Current Accounts - UK - June 2007

Table of Contents

• Issues in the Market
• Abbreviations
• Market in Brief
• Demand for current accounts is expected to remain strong over the coming years
• People are going online more regularly to manage their account
• Approximately one in ten adults do not have a current account
• The number of current accounts is estimated to have surpassed 74 million in 2006
• The big five continue to reign supreme
• First Direct is the leading advertiser of current accounts
• As branch networks shrink, remote banking grows in popularity
• Poor service will send customers packing
• Broader Market Environment
• Key points
• A growing population will fuel demand for current accounts
  • Figure 1: UK population, by age group, 1992-2012
• Another 320,000 people are expected to enter the workforce by 2012
  • Figure 2: UK workforce and employment, by gender, 2002-12
• Savings activity is expected to increase gradually in the coming years
  • Figure 3: PDI, consumer expenditure, savings and the savings ratio, 1992-2012
• Interest rates are at their highest level since 2001
  • Figure 4: The Bank of England' s base rate, February 2003-May 2007
• At least 61% of adults have access to the Internet
  • Figure 5: British Internet penetration at home/work/place of study or elsewhere, by socio-economic group, 2001-06
• Over a fifth of Internet users have recently browsed current accounts online
  • Figure 6: Websites browsed and purchased from, by type of financial product, 2002-06
• Internal Market Environment
• Key points
• Fees account for a growing proportion of bank income
  • Figure 7: Sources of bank income, net interest and non-net interest, 2000-05
• Overdraft fee investigation prompts consumer movement to reclaim ' unlawful' charges...
• ...and a new investigation will examine the entire structure of personal banking...
• ... which may result in the end of ' free' banking
• Banks are under pressure to accelerate the cheque clearing process
• Competitive Context
• Key points
• What alternatives?
• Basic bank accounts: a stepping stone to current accounts
• Over 153,000 basic bank accounts were opened in the last quarter of 2006
  • Figure 8: Total number of basic bank accounts opened, net of closures, April 2003-December 2006
• Strengths and Weaknesses
• Would you like motor insurance with that?
• Sources of revenue are running dry
• Market Size and Forecast
• Key points
• Over £461 billion is held in personal bank accounts
  • Figure 9: Value of personal bank accounts (MBBG only), 2000-05
• Why not earn interest?
  • Figure 10: Number of personal bank accounts (MBBG only), 2000-05
• Multi-account ownership has helped to drive up account numbers
  • Figure 11: Number of current accounts, 1998-2006
• Borrowing on overdraft is rapidly gaining popularity
  • Figure 12: Number of overdraft advances (MBBG only), 1998-2005
• The number of debit cards in circulation has grown by over a third
  • Figure 13: Number of cards in issue, 2000-05
• Forecast
  • Figure 14: Forecast of the value of personal bank accounts (MBBG only), 2006-12
  • Figure 15: Forecast of the number of current accounts, 2006-12
• Factors used in the forecast
• Market Share
• Key points
• Smaller banks have not managed to increase their share
  • Figure 16: Volume share of current account market, 2003-07
• Poaching tactics
• Companies and Products
• Competitive rates are available to those who look for them
  • Figure 17: Examples of leading interest-bearing current accounts, 2007
• Too many types of account?
  • Figure 18: Bank accounts offered by Halifax, 2007
• Banks target specific consumer groups through sub-brands
  • Figure 19: Selected current account parent and subsidiary brands (MBBG only), May 2007
• Company profiles
• Lloyds TSB
  • Figure 20: Lloyds TSB company profile, 2002-05
• RBS Group
  • Figure 21: The Royal Bank of Scotland/NatWest company profile, 2002-05
• Barclays
  • Figure 22: Barclays company profile, 2002-05
• HSBC
  • Figure 23: HSBC company profile, 2002-05
• HBOS
  • Figure 24: HBOS company profile, 2002-05
• Brand Communication and Promotion
• Key points
• Over £28 million was spent advertising current accounts in 2006/07
  • Figure 35: Advertising expenditure on financial services, by sector, 2006/07
• First Direct is one of the leading current account advertisers
  • Figure 36: Top ten current account advertisers, 2002/03-2006/07
• A significant proportion of current account adspend went to TV adverts
  • Figure 37: Advertising expenditure on current accounts, by media type, 2006/07
• Channels to Market
• Key points
• The branch network continues to shrink
  • Figure 38: Number of branches, by bank, 1999-2005
• Backlash against branch closures and bans
• But is a branch renaissance on the cards?
• The number of fee-charging ATMs continues to surge
  • Figure 39: Number of ATMs, 2000-05
• ATM cash withdrawals are on the rise
  • Figure 40: Number of bank cash dispensers/ATMs and cash withdrawals, 2003-05
• ATMs allow customers to do more than withdraw money
  • Figure 41: Proportion of ATMs with additional facilities, banks and building societies only, 2005
• Are consumers logging in more regularly to check their account?
  • Figure 42: The number of personal customers registered for telephone and Internet banking and the number of transactions, 2001-05
• Telephone banking: popular with banks, not so popular with customers
  • Figure 43: Number of transactions by telephone, 2001-05
• The number of telephone banking transactions has begun to stagnate
  • Figure 44: Number of telephone and Internet banking transactions, 2001-05
• Balance information queries were the most common type of online transaction in 2005
  • Figure 45: The number of transactions by computer, 2001-05
• The Consumer -- Product Penetration
• Key points
• Survey background
• Latest survey suggests increased take-up of current accounts
  • Figure 52: Ownership of current accounts -- summary of results, 2006 and 2007
• The big five dominate
• The cross-selling advantage...
• ... but there are alternative approaches
• Lloyds TSB has the largest share of customers
  • Figure 53: Main current account provider (re-based), 2006 and 2007
• To pay or not to pay -- the First Direct way
• Loss of some customers
• Others could follow suit
• NatWest and RBS have the greatest success attracting ABs
  • Figure 54: Customer profile of the top seven current account providers, by gender, age and socio-economic group, March 2007
• Implication and opportunity
• Targeting the youth market
• Implication and opportunity
• Abbey and HBOS appeal to families
  • Figure 55: Customer profile of the top seven current account providers, by marital status, lifestage, Mintel' s Special Groups and tenure, March 2007
• Implication and opportunity
• HSBC' s customer base is biased towards the higher income groups...
  • Figure 56: Customer profile of the top seven current account providers, by working status, gross annual household income, region and ACORN category, March 2007
• Implication and opportunity
• ...and records the highest Internet penetration
  • Figure 57: Customer profile of the top seven current account providers, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2007
• Implication and opportunity
• Relationships with retailers
• The merits of a multi-brand approach
• The Consumer -- Switching Behaviour
• Key points
• Assessing customer churn
  • Figure 58: Current account switching activity, 2006 and 2007
• Implication
• Lloyds TSB and Barclays grab the largest share of recent ' switchers'
  • Figure 59: Current account provider, by switching activity, March 2007
• Various strategies used to acquire new customers
• Barclays targets regular savers
• The under-35s are most likely to switch
  • Figure 60: Current account switching activity, by gender, age, socio-economic group, gross annual household income and region, March 2007
• Implication and opportunity
• Internet users are also more prone to switching
  • Figure 61: Current account switching activity, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2007
• Implication and opportunity
• The Consumer -- Channel Preference
• Key points:
• Most switchers visited a branch to open their new account...
  • Figure 62: Channel used to arrange new current account, 2006 and 2007
• Implication and opportunity
• ...but the Internet is growing in importance
  • Figure 63: Channel used to arrange new current account, by how long ago switched, March 2007
• A fifth of those using ' non-branch' channels joined First Direct
  • Figure 64: Provider switched to, by channel used to arrange new current account, March 2007
• Of the big five, Barclays is best at capturing online switchers
  • Figure 65: Channel used to arrange new current account, by existing provider (top five only), March 2007
• Women are less likely than men to open a current account online
  • Figure 66: Channel used to arrange new current account, by gender, age, socio-economic group, March 2007
• Implication and opportunity
• Online switchers are more likely to live in London or the South
  • Figure 67: Channel used to arrange new current account, by region, March 2007
• Implication and opportunity