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Executive Summary

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EXECUTIVE SUMMARY

A wave of change is sweeping through personal banking. In 1998, a number of new entrants to the UK market arrived from retailing, insurance and from building society conversions. These newcomers have already captured over £6bn in depositors' money as savers switched allegiance from the traditional High Street banks in search of a better deal.
So far, the new telephone banks have concentrated on the savings market in which they have captured an estimated share of just over 1 percent, but the environment is set to become tougher as more new entrants arrive from overseas and non-banking segments, and move into mortgages, insurance and personal pensions.
Key Note estimates that the total UK market for personal banking in 1998 was £143.8bn at current prices, and even in today's somewhat uncertain economic environment, this will increase at current prices to £173bn by the year 2003.
At the moment, the traditional banks enjoy the protective cushion of holding a dominant share of the current account business, but how much of this they will lose to the new-style banks and who will ultimately win the battle for personal banking business in mortgages, insurance services and pensions is by no means certain.
The Internet is likely to have a significant effect and 41 percent of European and US bankers see it as the major battleground of the future. Also, expansion in digital television, hand-held computers and mobile telephone Internet access is just around the corner, bringing new ways for people to bank. Many of the major High Street banks do not feel the public are ready for this yet; they are adopting a `wait-and-see' approach, dipping their toes into the market with a limited array of PC banking initiatives.
The companies most likely to succeed in the changing world of personal banking are those able to build lasting relationships with customers. Whether they win or lose, most agree the new banks have already created a stir, which at the very least will force traditional banks to look to their laurels.
A significant effect of the changes taking place will be the redistribution of the UK's personal banking business over an increasing variety of distribution channels. Another effect will undoubtedly be a dilution of market shares as a result of the number and type of financial institutions likely to be attacking the market.

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TABLE OF CONTENTS

Executive Summary

Market Definition

INTRODUCTION

MARKET SECTORS

MARKET SEGMENTS

EUROPE

MARKET TRENDS

Table 1: UK Payment and Cash Acquisition Volumes (billion), 1997

Market Size

INTRODUCTION

THE TOTAL MARKET

MARKET SECTORS

A GLOBAL PERSPECTIVE

REGIONAL PERSPECTIVES

Table 2: Total UK Market for Personal Banking (£m), 1994-1998

Table 3: UK Retail Deposits and Cash Management in M4 (£m annual flows), 1994-1998

Table 4: UK Risk Management Premiums (£m), 1994-1998

Table 5: UK Personal Pensions Market by Premium Value (£m), 1994-1998

Table 6: UK Net Mortgage Lending (£m), 1994-1998

Table 7: UK Consumer Credit and Other Personal Sector Lending (£m), 1994-1998

Industry Background

INTRODUCTION

THE IMPORTANCE OF DISTRIBUTION

INDUSTRY CONCENTRATION

DISTRIBUTION

EMPLOYMENT

TRADE ASSOCIATIONS

Table 8: Personal Banking Activities in the UK Market by Company Type and Services Offered by Traditional Retail Banks, 1998

Table 9: Personal Banking Activities in the UK Market by Services Offered by Converted Building Societies, 1998

Table 10: Personal Banking Activities in the UK Market by Services Offered by Mutual Building Societies, 1998

Table 11: Personal Banking Activities in the UK Market by Services Offered by Insurance Companies, 1998

Table 12: Personal Banking Activities in the UK Market by Services Offered by Retailers, 1998

Table 13: Personal Banking Activities in the UK Market by Services Offered by Other Financial Institutions, 1998

Table 14: Branch Networks Leading UK Banks and Building Societies, 1993-1997

Table 15: The UK ATM Network in Banks and Building Societies (number and million), 1993-1997

Table 16: Staff Numbers in Major UK Banks and Building Societies, 1993-1997

Table 17: Employment in the UK Insurance Sector (000), 1993-1997

Competitor Analysis

THE MARKETPLACE

MARKET LEADERS AND THEIR BRANDS

ADVERTISING AND PROMOTION

Table 18: Comparative Performance of Major UK Retail Banks ( percent and £m), 1995-1997

Table 19: New-Style Banks Savings Account Balances (£m), 1998

Table 20: Main Media Advertising Expenditure on Personal Banking and Financial Services (£000), 12 Months to June 1998

Table 21: Summary of Personal Banking Main Media Advertising Expenditure (£000), 12 Months to June 1998

Strengths, Weaknesses, Opportunities and Threats (SWOT)

INTRODUCTION

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

DEMOGRAPHIC TRENDS

HOUSEHOLD AND PERSONAL INCOMES

TELEPHONE BANKING IN THE UK

ACCOUNT OWNERSHIP

RISK MANAGEMENT

LIFE INSURANCE

PROPERTY INSURANCE

PRIVATE HEALTH AND MEDICAL INSURANCE

SPENDING ON INSURANCE

PERSONAL PENSIONS

MORTGAGES

DEMOGRAPHICS

Table 22: Number of UK Households by Size and Structure (million), 1994-2002

Table 23: Number of Households and Persons with Total Incomes in Great Britain ( percent and per annum gross), 1998

Table 24: Use of Telephone Banking Services in the UK (000 and percent of adults), 1994 and 1998

Table 25: Use of Telephone Banking Services by Time of Day ( percent), 1998

Table 26: Share of Current and Instant Access Accounts, ATM, Credit and Debit Cards - Mutual Building Societies, New Banks and Traditional Banks (number

and percent), 12 Months to March 1998

Table 27: Life Assurance Taken Out by Adults in Great Britain ( percent), 12 Months to March 1994 and 1998

Table 28: Life Assurance Taken Out by Adults in Great Britain ( percent), 12 Months to March 1994 and 1998

Table 29: Insurance of Home Property and Contents by Adults in Great Britain ( percent), 12 Months to March 1994 and 1998

Table 30: Private Health and Medical Insurance by Adults in Great Britain ( percent), 1994 and 1998

Table 31: Average Yearly Expenditure by UK Households on Insurance, 1993-1996/1997

Table 32: Ownership of Pensions by UK Adults (000 and percent), 1994 and 1998

Table 33: Expenditure on Pensions by Average UK Household (£ and percent), 1997/1998

Table 34: Types and Source of Mortgages Owned by Adults in Great Britain ( percent), 1993-1998

Table 35: Household Projections - England Only, 1991-2006

Table 36: Number of Households in England by Structure (million), 1981-2006

Outside Suppliers to the Industry

TECHNOLOGY

CROSS-SELLING SOFTWARE

NEW CHANNELS

YEAR 2000 BUG AND THE EURO

ATMS AND SMART CARDS

TRAINING

SELECTION AND REMUNERATION

Current Issues

BANKING INDUSTRY REVIEW

BARCLAYCARD

CUSTOMER COMPLAINTS

CUSTOMER PROFILING

HOME CASH POINTS

LLOYDS TSB

DIGITAL TELEVISION SERVICES

CO-OP SMART ISAS

NATIONAL SAVINGS BANK

AXA BUYS GUARDIAN ROYAL EXCHANGE

CHELSEA BUILDING SOCIETY

PERSONAL FINANCES

Forecasts

INTRODUCTION

FORECASTS 1999 TO 2003

Table 37: Forecast for the UK Market for Personal Banking at Current Prices (£bn), 1999-2003

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HOPPENSTEDT BONNIER PLC

GOVERNMENT PUBLICATIONS

OTHER SOURCES

Text © 1999 Key Note

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Last updated by Jacob van Eldik 20th February 2000