Current, Packaged and Premium Accounts - UK - June 2009

Table of Contents

• Issues in the Market
• Key issues in the market
• Product definitions
• Abbreviations
• Market in Brief
• Overall current account numbers show slight decline
  • Figure 1: Estimated number of current accounts in the UK, 2004-09
• Lloyds TSB tops current account market share
  • Figure 2: Main or primary current account providers, March 2009
• Banking turmoil creates new landscape
• Potential new entrants to the market
• Legal proceedings continue to create negative headlines
• Packaged accounts drive adspend
  • Figure 3: Proportion of adspend on ordinary and value-added (prem) accounts, 2006-08
• An innovative market
• Remote channels develop but branch remains key
• 90% of adults have a current account
• Switchers are more likely to be tempted by incentives
  • Figure 4: Reasons to change existing current account provider, March 2009
• There is still considerable resistance to packaged accounts
  • Figure 5: Attitudes towards packaged and premium current accounts, March 2009
• Overview of the OFT Investigation
• Key points
• OFT investigation dominates current account market
• OFT investigation -- two years of uncertainty
  • Figure 6: Timeline of OFT investigation into unarranged overdraft charges, May 2009
• Overdraft charges continue to create negative headlines
• Consumer perspective on overdraft charges
• Potential consequences of OFT ruling
  • Figure 7: Breakdown of personal current account revenue, 2006
• Pros and cons of a new current account model
• Internal Market Environment
• Key points
• Bank rate falls to an historic low
  • Figure 8: Official end of month bank rate and monthly bank and building society overdraft interest rate, January 2002-May 2009
• FSA to take more control of retail banking activities
• Replacing the Banking Code
• Faster Payments Service should benefit customers and providers
• OFT to investigate consumer credit market
• Broader Market Environment
• Key points
• Economic crisis brings turmoil to retail banking sector
• Impact of the recession on current accounts
• Industry thoughts on the impact of the downturn
• Consumer confidence begins to level out
  • Figure 9: Monthly consumer confidence index, March 1988-March 2009
• Financial activity indicators reveal a change in consumer priorities
  • Figure 10: Savings, investment, borrowing and debt repayment -- consumers' expected activity, quarterly indices, 2002-09 (Q2)
• Growing population will continue to drive demand for current accounts
  • Figure 11: Overview of UK population, by age group, 1994-2014
• Some 70% of the UK population are now online
  • Figure 12: British internet penetration at home/work/place of study or elsewhere, April 2002-January 2009
• Competitive Context
• Key points
• Only a small minority of population exist without a current account
• More than 7 million basic bank accounts in the UK
  • Figure 13: Number of basic bank accounts in operation in the UK, 2003-07
• Prepaid cards -- a growing niche
• Strengths and Weaknesses in the Market
  • Figure 14: Current account SWOT analysis, May 2009
• Market Size and Forecast
• Key points
• Overall number of current account numbers shows slight decline
  • Figure 15: Estimated number of current accounts in the UK, 2004-09
• Account ownership levels off, after period of sustained growth
  • Figure 16: Percentage of people with a current account, 2001-08
• Multiple account ownership is on a downward trend
  • Figure 17: Trends in number of current accounts held by individuals and estimated total number of current accounts in the UK, 2006-08
• Several factors contribute to fall in multiple account ownership
• Individual sight account numbers to continue to rise
  • Figure 18: Number of individual sight accounts (MBBG only), 2002-07
  • Figure 19: Deposits into individual sight accounts (MBBG only), 2002-07
• Overdraft advances fall as the credit crisis bites
  • Figure 20: Overdraft advances to individuals and individual trusts (MBBG only), 2002-07
• Forecast
  • Figure 21: Forecast for the number of current accounts in the UK, 2004-14
• Factors used in the forecast
• Market Share
• Key points
• Lloyds TSB remains the largest current account provider
  • Figure 22: Main or primary current account providers, March 2009
• A new landscape for current accounts
  • Figure 23: Main or primary current account providers, by main banking groups, March 2009
• Lloyds TSB is also number one main financial services provider
  • Figure 24: Leading main financial services providers brands' , 2008 and 2009
• Companies and Products
• Key points
• Packaged accounts make up around a quarter of the market
  • Figure 25: Overview of number of products in the current account market, April 2009
• The possibility of new entrants
• Segmentation drives innovation in current account market
  • Figure 26: Current accounts distribution, by provider, April 2009
• Overdraft structures overhauled
• Company profiles of major players
• Lloyds Banking Group
• Royal Bank of Scotland
• HSBC
• Santander Group
• Barclays
• Nationwide
• Brand Communication and Promotion
• Key points
• Adspend for current accounts impacted by financial crisis
  • Figure 27: Total adspend on current accounts and associated products, 2005-08
• Packaged accounts take a greater proportion of adspend
  • Figure 28: Proportion of adspend on ordinary and value-added (prem) accounts, 2006-08
• TV advertising dominates current account market
  • Figure 29: Adspend on current accounts, by media type, 2006-08
• HSBC tops the current account adspend chart
  • Figure 30: Adspend on current accounts, by top providers, 2006-08
• Channels to Market
• Key points
• Branch network remains the most used banking channel
  • Figure 31: Use of banking channels, April 2008
• Telephone banking transactions in decline...
  • Figure 32: The number of personal customers registered for telephone and internet banking, and the number of transactions, 2003-07
• ...but online transactions continue to increase sharply
• Mobile banking -- still in the early stages
• Branch numbers fall further...
  • Figure 33: Branch numbers, 2003-07 (end-December figures)
• ...but branch network integral to gaining market share
  • Figure 34: Comparison of current account market share and branch network share
• ATM numbers remain stable, but withdrawals increase
  • Figure 35: Number of ATMs and cash withdrawls (MBBG only), 2003-07
• The Consumer -- Product Ownership
• Key points
• Near universal ownership of current accounts
  • Figure 36: Ownership of various financial products and services, March 2009
• Account ownership peaks among over-35s
  • Figure 37: Ownership of current accounts and premium/packaged accounts, by age group, March 2009
• Packaged accounts appeal to an older audience
• Opportunities exist to extend ownership among those in education
  • Figure 38: Ownership of current accounts and premium/packaged accounts, by working group, March 2009
• Account ownership boosted among lower income groups
• Appeal of package accounts increases with affluence
  • Figure 39: Ownership of current accounts and premium/packaged accounts, by annual household income, March 2009
• Current accounts provide ' gateway' for cross-sale opportunities
  • Figure 40: Ownership of current accounts and premium/packaged accounts, by ownership of other financial products, March 2009
• Four in ten have more than one current account
  • Figure 41: Current account ownership -- number of current accounts, 2008
• The Consumer -- Current Account Providers
• Key points
• Lloyds TSB remains the leading current account provider
  • Figure 42: Main or primary current account providers, March 2009
• Winners and losers in the packaged account market
  • Figure 43: Ownership of current accounts and premium/packaged current accounts, by main or primary current account provider, March 2009
• Banking crisis leads to a new landscape for current accounts
• Almost 30% have a current account with the Lloyds Banking Group
  • Figure 44: Main or primary current account providers, by main banking groups, March 2009
• Lloyds Banking Group also dominates packaged/premium account market
  • Figure 45: Ownership of current accounts and premium/packaged current accounts, by main or primary current account provider (main banking groups), March 2009
• RBS and HSBC attract a younger demographic
  • Figure 46: Main or primary current account providers, by main banking groups, by demographics, March 2009
• HSBC more likely than average to attract higher earners
  • Figure 47: Main or primary current account providers, by main banking groups, by demographics, March 2009
• The Consumer -- Switching Activity
• Key points
• More than four in ten are not interested in switching
  • Figure 48: Reasons to change existing current account provider, March 2009
• Packaged/premium account holders more likely to value safety and flexibility
  • Figure 49: Reasons to change existing current account provider, by ownership of various financial products and services, March 2009
• Likelihood to switch varies between current account providers
  • Figure 50: Reasons to change existing current account provider, by main or primary current account providers (main banking groups), March 2009
• Account features provide the strongest motivation to switch
  • Figure 51: Reasons to change existing current account provider, March 2009
• Younger adults are much more likely to consider switching providers
  • Figure 52: Reasons to change existing current account provider, by demographics, March 2009
• More affluent consumers are more likely to switch accounts
  • Figure 53: Reasons to change existing current account provider, by demographics, March 2009
• Appendix -- Internal Market Environment
• Banking Code Revisions -- March 2008
• Appendix -- Brand Promotion and Communication
  • Figure 63: Current account adspend, by category, 2004-08
  • Figure 64: Current account adspend of the top providers, by media type, 2008
• Appendix -- The Consumer -- Product Ownership
  • Figure 65: Ownership of various financial products and services, by demographics, March 2009
• Appendix -- The Consumer -- Current Account Providers
  • Figure 66: Main or primary current account held, by demographics, March 2009
  • Figure 67: Main or primary current account held, by demographics, March 2009