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Deposit and Savings Accounts - UK - June 2017

Published By :

Mintel

Published Date : Jun 2017

Category :

Banking

No. of Pages : N/A

Savers are having a grim time, with an ultra-low base rate and rising inflation making it near-impossible to achieve a real return. The introduction of funding schemes by the Bank of England has also reduced banks’ reliance on retail deposits, removing the pressure to aggressively compete. Many savers, therefore, are turning to alternative products, such as high interest current accounts and peer-to-peer lending, in pursuit of better yields.

Table of Content

OVERVIEW
What you need to know
Products covered in this report
Household retail savings balances

EXECUTIVE SUMMARY
The market
Slower growth in household balances forecast
Figure 1: Forecast of retail savings balances, at current prices – Fan chart, 2012-22
Time deposit balances fell 4% in 2016, while all other product sectors grew
Savers struggle to achieve a real return with low interest rates and rising inflation
Government introduces new ISA products and consults on Help to Save Scheme
Companies and brands
Major banking groups and NS&I are the largest providers of retail savings products
Individual-brand market positions vary across main product types
Figure 2: Company hold savings product with, by selected product type, April 2017
Providers tweak existing products…
…and invest in new digital platforms
The consumer
More than three quarters of UK adults own a deposit or savings account
Figure 3: Ownership of cash savings products, April 2017
Online and digital dominate channel preference for most account activities
Figure 4: Preferred channel per activity, April 2017
Many savers are turning to high interest current accounts to boost their returns…
Figure 5: Ownership of competitor products, April 2017
…and are showing growing interest in equity and crowd-lending investment
Figure 6: Impact of low interest rate on motivation to save and product/asset choice, April 2017
Digital revolution paves the way for new micro-saving apps
Figure 7: Usage of or interest in digital apps/tools that help track spending, aggregate online accounts and achieve savings goals, April 2017
Good level of interest in intelligent automatic saving tools
Figure 8: Usage of or interest in intelligent automatic saving tools/apps, April 2017
What we think

ISSUES AND INSIGHTS
Older savers respond very differently to low interest rates than younger savers
The facts
The implications
Beware of overlooking the importance of branches in the drive towards digital
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Growth in household savings predicted to slow
Time deposit balances down 4% in 2016
Digital is the way forward
Tough climate for savers
Government offers new incentives

MARKET SIZE AND FORECAST
In real terms, household savings balances grew by 4.3% in 2016…
Figure 9: Household retail savings balances (non-seasonally adjusted), 2007-16
…but 2017 could see a fall in the value of retail savings
Figure 10: Household retail savings balances (non-seasonally adjusted), at current and constant prices, 2007-17
Slower growth forecast
Figure 11: Forecast of retail savings balances, at current prices – Fan chart, 2012-22
Figure 12: Forecast of total retail savings balances, at current and constant prices, 2017-22
Forecast methodology

MARKET SEGMENTATION
Interest-bearing sight accounts attract the largest proportion of retail balances
Figure 13: Household retail savings balances, by main product type, 2012-16
CHANNELS TO MARKET
Online is the preferred channel to manage a saving account…
Figure 14: Preferred channel per activity, April 2017
…but many still prefer to open an account in person

MARKET DRIVERS
Savers hit by double whammy of low interest rates and rising inflation
Figure 15: Official bank base rate and annual percentage changes in CPI and RPI, March 2008-March 2017
Situation for savers exacerbated by government funding schemes
Figure 16: Effective interest rates on household deposit balances versus official bank base rate, February 2008-February 2017
Best returns available on longer-term fixed-rate products
Figure 17: Average monthly quoted household deposit and cash ISA interest rates, March 2011-March 2017
Savings ratio fell sharply in 2016
Figure 18: Gross household savings and saving ratio, seasonally adjusted and at current prices, 2006-16
Low interest rates reduce the appeal of saving…
…and heighten interest in alternatives
Growth of peer-to-peer lending
Some savers are turning to current accounts

REGULATORY AND LEGISLATIVE CHANGES
Government consults on Help to Save scheme
Most savers no longer pay tax on their savings…
…but has the new tax-free allowance made cash ISAs irrelevant?
Government raises ISA allowance and introduces new products
Banks drag their feet on launching LISAs
A new ISA for the peer-to-peer lending market
CMA publishes final order on open banking

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Major banking groups and NS&I are the largest providers of retail savings accounts
Individual-brand market positions vary across main product types
The traditional retail savings sector sees limited product development…
…but there’s significant investment in digital innovation
Low levels of adspend

MARKET SHARE
LBG is the largest provider of savings and current accounts in the UK
Figure 19: Providers’ total retail savings balances at year end, shown on a group basis – UK, 2014-16
Nationwide is larger than most rivals when current account balances are stripped out
Provider rankings vary according to product type
Figure 20: Company hold savings product with, by product type, April 2017

COMPETITIVE STRATEGIES AND INDUSTRY INNOVATION
New product launches
NS&I unveils a new three-year guaranteed growth bond
Other recent launches
New players
New entrants from the motor finance sector currently offer some of the best rates on savings accounts
More banks emerge to take on the “challenger” mantle
Digital developments
Proliferation of personal finance apps
HSBC trials new microsaving app
UK sees the arrival of first mobile bank
Clydesdale and Yorkshire Banks launch innovative digital platform B

ADVERTISING AND MARKETING ACTIVITY
Low levels of above-the-line adspend
Figure 21: Above-the-line, online display and direct mail advertising expenditure on cash savings products, by type of product, 2012/13-2016/17
Providers invest less in TV and press advertising…
…and spend more on digital and direct mail
Figure 22: Share of above-the-line, online display and direct mail advertising expenditure on cash savings products, by type of media, 2012/13-2016/17
Halifax was the highest-spending advertiser 2016/17, even after cutting its adspend by 71%
Figure 23: Top 16 advertisers of above-the-line, online display and direct mail advertising on cash savings products, 2014/15-2016/17
Nielsen Ad Intel coverage

THE CONSUMER – WHAT YOU NEED TO KNOW
77% of UK adults have some form of savings account
Many savers are using high interest current accounts to boost their returns
There is growing interest in equity and crowd-lending investment
Digital revolution paves the way for new micro-saving apps

OWNERSHIP OF CASH SAVINGS PRODUCTS
The average saver has two different types of cash savings product
Figure 24: Ownership of cash savings products, April 2017
NS&I’s Premium Bonds continue to garner popularity
Regular savings accounts are a popular choice for the under-35s
9% of 25-34-year-olds have a Help to Buy ISA
Those with the largest savings balances show greater preference for time accounts and NS&I products
Figure 25: Ownership of cash savings products, by value of investible assets, April 2017

OWNERSHIP OF COMPETITOR PRODUCTS
30% believe they have a current account that pays 1% or more on in-credit balances
Figure 26: Ownership of competitor products, April 2017
14% have a stocks and shares ISA
5% are investing in crowd-lending
Ownership of competitor products increases with asset wealth
Figure 27: Ownership of competitor products, by value of investible assets, April 2017

IMPACT OF LOW INTEREST RATES ON SAVING BEHAVIOUR
Low interest rates reduce motivation to save…
Figure 28: Impact of low interest rate on motivation to save and product choices/considerations, April 2017
…and shift the focus on to alternative assets
13% have moved their savings to a high interest current account
Impact on motivation varies hugely across different age groups
Figure 29: Impact of low interest rate on motivation to save, by age, April 2017

INTEREST IN DIGITAL SAVING APPS
Finance apps currently attract low usage but high interest levels
Figure 30: Usage of or interest in digital apps/tools that help track spending, aggregate online accounts and achieve savings goals, April 2017
48% are interested in using a round-up and save spare change facility
Figure 31: Usage of or interest in intelligent automatic saving tools/apps, April 2017
People sometimes just need a nudge

APPENDIX – DATA SOURCES AND ABBREVIATIONS
Abbreviations
Consumer research methodology

APPENDIX – MARKET SIZE AND FORECAST
Household saving balances forecast – Best- and worst-case scenarios
Figure 32: Forecast – Best- and worst-case scenarios, 2017-22
Forecast methodology

List of Table

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