choosing a new main bank, by area, 2024
- Important sustainability factors when choosing banks
- Although rarely the leading factor, sustainability is playing a role in choice of bank
- Reducing fossil fuel investments may stop people leaving but banks must go further to attract new customers
- Younger account holders show far more interest in sustainability factors when choosing a new bank
- Graph 23: attractive sustainability factors when choosing a new main bank account, by generation, 2024
- Banks must consider wide-ranging sustainability
- Draw in eco-conscious customers with proactive investment in renewables alongside rewards on sustainable spending
- Digital banks could be well-placed to offer more sustainable accounts
- Information sources on banking sustainability
- Banks must ensure sustainability information is easy to find and understand
- Consumers most likely to look at banks’ own information to research their sustainability record
- Graph 24: researching a bank’s sustainability record, by generation, 2024
- Standardisation is vital to help consumers decipher complex sustainability information
- Older demographics are less trusting of the government, media and international organisations
- The majority are not researching bank’s sustainability records but younger customers are more engaged
- Graph 25: proportion who have researched a bank’s sustainability record in the last 12 months, by generation, 2024
- Attitudes towards sustainability in banking
- More consistent and reliable information is needed with the majority struggling to gauge sustainability
- The high proportion leaving banks due to poor sustainability brings opportunity for building societies and digital banks
- Graph 26: “A bank’s sustainability record has caused me to close/switch bank accounts in the last 12 months”, by generation, 2024
- High street banks should launch sustainability-focused current accounts
- Strong demand for sustainable credit cards among younger borrowers
- Graph 27: interest in sustainability-focused credit cards, by generation, 2024
- Raise awareness of how data sharing and Open Banking can help gauge sustainable spending
- Digital banks are well-placed to roll out innovative sustainability tools
- Graph 28: interest in sustainability features from digital banks, by generation, 2024
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INNOVATION AND MARKETING TRENDS
- Competitive strategies and launch activity
- Barclays announces end to direct financing of new oil and gas projects…
- … and looks to climate tech and improved energy efficiency to help the UK meet emissions targets
- NatWest and British Gas look to provide home decarbonisation blueprint
- Nationwide expands green loans to boost take-up
- Halifax launches an improved Green Living Reward offer and brings EPC rating into affordability calculations
- HSBC looks to support spending on energy innovations through Flexipay
- Ethical bank Triodos looks to boost investment in fighting climate change
- Atom Bank reports operational emissions for the first time
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APPENDIX
- Report scope and definitions
- Consumer research methodology
- Abbreviations and terms
- TURF analysis methodology
- TURF analysis – additional data
Sustainability is already playing a role in how people choose new banks, and this is likely to grow as climate change progresses. 90% of Gen Z say it would be a consideration, while it would be the main factor for 34% of this generation. For others, interest rates and cash welcome bonuses will continue to be the biggest draw.
The challenge for providers is offering sustainability without increasing costs for consumers. Indeed, for widespread adoption sustainabiity measures must help people to reduce costs. This can be through tracking tools and budgeting, rewards on sustainable spending and help to improve the energy efficiency of homes.
If high street banks cannot boost sustainability and trust in their climate change pledges, there is scope for digital banks to gain some ground in the main account market. All-digital sign up, account management and virtual cards are seen as positives in terms of sustainability, and digital banks have less baggage from historic fossil fuel investments. Particularly amongst younger customers, digital banks could benefit from emphasising their sustainability.
This report looks at the following areas:
- Consumer perceptions of the impact of retail banks on the environment, including how they are viewed more positively than companies in more directly polluting industries such as airlines and energy.
- The lack of agreement among consumers on who should be most responsible for improving sustainability.
- The importance of sustainability as a consideration when choosing a new main bank, and how this grows among younger customers.
- Consumer interest in a wide range of sustainability features and how these can be used to attract eco-conscious customers. This must go beyond ending fossil fuel investments and look to positive investment in renewables, alongside rewards on sustainable purchasing.
Sustainability may have taken a back seat for some during the cost of living crisis, but it is playing a major role in how younger consumers choose a new bank.
Adrian Reynolds, Associate Director
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