UK Direct Banks 2007: Competitors for deposit-based funding

Table of Contents

• OVERVIEW
  • Catalyst
  • Summary
  • Methodology
• EXECUTIVE SUMMARY
  • Direct banks present strong rate-based competition, particularly in the variable rate savings market
    • Since August, deposit rates have stagnated
    • Online banks offer similar product features
• Table of Contents
• Table of figures
• Table of tables
• VARIABLE & FIXED DEPOSIT RATE TRENDS - DIRECT BANKS, HIGH STREET BANKS AND BUILDING SOCIETIES
  • Since August, deposit rates have stagnated
    • Among direct banks, Sainsbury' s Bank has offered the most competitive variable rates
    • High street banks' variable deposit rates lag behind those of their online competitors
    • Building societies offer strong competition in the market for online deposits
    • Building societies are prepared to market aggressively on rate
  • The market for fixed deposits sees increasing competition
    • A limited but growing number of online banks offers fixed rate investments
    • Online offers on fixed rate investments face strong competition from bricks-and-mortar banks
    • Building societies are also holding their own in the fixed investments market
    • Gradual rate increases from online banks have allowed them to compete against banks and building societies
• VARIABLE AND FIXED RATE PRODUCT FEATURES - DIRECT BANKS
  • Online banks offer similar product features
    • Interest rate guarantees and flexible payment options are common on variable rate accounts
    • Low deposit requirements and easy access features are designed to attract the average investor
  • Direct banks are developing their fixed investment ranges
    • Current providers offer a mix of terms and flexible interest payment options
    • Most fixed investments from direct banks are available from £1,000
• APPENDIX
  • Definitions
    • Annual Effective Rate (AER)
    • Direct banks
    • Fixed investment / Fixed rate savings account
    • Gross interest
    • Variable rate savings account
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Highest deposit rates offered by direct banks, gross % p.a., monthly interest, Jun-Dec 2007
    • Table 2: Highest internet savings deposit rates offered by high street banks compared to the top three direct banks, gross % p.a., yearly interest, Jun-Dec 2007
    • Table 3: Highest internet savings deposit rates offered by building societies compared to the top three direct banks, gross %, p.a., yearly interest, Jun-Dec 2007
    • Table 4: Average variable deposit rates offered by direct banks, high street banks and building societies, gross % p.a., yearly interest, Jun-Dec 2007
    • Table 5: Highest fixed deposit rates offered by direct banks, gross % p.a., Jun-Dec 2007
    • Table 6: Direct banks' variable rate savings account features - interest terms
    • Table 7: Direct banks' variable rate savings account features - eligibility and access terms
    • Table 8: Direct banks' fixed investment account features - interest and terms
    • Table 9: Direct banks' fixed investment account features - eligibility and access terms
  • List of Figures
    • Figure 1: Since August 2007, most direct banks have held their savings rates constant
    • Figure 2: Abbey' s internet savings account offered the highest rate among high street banks
    • Figure 3: Only Abbey compares favorably to the top three direct banks by rate
    • Figure 4: Bradford & Bingley' s e-savings account holds its own against direct banks
    • Figure 5: Building societies offer strong rate-based competition in direct banking
    • Figure 6: Two direct banks have introduced new fixed rate deposits since June
    • Figure 7: High street banks offer comparable rates on fixed investments
    • Figure 8: Nationwide and Bradford & Bingley offer rates in excess of the average of direct banks' rates
    • Figure 9: High street banks offer strong rate-based competition on fixed investments