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UK Changing Channel Preferences in Retail Banking market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Changing Channel Preferences in Retail Banking 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 and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

This report discusses the following key topics:

  • Consumers have forgiven security concerns to reap the benefits of online banking
  • Branches still have a place in modern banking
  • Early adopters have significant influence over future innovation

Banking in the UK has changed significantly in the last 15 years. The growth of digital channels offers consumers greater choice over how they manage their accounts and interact with their bank. Online and mobile banking provide more convenience than traditional options such as branch services, and current account holders have taken advantage of this by moving on from a reliance on branches. By moving their customers on to new, remote channels, banks have had the opportunity to reduce their branch networks and significant overheads, increasing profitability.

This report examines consumers changing channel preferences in retail banking. This includes looking at the wider market trends in channel use and a brand-level discussion of what channels are offered by both leading banks and newer challengers. Mintel's exclusive consumer research includes a look at the frequency of use of different banking channels and what tasks they are used for, how people would prefer to bank, and how satisfied they are with their bank's channels. Attitudes towards banking channels are also examined. This includes consumers' approach towards new digital services, branch closures and how people prefer to be contacted by their bank.

Expert analysis from a specialist in the field

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

Consumers have made an irreversible switch from traditional banking channels to digital banking. People not only use online banking more than branches, but see it as the preferential choice for everyday banking and are more satisfied with it than any other channel. The challenge for banks is how to prevent the shift online weakening customer relationships and undermining customer loyalty. This will become even more pressing as Open Banking looms on the horizon. Richard Shepherd
Senior Financial Services Analyst

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Table of contents

  1. Overview

    • What you need to know
      • Scope of this Report
      • Executive Summary

          • The market
            • Open Banking comes into force
              • Earnings growing faster than inflation
                • Figure 1: CPI and average weekly earnings, July 2013-July 2018
              • First interest rate rises in a decade
                • Figure 2: Consumer deposits quoted interest rates to households, July 2013-August 2018
              • Companies and brands
                • Lloyds Banking Group is the largest current account provider
                  • Nationwide remains the largest advertiser in retail
                    • Brand building and personal banking remain the main focus of advertising
                      • Figure 3: 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, 2017/18
                    • The consumer
                      • Consumers have complex financial lives
                        • Figure 4: Current account ownership, by number of accounts held, June 2018
                        • Figure 5: Proportion of secondary current accounts held with main current account provider, June 2018
                      • Savings accounts and credit cards are the most commonly held financial products after current accounts
                        • Figure 6: Ownership of financial products, June 2018
                      • Savings products most likely to be held with main current account provider
                        • Figure 7: Financial products ownership, by proportion held with main current account provider, June 2018
                      • Online banking is the preferred channel
                        • Figure 8: Channel preference in retail banking, by activity, June 2018
                      • ‘Push’ factors more powerful than ‘pull’ factors when it comes to retaining customers
                        • Figure 9: Reasons to review financial products, June 2018
                      • Trust is paramount when it comes to cross-selling
                        • Figure 10: Attitudes towards retail banking, June 2018
                      • Two out of three consumers have not heard of Open Banking
                        • Figure 11: Awareness of Open Banking, by gender and age group, June 2018
                      • Willingness to engage with Open Banking is limited
                        • Figure 12: Likelihood of using Open Banking, June 2018
                      • What we think
                      • Issues and Insights

                        • Open Banking needs some backing
                          • The facts
                            • The implications
                              • A turning point for savers?
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Open Banking comes into force
                                      • Debit card payments overtake cash for the first time
                                        • First interest rate rises in a decade
                                        • Economic and Regulatory Environment

                                          • Open Banking comes into force
                                            • Compliance with ring-fencing directives
                                              • LINK re-evaluates ATM fee plans as usage falls
                                                • Debit card payments grew by 14% in 2017, overtaking cash for the first time
                                                • Market Drivers

                                                  • Earnings growing faster than inflation
                                                    • Figure 13: CPI and average weekly earnings, July 2013-July 2018
                                                  • First interest rate rises in a decade
                                                    • Figure 14: Consumer deposits quoted interest rates to households, July 2013-August 2018
                                                  • FCA’s discussion paper proposes minimum interest rate on savings
                                                    • Funding for Lending and Term Funding Schemes end
                                                      • Consumer credit
                                                        • FCA introduces new credit rules to support people in persistent debt
                                                          • Complaints about consumer credit reach record level after 40% increase in 2017/18
                                                            • FCA announces caps on high-cost credit, but delays further action on overdraft fees
                                                              • 30% of customers fail to find cheapest mortgage deal
                                                                • Figure 15: Consumer credit quoted interest rates to households, July 2013-July 2018
                                                            • Companies and Brands – What You Need to Know

                                                              • Lloyds Banking Group is the largest current account provider
                                                                • Nationwide remains the largest advertiser in retail banking
                                                                  • Brand building and personal banking remain the main focus of advertising
                                                                  • Market Share

                                                                    • Lloyds Banking Group is the largest current account provider
                                                                      • Figure 16: Top six main current account providers (including netted banking groups), May 2018
                                                                    • Barclays is the largest individual current account provider
                                                                      • Figure 17: Top 10 current account providers, by share of main and other current accounts, May 2018
                                                                  • Company Profiles

                                                                    • Lloyds Banking Group
                                                                      • Performance and news
                                                                        • Recent developments in retail banking proposition
                                                                          • Barclays
                                                                            • Performance and news
                                                                              • Recent developments in retail banking proposition
                                                                                • RBS Group
                                                                                  • Performance and news
                                                                                    • Recent developments in retail banking proposition
                                                                                      • Santander
                                                                                        • Performance and news
                                                                                          • Recent developments in retail banking proposition
                                                                                            • HSBC Group
                                                                                              • Group performance and news
                                                                                                • Recent developments in retail banking proposition
                                                                                                  • Nationwide Building Society
                                                                                                    • Performance and news
                                                                                                      • Recent developments in retail banking proposition
                                                                                                        • CYBG and Virgin Money
                                                                                                        • Launch Activity and Innovation

                                                                                                          • Virgin Money and Virgin Atlantic launch air miles savings account
                                                                                                            • Goldman Sachs to launch its digital-only Marcus brand in the UK
                                                                                                              • Starling Bank and Monzo introduce option to block betting payments
                                                                                                                • App-only bank Starling launches joint current accounts
                                                                                                                • Advertising and Marketing Activity

                                                                                                                  • Nationwide remains the largest advertiser in retail banking
                                                                                                                    • Figure 18: Top 10 highest-spending retail banks/building societies for recorded above-the-line, online display and direct mail advertising expenditure on retail banking, 2013/14-2017/18
                                                                                                                  • Brand building and personal banking remain the main focus of advertising
                                                                                                                    • Lloyds Bank’s Get The Inside Out campaign
                                                                                                                      • Figure 19: 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, 2017/18
                                                                                                                    • TV accounts for over half of ATL expenditure
                                                                                                                      • Figure 20: 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, 2017/18
                                                                                                                    • Sponsorships
                                                                                                                      • Charitable foundations and partnerships
                                                                                                                        • Nielsen Ad Intel coverage
                                                                                                                        • Brand Research

                                                                                                                            • Brand map: Nationwide scores high in both trust and differentiation
                                                                                                                              • Figure 21: Attitudes towards and usage of selected brands, May 2018
                                                                                                                            • Key brand metrics: First Direct customers most likely to rate their experience as excellent
                                                                                                                              • Figure 22: Key metrics for selected brands, May 2018
                                                                                                                            • Brand attitudes: Generous rates, such as Tesco’s and Santander’s, pay off when it comes to rewarding loyalty scores
                                                                                                                              • Figure 23: Attitudes, by brand, May 2018
                                                                                                                            • Brand personality: Smaller brands most likely to been seen as exclusive
                                                                                                                              • Figure 24: Brand personality – Macro image, May 2018
                                                                                                                            • Brand personality: HSBC and Barclays associated with being irresponsible, authoritative and only caring about profits
                                                                                                                              • Figure 25: Brand personality – Micro image, May 2018
                                                                                                                            • Brand analysis
                                                                                                                              • Nationwide stands out in most of the positive metrics
                                                                                                                                • First Direct customers most likely to recommend the brand
                                                                                                                                  • IT issues: lessons from TSB and Tesco Bank
                                                                                                                                    • HSBC and Barclays struggle to leave scandals behind
                                                                                                                                    • The Consumer – What You Need to Know

                                                                                                                                      • Consumers have complex financial lives
                                                                                                                                        • Online banking is the preferred channel
                                                                                                                                          • ‘Push’ factors more powerful than ‘pull’ factors when it comes to retaining customers
                                                                                                                                            • Trust is paramount when it comes to cross-selling
                                                                                                                                              • Two out of three consumers have not heard of Open Banking
                                                                                                                                                • Willingness to engage with Open Banking is limited
                                                                                                                                                • Current Account Ownership

                                                                                                                                                  • 98% of consumers have a current account, with 33% owning two or more
                                                                                                                                                    • Figure 26: Current account ownership, by number of accounts held, June 2018
                                                                                                                                                  • Multi-banking more common among older consumers
                                                                                                                                                    • Figure 27: Proportion of secondary current accounts held with main current account provider, by generation, June 2018
                                                                                                                                                • Ownership of Financial Products

                                                                                                                                                  • Savings accounts and credit cards are the most commonly held financial products after current accounts
                                                                                                                                                    • Figure 28: Ownership of financial products, June 2018
                                                                                                                                                  • Multiple product ownership increases with age
                                                                                                                                                      • Figure 29: Repertoire of financial products owned, by age, June 2018
                                                                                                                                                    • Savings products most likely to be held with main current account provider
                                                                                                                                                        • Figure 30: Financial products ownership, by proportion held with main current account provider, June 2018
                                                                                                                                                    • Channel Preference

                                                                                                                                                      • Online is the most preferred channel
                                                                                                                                                        • Figure 31: Channel preference in retail banking, by activity, June 2018
                                                                                                                                                      • Branches offer reassurance
                                                                                                                                                        • The concept of aggregator apps still eludes consumers
                                                                                                                                                        • Reasons to Review Financial Arrangements

                                                                                                                                                          • Customer experience is key to retain customers
                                                                                                                                                            • Special offers can attract and retain the value-driven consumer
                                                                                                                                                              • Figure 32: Reasons to review financial products, June 2018
                                                                                                                                                            • Open Banking has the potential to highlight relevant offers
                                                                                                                                                            • Attitudes towards Retail Banking

                                                                                                                                                              • Open Banking can enhance positive consumer behaviour
                                                                                                                                                                • Trust is paramount
                                                                                                                                                                  • Figure 33: Attitudes and behaviours towards retail banking, June 2018
                                                                                                                                                                • Affluent millennials are most likely to welcome offers from other providers
                                                                                                                                                                  • Figure 34: Agreement with the statement “I am happy for providers other than my main bank to send me new product offers” – CHAID – Tree output, June 2018
                                                                                                                                                              • Awareness of Open Banking

                                                                                                                                                                • Two out of three consumers have not heard of Open Banking
                                                                                                                                                                  • Awareness is higher among the young for men and the old for women
                                                                                                                                                                    • Figure 35: Awareness of Open Banking, by gender and age group, June 2018
                                                                                                                                                                • Likelihood to Engage with Open Banking

                                                                                                                                                                  • Willingness to engage with Open Banking still limited
                                                                                                                                                                      • Figure 36: Likelihood of using Open Banking, June 2018
                                                                                                                                                                    • Incentives are key
                                                                                                                                                                      • Likelihood of using Open Banking increases with awareness…
                                                                                                                                                                          • Figure 37: Likelihood of using Open Banking, by awareness of Open Banking, June 2018
                                                                                                                                                                        • …and is higher among Millennials
                                                                                                                                                                          • Figure 38: Likelihood of using Open Banking, by generation, June 2018
                                                                                                                                                                      • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                          • Abbreviations
                                                                                                                                                                            • Consumer research methodology
                                                                                                                                                                              • CHAID analysis – methodology