Abstract
There are two main issues that shape the focus of this report: a potential increase in customer churn and maximising per customer profitability. While the current account market has not traditionally experienced high levels of customer churn, the fact remains that best buy tables and aggregator sites now make it very easy for consumers to compare products. Given the high base rate environment, Mintel predicts that more consumers may be keen to secure a competitive rate of interest in their current account. However, in light of the current economic climate, consumers will be less keen to borrow - which will present some cross-selling challenges for providers.
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
