Table of Contents
- EXECUTIVE SUMMARY
- The market context
- Product trends in UK deposits
- Product segments of the UK deposit market
- CHAPTER 1 INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
- CHAPTER 2 THE MARKET CONTEXT
- Introduction
- Key findings
- Deposits are the key to consumers' assets
- Consumers continue to be attracted to the security ofsavings accounts
in the aftermath of the 2002 stock market collapse
- Deposits made up 43% of the UK savings and investmentmarket in 2005
- Despite positive stock market trends, net inflowsunderline continued
preference for deposits
- The relative stability of the base rate has been anadditional bonus
for the deposit sector
- With few changes in the base rate since 2002, depositshave offered
greater predictability of expected returns
- Datamonitor expects deposits to remain a favourite withUK consumers
- Deposits will make up close to 40% of UK retail savingsand investments
in 2010
- Deposit balances are forecast to increase by 5.6%(compounded
annually) until 2010
- CHAPTER 3 PRODUCT TRENDS IN UK DEPOSITS
- Introduction
- Key findings
- The product segments are shifting
- Regular savings accounts and Mini Cash ISAs are gainingweight in the
market
- Ordinary savings accounts continue to be prevalentoverall...
- ... but new entrants have boosted the number of regularsavings
accounts
- The number of Mini Cash ISAs is also on the increase
- USD accounts show the strongest growth rates among theforeign
currency accounts
- Few current accounts without overdraft facility are left
- Distribution channels have an impact on the splitbetween sight
deposits and time deposits
- No-notice and instant access accounts are gainingconsiderable ground
- The increased use of direct access channels among bankaccounts is
fuelling their shift to sight deposits
- Smart Davids are rewarded with success despite thedominance of a few
Goliaths
- The current climate of growth allows clever competitorsto gain a
foothold in the market
- Market concentration remains very high
- Nevertheless, ING Direct storms the Top 10
- What counts is how products are offered
- Banks have a much more diverse product portfolio thanbuilding
societies
- Product packages are used to strengthen the customerrelationship
- Pricing trends reveal the dynamics of the market
- Margins are under pressure
- Increasing competition on sight deposits has putpressure on margins
- Small players force big banks to rethink their pricingstructures
- The number of accounts with tiered interest rates hasdecreased
- ... but the pricing is still too complex
- Investec markets a long-term view
- The focus for price competition has shifted to regularsavers
- Providers are currently trying to attract customersthrough a price
war on regular savings accounts
- Distribution differs by product line
- Distribution of regular savings accounts is focused onbranches
- CHAPTER 4 PRODUCT SEGMENTS OF THE UK DEPOSIT MARKET
- Introduction
- Key findings
- Ordinary savings accounts
- Long notice periods are becoming obsolete
- Banks are driving the shift towards sight deposits
- Competitive pressure has strongly affected pricing
- Pricing structures are being simplified to some extent
- Pricing levels on no-notice accounts have soared
- Increasing numbers of both bank and building societyaccounts have
beaten the base rate
- Distribution continues to impact pricing
- Banks are trimming their offering, while buildingsocieties have added
more products
- Banks have simplified their offering
- Established players are driving the market
- Most top providers have reduced the number of accountsthey offer
- Non-branch distribution has a long way to go
- Branch-only distribution has remained strong at close to50%
- The channel mix is more developed among banks thanbuilding societies
- Regular savings accounts
- New accounts are altering standard product features
- A spate of one year notice accounts are challengingtraditional
instant access
- Fixed rates contain high marketing value
- Pricing trends are determined by the current price war
- The average interest rate exceeds the base rate
- Banks have become much more competitive in their pricing
- Banks are beginning to build up presence
- Building societies dominate in terms of numbers
- New entrants are stepping up the pressure
- Distribution is branch-based
- Mini Cash ISAs
- Long-term, fixed rate accounts attempt to strengthen thecustomer
relationship
- Building societies are shifting their products towardsquick access,
whereas banks have extended long-term accounts
- Long-term ISAs are coupled with fixed interest rates
- Rates are becoming more competitive on all savingslevels
- Mini Cash ISAs generally offer one interest rateregardless of the
amount saved
- Building societies reward longer notice periods
- Interest rates have become more competitive since 2004
- Building societies have a much bigger presence in thissegment
- Almost all building societies offer Mini Cash ISAs
- Established competitors are expanding their productrange
- Accounts of top providers
- The combination of branch and post is a key distributionapproach
- Current accounts
- Product features
- Quarterly interest payment has become more common
- Offsetting is available through 6 competitors
- An increasing number of accounts expect a minimum offunding to be
paid in on a monthly basis
- Just under one third of accounts charge monthly fees
- Current accounts without overdraft facilities could finda promising
niche following Islamic law
- Competitive pricing has calmed down in the last twoyears
- Few current accounts offer interest rates tiered bylevel of
investment
- Interest rates have clearly moved away from the Bank ofEngland base
rate
- Few building societies compete in this segment
- Penetration of direct distribution channels isextraordinarily high for
current accounts with overdraft facility
- Foreign currency accounts
- Onshore accounts are a niche market
- Gross rates are lower on foreign currency accounts
- Offshore USD and Euro accounts
- No-notice offshore accounts dominate
- Pricing structures are characterized by traditionalfeatures
- Most accounts reward higher deposit levels
- Longer notice periods offer significantly higherinterest rates
- The competitive landscape has been fairly stable
- Top competitors are almost identical for USD and Euroaccounts
- Established players have expanded their product offering
- Onshore Euro and Euro current accounts
- Most onshore Euro accounts are geared towards wealthyclients
- Notice accounts are currently more common
- Pricing varies substantially
- Onshore Euro current accounts do not normally earninterest
- Few competitors have so far found onshore Euro accountsworth a try
- APPENDIX
- Supplementary data
- Definitions
- Average interest rate
- Base rate / discount rate
- Deposits
- Investment trusts
- Mini Cash ISAs
- OEICs
- Unit trusts
- Research methodology
- Further reading
- Savings and Investments SPP
- Interactive Databases
- Reports
- Briefs
- SPP writing team
- List of Tables
- Table 1: Branch-only accounts, split by type ofinstitution, 2006
- Table 2: Distribution continues to have a strongimpact on pricing, 2006
- Table 3: Number of accounts by type of institution,2004-6
- Table 4: Driving forces behind competitive pressure,2004-6
- Table 5: Savings account range of top providers,2004-6
- Table 6: Percentage of accounts accessible viadifferent distribution
channels, 2006
- Table 7: Analysis by type of institution: number ofaccounts and
providers, 2004-6
- Table 8: New entrants are growing the market, 2004-6
- Table 9: Analysis by type of institution: number ofMini Cash ISAs and
providers, 1999-2006
- Table 10: Established players are extending theirproduct range, 2004-6
- Table 11: Proportion of Mini Cash ISAs distributed viadifferent
channels, 2006
- Table 12: Number of current accounts with monthlyfees, 2006
- Table 13: Interest rates on current accounts withoverdraft facility,
2004-6
- Table 14: Average interest rates on current accountswithout overdraft
facility, 2004-6
- Table 15: Number of accounts by type of institution,2004-6
- Table 16: Average interest rates on offshore USD andEuro accounts with a
deposit level of USD/EUR50,000, 2006
- Table 17: Top 10 Offshore USD accounts by interestrate for a deposit of
USD50,000, February 2006
- Table 18: Top 10 Offshore Euro accounts by interestrate for a deposit of
EUR50,000, February 2006
- Table 19: Key variables for the development of the UKsavings and
investments market, 2005-10f
- Table 20: UK retail deposits, 2001-5
- Table 21: Breakdown of UK personal deposit balancesand net inflows,
2001-2005
- Table 22: UK retail deposits, 2005-2010f
- Table 23: Net inflows in UK retail deposits, 2000-4
- Table 24: Bank of England base rate, March 2000-6
- Table 25: Product segments in the UK retail depositmarket, 2004-6
- Table 26: UK retail deposit account balances by typeand institution,
2000-4
- List of Figures
- Figure 1: Value of UK deposits as part of the savingsand investments
market, 2001-5
- Figure 2: Net inflow has been continuously strong fordeposits, 2000-4
- Figure 3: Development of the Bank of England baserate, 2000-6
- Figure 4: Forecasted value of the UK savings andinvestments market,
2005-10f
- Figure 5: Market segmentation by number of accounts,2004-6
- Figure 6: Sight deposits are gaining market share,2000-4
- Figure 7: Notice period by type of institution, 2004-6
- Figure 8: Competitor market shares of retail accountbalances, 2004
- Figure 9: Product range by type of institution, 2006
- Figure 10: Product range of top competitors, 2006
- Figure 11: Weighted average rates on household timeand sight deposits,
2003-5
- Figure 12: Tiered vs. non-tiered pricing structure bytype of
institution, 1999-2006
- Figure 13: Percentage of accounts offering an interestrate at or above
base rate level, 1999-2006
- Figure 14: Distribution by product line, 2006
- Figure 15: Ordinary savings accounts by notice period,1999-2006
- Figure 16: Tiered vs. non-tiered interest rate by typeof institution,
1999-2006
- Figure 17: Average interest rates on ordinary savingsaccounts by notice
period and level of investment, 2006
- Figure 18: Percentage of no-notice savings accountsoffering an interest
rate at of above base rate level, 1999-2004
- Figure 19: Average interest rate on no-notice andinstant access savings
accounts by distribution channel, 2006
- Figure 20: Ordinary savings accounts by distributionstrategy, 2006
- Figure 21: Regular savings accounts by notice period,2006
- Figure 22: Notice periods for regular savings accountssplit by type of
institution, 2006
- Figure 23: Average interest rates on regular savingsaccounts, 1999-2006
- Figure 24: Average interest rates on regular savingsaccounts by type of
institution, 2006
- Figure 25: Number of regular savings accounts offeringinterest at or
above base rate level, 1999-2006
- Figure 26: Mini Cash ISAs by notice period, 1999-2006
- Figure 27: Mini Cash ISAs by notice period and type ofinstitution,
1999-2006
- Figure 28: Variable vs. fixed rate Mini Cash ISAs,1999-2006
- Figure 29: Tiered vs. non-tiered interest rates bytype of institution,
1999-2006
- Figure 30: Average interest rates on Mini Cash ISAs bynotice period and
level of investment, 2006
- Figure 31: Average interest rates on Mini Cash ISAs bytype of
institution, 1999-2006
- Figure 32: Average interest rates on Mini Cash ISAs bytype of
institution, 1999-2006 (cont'd.)
- Figure 33: Mini Cash ISAs by distribution channels,2006
- Figure 34: Frequency of interest payment on currentaccounts with an
overdraft facility, 2004-6
- Figure 35: Distribution of current accounts, 2006
- Figure 36: Channel mix for current accounts withoverdraft facility, 2006
- Figure 37: Number of foreign currency accounts, 2006
- Figure 38: Offshore USD accounts earn the highestinterest rates, 2006
- Figure 39: Notice period for offshore USD and Euroaccounts, 2006
- Figure 40: Notice period for onshore Euro accounts,2006
- Figure 41: Interest rate bands on onshore Euroaccounts, % gross, 2006
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