United Kingdom (UK) Retail Banking Market Sizing and Opportunities 2022
Summary
The UK retail banking sector has been resilient despite COVID-19. The UK has witnessed a double threat to the economy in the form of uncertainty and external shocks caused by the 2016 Brexit referendum and the COVID-19 pandemic. Concerns about the UK’s status within global finance remain as financial services providers look to move roles abroad. Meanwhile, the threat posed by high inflation and a cost-of-living crisis have become more pronounced in early 2022. As a result, the likelihood of a post-COVID boom has dissipated. Savings built up over the COVID period are likely to lose value due to inflation and be spent on necessities, as energy prices in particular increase by an average of over 50%.
This report explores the key trends in the UK retail banking sector and offers insight into consumer preferences and changes in behavior regarding financial services providers. It also examines channel preferences and covers overall satisfaction and importance levels of the main banking attributes. In addition, the report analyzes cross-selling opportunities by looking at customer tenures and areas of dissatisfaction.
Scope
- GlobalData’s 2021 Financial Services Consumer Survey found that the preference for current accounts from traditional providers in the UK declined by 12 percentage points (pp) compared to the previous year.
- Banks have prioritized the elements of service customers rank as most important, but greater attention should be paid to offering competitive prices and loyalty rewards as these are areas digital challengers thrive in.
- Between 2020 and 2021 online channels saw a 3pp decrease in use, while mobile channels saw a 3pp increase.
- Understand and analyze UK mortgage, deposit, and lending market trends based on present and forecast growth up to 2025.
- Analyze data from GlobalData’s 2021 Financial Services Consumer Survey by looking at consumer preferences and behaviors in the UK retail banking market.
- Identify critical data points for customer retention and acquisition through three core areas in banking: financial services provider preference and movements, digital and alternative channel preferences, and cross-selling opportunities based on tenure and satisfaction levels.
- Executive Summary
- Growth in consumer credit balances has slowed
- UK consumers’ preference for incumbents has decreased
- Key Facts
- Table Figure 1: Average cost/income ratio, Average return on assets & Average net interest margin 2015-20
- Table Figure 2: Current account market share and channel visitation daily/weekly 2017-21
- Table Figure 3: Mobile wallet users in the past 12 months.
- Market Environment
- Market balances
- Table Figure 4: Residential mortgage and retail deposit balances have increased year on year since 2010, with deposits increasing most in 2020 due to COVID-19
- Table Figure 5: Consumer credit balances have followed a similar trajectory since 2010, although personal loan balances far exceed credit card balances
- Table Figure 6: Retail deposit and residential mortgage growth will be lower than in comparable markets
- Market balances
- Macroeconomic Environment
- GDP and unemployment
- Table Figure 7: GDP is set to have grown in 2021 as vaccination programs allowed for reopening and recovery
- Table Figure 8: Inflation is expected to increase and peak in 2022, with forecasted wage growth unlikely to keep up
- GDP and unemployment
- Competitor Environment
- Retail deposits: The market share held by the top five decreased from 66% in 2010 to 58% in 2020
- Table Figure 9: Retail deposits market share quarterly growth, 2017-21
- Residential mortgages: Market share concentration among the top five decreased from 69% in 2010 to 65% in 2020
- Table Figure 10: Residential mortgages market share quarterly growth, 2017-21
- Credit cards: Market share concentration among the top five increased from 56% in 2010 to 57% in 2020
- Table Figure 11: Credit cards market share quarterly growth, 2017-21
- Personal loans: Market share among the top five settled at 36% in 2020 - the same as in 2010
- Table Figure 12: Personal loans market share quarterly growth, 2017-21
- COVID-19 has made it possible for banks to make efficiencies, but these have increased short-term costs
- Table Figure 13: Cost/income ratios, 2015-20
- Retail deposits: The market share held by the top five decreased from 66% in 2010 to 58% in 2020
- Survey Insights
- Retail banking provider preference is beginning to shift from incumbents to alternative providers
- Table Figure 14: Preference for a transaction/savings account from financial intermediaries and retailers/supermarkets grew most in the UK between 2020 and 2021
- Table Figure 15: A decline in preference for traditional providers has been seen globally
- Table Figure 16: In terms of transaction/savings accounts from traditional providers, a decline in preference was witnessed across all UK age groups - especially 18-24-year-olds
- UK consumers prefer traditional providers due to their better levels of service and branch networks
- Table Figure 17: Better overall levels of service is the top reason for choosing a traditional provider, but trust in incumbents is also a key factor
- The preference for alternatives is driven by better rates/ rewards and superior digital banking functionality
- Table Figure 18: Bett8er rates and rewards is the top reason for preferring alternatives across all age groups
- Table Figure 19: The key reason consumers prefer alternative providers is better rates and rewards
- The COVID-19 pandemic drove an increase in fraud
- Table Figure 20: Card details being stolen online is the most likely reason for being a victim of fraud
- UK banks have attempted to prioritize the attributes of service that customers rank as most important
- Table Figure 21: Satisfaction across attributes shows that banks in the UK have not been entirely successful in prioritizing the attributes that matter most to customers
- UK banks must perfect the ability to resolve minor and regular banking problems
- Table Figure 22: Regular branch users are most likely to want an omnichannel experience
- Table Figure 23: When applying for a mortgage, preference for branches is lower in the UK than comparable markets
- Cross-selling is correlated with high rates of customer satisfaction and tenure
- Table Figure 24: Proportion of consumers who have been with their financial services provider less than five years
- Table Figure 25: A tenure of five years or longer is when customers are most receptive to cross-selling
- Table Figure 26: Higher rates of cross-selling correlate with higher customer satisfaction across all attributes
- Retail banking provider preference is beginning to shift from incumbents to alternative providers
- Disruptors
- Starling Bank
- Monzo
- Revolut
- Appendix
- Abbreviations and acronyms
- Methodology
- Further reading
- About GlobalData
- Contact Us
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