The past 12 months has seen a shift away from the high street banks as main financial services providers (MFSPs).
Product mis-selling, together with the desire for retail and investment banking activities to be split, are factors behind the shift. There is also growing pressure from many consumer campaigning bodies for people to ditch the high street banks.
In the 39th quarterly UK Banking Barometer commissioned from GfK NOP by JGFR there is evidence of the public making this move, although for the vast majority of customers inertia, and a sense of convenience, familiarity and loyalty will have prevailed.
The summer UK Banking Barometer found both a fall over the past year in the market share of the leading top ten brands, particularly the top 5 brands, but also the loss of confidence in having a main financial services provider.
For the first time since December 2007 after the collapse of Northern Rock, there is a notable drop in people who have an MFSP. On average around 11% of consumers have no MFSP; the latest survey found nearly 15% cited no MFSP, a figure slightly below the 16% recorded in December 2007 and down on 10% in March 2012.
For much of 2008 people became more uncertain about MFSP’s but following the bank bail outs of autumn 2008 some level of confidence returned as people sought safe havens for their accounts.
Since the underlying GfK survey was undertaken in the first two weeks of June, two crises have rocked the sector – the bungled software upgrade at RBS and the LIBOR rate fixing scandal at Barclays. Both events are likely to see further falls in customer defections.
In the past five quarters the proportion of people with an MFSP and using one of the top ten banking brands has reduced from 89% to 86% on a 4-quarter moving average basis. Comparing actual quarterly market share year-on-year shows a drop from 89% in June 2011 to 84% in June 2012.
Comparing just the top 5 brands the situation shows a similar trend – on a 4-quaerter moving average sliding from 65% to 62% while on a year-on-year comparison the decline is greater, from 65% to 60%.
In the past year most of the major banks have suffered a fall in market share. Among the challenger brands the Co-operative Bank shows the most gain. Its customer base is among the most active.
With negotiations to re-start on its acquisition of some 600 Lloyds TSB branches it should become a leading challenger brand.
The latest survey shows neither Tesco Bank nor Virgin Money has made any inroads into being a major financial services provider as yet. The recent announcement that M & S is to offer currentaccount services through selected branches would appear to be more a white-labelling of an HSBCprovided current account.
Having a branch network will help, with the Post Office, set to introduce a current account next year, well-placed. A small number of consumers already regard the Post Office as their MFSP. Research by JGFR/GfK early this year found almost a half of people still use a branch in researching, taking out or setting up new financial services or products with 29% using a named relationship manager. Having someone familiar to engage with is important for many people in their main financial provider relationship.
Commented John Gilbert, Chief Executive of JGFR:
“The final countdown for major UK banks in their current structure is underway. The public mood is set to quicken such change, but with a major proviso – the safety of funds. Having an account with a semi or fully taxpayer owned organisation provides greater security. In the current highly uncertain financial climate such a consideration may gain reluctant customer support”
The UK Banking Barometer is part of the Financial Activity Barometer that measures consumers intended savings, investment and borrowing activity in the next 12 months, commissioned by JGFR from GfK NOP among 2,000 adults aged 16+ quarterly. The survey has been running since March 2003.
The latest survey took place among a sample of 2,003 adults aged 16+ between 8-17 June 2012 representative of the UK population by telephone
The UK Banking Barometer will be published on Friday July 13th
Chart: Proportion of adults without a main financial services provider March 2007 – June 2012, UK
Please visit www.jgfr.co.uk for more information
6 July 2012