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UK Consumer Attitudes towards Challenger Brands market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Consumer Attitudes towards Challenger Brands 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?

Products covered in this Report

This Report examines the UK (United Kingdom) retail banking market for challenger brands. Whilst it does not cover specific product areas, it focusses primarily on challenger banks, particularly those that have launched recently such as new digitalonly banks. To some extent, it also covers insurance, investment and lending markets, exploring awareness of selected brands, and how consumers feel about using challengers for these products.

The Report excludes mobile payments, FX (Foreign Exchange) payments, pre-paid debit cards, crowdfunding, payday loans, private banks, and credit card companies. However, references and comparisons to these brands/sectors may be made where relevant.

What you need to know

New regulations have made it easier for financial services brands to launch and expand. The CMA’s (Competition and Markets Authority) Open Banking solution has been designed to improve competition in the industry, whilst the FCA (Financial Conduct Authority) has a number of initiatives to support new brands and innovation.

Many challenger brands are using innovative approaches and more useful products and services to challenge incumbents’ hold on the market. They are now slowly starting to gain traction, driven by consumer interest and the strength of early adopters’ recommendations.

Going forward, Open Banking will do even more to change how consumers interact with financial services brands, particularly their main bank. It will also make it easier for consumers to find new or less well-known brands that could be more suited to their financial needs. However, people have a number of concerns about using challenger brands, such as how reliable services will be and the security of their data. Inertia is also a major barrier, as people are generally happy with their existing providers and see switching as an inconvenience.

Expert analysis from a specialist in the field

Written by Jessica Galletley, a leading analyst in the Financial Services sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Financial incentives and competitive prices will incentivise people to choose a challenger over an established provider, and give them a clear financial benefit to doing so. However, consumers need help to filter through the growing number of providers to find those that are most relevant to them. Jessica Galletley
Financial Services Analyst

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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 accounts rises with population
              • Figure 1: Estimated number of current accounts in the UK, 2015-18
            • Current account switches have risen in the last year
              • Figure 2: Number of switches per month, with and without using the Current Account Switch Service, September 2013-May 2018
            • Open Banking will disrupt the market
              • Companies and brands
                • Lloyds Banking Group is largest group current account provider
                  • Figure 3: Current account providers, by share of main and other current account market, May 2018
                • Consolidating to stay ahead of the curve
                  • Challengers incentivise recommendations
                    • The consumer
                      • Two thirds have heard of at least one challenger brand
                        • Figure 4: Awareness of challenger brands, May 2018
                      • 23% who have heard of a challenger brand have used one
                        • Figure 5: Use of challenger brands, May 2018
                      • Savings accounts can be an inroad for further usage
                        • Figure 6: Likelihood of considering using a challenger brand, May 2018
                      • Unfamiliarity is a barrier to uptake
                        • Figure 7: Barriers to using a challenger brand, May 2018
                      • Financial benefits most likely to convince people
                        • Figure 8: Reasons for using a challenger brand over a long-established provider, May 2018
                      • Consumers need help to filter relevant brands
                        • Figure 9: Attitudes towards challenger brands, May 2018
                      • What we think
                      • Issues and Insights

                        • Challengers will have to explore new ways to establish awareness and trust
                          • The facts
                            • The implications
                              • Concerns about using challengers can be overcome with financial incentives
                                • The facts
                                  • The implications
                                  • The Market – What You Need to Know

                                    • Number of accounts rises with population
                                      • Current account switches have risen in the last year
                                        • Open Banking will disrupt the market
                                        • Market Drivers

                                          • Number of accounts rises with population
                                            • Figure 10: Estimated number of current accounts in the UK, 2015-18*
                                          • Current account switches have risen in the last year
                                              • Figure 11: Number of switches per month, with and without using the Current Account Switch Service, September 2013-May 2018
                                          • Regulatory and Legislative Changes

                                            • Open Banking will disrupt the market
                                              • Open Banking builds on EU PSD2 regulation
                                                • Insurers required to prompt longstanding customers to shop around
                                                  • FCA investigates mortgage competition…
                                                    • …and is set to publish Approach to Competition Report
                                                      • FCA’s Project Innovate continues
                                                      • Companies and Brands – What You Need to Know

                                                        • Lloyds Banking Group is largest group current account provider
                                                          • Consolidating to stay ahead of the curve
                                                            • Challengers incentivise recommendations
                                                            • Market Share

                                                              • Lloyds Banking Group is largest group current account provider
                                                                • Greatest change in the ‘other account’ market
                                                                  • Figure 12: Current account providers, by share of main and other current account market, May 2018
                                                              • Competitive Strategies

                                                                • Consolidating to stay ahead of the curve
                                                                  • Niche firms look to take on banking heavyweights by extending their services
                                                                    • FinTechs seek mutually beneficial partnerships
                                                                      • Challengers incentivise recommendations
                                                                      • The Consumer – What You Need to Know

                                                                        • Two thirds have heard of at least one challenger brand
                                                                          • Savings accounts can be an inroad for further usage
                                                                            • Unfamiliarity is a barrier to uptake
                                                                              • Financial benefits most likely to convince people
                                                                                • Consumers need help to filter relevant brands
                                                                                • Awareness of Challenger Brands

                                                                                  • Two thirds have heard of at least one challenger brand
                                                                                    • Figure 13: Awareness of challenger brands, May 2018
                                                                                  • Opportunities to build awareness outside of London
                                                                                    • Figure 14: Awareness of challenger brands, by region, May 2018
                                                                                  • People are generally aware of only one or two challenger brands
                                                                                    • Figure 15: Number of challenger brands aware of, by age, May 2018
                                                                                • Use of Challenger Brands

                                                                                  • 23% who have heard of a challenger brand have used one
                                                                                    • Figure 16: Use of challenger brands, May 2018
                                                                                  • Revolut is most successful at converting customers
                                                                                    • 23% who have heard of a digital-only bank have used one
                                                                                      • Figure 17: Use of challenger brands, by awareness of challenger brands, May 2018
                                                                                  • Challenger Brand Consideration

                                                                                    • Savings accounts can be an inroad for further use
                                                                                      • Figure 18: Likelihood of considering using a challenger brand, May 2018
                                                                                    • Insurance challengers have a good chance, but will need to compete on price
                                                                                      • 18-24-year-olds most likely to consider a challenger brand
                                                                                        • Figure 19: Likelihood of considering using a challenger brand, by age, May 2018
                                                                                      • One in four would consider a challenger for six or more products
                                                                                        • Figure 20: Number of products people are likely to consider a challenger brand for, May 2018
                                                                                    • Barriers to Using a Challenger Brand

                                                                                      • Unfamiliarity is a barrier to uptake
                                                                                        • Figure 21: Barriers to using a challenger brand, May 2018
                                                                                      • Recent IT issues have affected consumer perceptions
                                                                                        • Open Banking can reduce inertia
                                                                                          • 18-34-year-olds have fewer concerns
                                                                                            • Figure 22: Barriers to using a challenger brand, by age, May 2018
                                                                                        • Reasons for Choosing a Challenger Brand

                                                                                          • Financial benefits most likely to convince people
                                                                                            • Figure 23: Reasons for using a challenger brand over a long-established provider, May 2018
                                                                                          • Recommendations are key to growth
                                                                                            • Good customer service will minimise concerns about face-to-face access
                                                                                              • Figure 24: Reasons for using a challenger brand, by barriers to using a challenger brand, May 2018
                                                                                          • Attitudes towards Challenger Brands

                                                                                            • New providers need to build trust
                                                                                              • Consumers need help to filter relevant brands
                                                                                                • Figure 25: Attitudes towards challenger brands, May 2018
                                                                                              • Three in five want the best online and mobile experiences
                                                                                                • Challenger users more likely to prioritise online/mobile banking
                                                                                                  • Figure 26: Use of challenger brands, by agreement with the statement ‘It is important for me to use a provider with the best online and mobile experiences’, May 2018
                                                                                                • Established brands can refer customers to challengers to maintain satisfaction
                                                                                                  • Figure 27: Agreement with the statement ‘I would be more likely to use a newly launched financial services provider if I was introduced to it by my main bank’, by likelihood to consider a challenger brand, May 2018
                                                                                              • Appendix – Data Sources, Abbreviations, and Supporting Information

                                                                                                  • Abbreviations
                                                                                                    • Consumer research methodology