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Home arrow Marketing Research News arrow Latest Market Research Findings arrow Where have the challenger banks gone?
Where have the challenger banks gone? PDF Print E-mail
Written by JGFR   
04 Nov 2015

Despite the welter of activity in the retail banking space the Q4 JGFR UK Banking Barometer finds no evidence of any progress of the new challenger bank brands (those with current accounts launched in the past 2 years).

Where there has been great change is among the existing main banking brands where Santander, Halifax and Nationwide have taken market share as main financial services providers (MFSPs) from the major high street bank brands (Barclays, Lloyds Bank, HSBC and NatWest).

Overall in the Q4 Barometer, a near-record 93% of adults cite having an MFSP, up from 92% in Q3 and a year ago.

Of people having an MFSP, the vast majority (89%) cite one of the top 10 banking brands (including Nationwide), slightly down from 90% in Q3, but above the long-term average of 85%. Since the easier switching service was introduced the effect seems mainly to have been to see greater switching to what many people will regard as building society-turned bank brands.

Share of people with a top 10 main financial services provider brand 2003-2015

 Where have the challenger banks gone?

The top 5 MFSP brands share is 61%, down slightly on Q3 and a year ago, but is notable for the shift in its composition over the period, with Santander the current leading MFSP brand and Halifax in fourth position. A year ago Santander was fifth and Halifax not in the top 5 brands.

Together the new current account offering brands named in the survey – Tesco, the Post Office, M&S Money and Virgin Money have a 0.5% MFSP share.

Having a branch network helps establish a brand as a potential MFSP. Following the divestment of TSB Lloyds Bank’s MFSP share fell by around 3%; the TSB MFSP share has hovered around this level providing a springboard for the new owners to grow. A similar situation may face the branches to be re-branded Williams & Glynns in the RBS divestment, although the resultant MFSP share is likely to be lower.

Top 10 Main financial services providers, September 2015, 4-quarter moving average Q1-Q4 2015

Where have the challenger banks gone?

Over the past 2 years Nationwide has moved alongside the other 6 brands to form an MFSP group of 7 brands that are far ahead of the next tier of MFSPs, led by Royal Bank of Scotland, first direct, TSB and Co-operative Bank. In the past 2 quarters Santander has moved into pole position as an MFSP for the first time, buoyed by the success of the 123 account.

By banking group, Lloyds Banking Group maintains its leading position as an MFSP with a share of 26% (25% June) well ahead of Santander (15%, 13% June) in second position.

Regionally Santander, Halifax and Nationwide have made inroads into the territory of the high street banks, especially in the South and East.

With very strong financial activity in prospect in the coming months, all MFSPs should see good business volumes with those with the most active customer bases the best placed. HSBC have historically had among the most active customer base.

Product demand among customers varies greatly between MFSPs with demand among Nationwide’s customers for cash based savings products far greater than among any of the other leading providers.

Among Santander customers they have a much greater demand for life & pension products, which may reflect the fact that more Santander customers (75% v 62% all adults) expect to live / have lived for over 20 years in retirement*.

With charities greatly in the public eye over recent weeks and banks increasingly making it easier for customers to give to charities*, greatest MFSP givers to charities are found among Co-operative customers (93%), Royal Bank of Scotland and HSBC customers (83%) compared to 77% overall.

Far more customers of Nationwide (32% v 24% overall) intend making a lump sum contribution in the coming year, while more HSBC and Royal Bank of Scotland customers (55% v 47% overall) have raised funds for charities.

Commented John Gilbert, CEO of JGFR:

“The Q4 Banking Barometer shows the main bank brands continuing to dominate as main financial services providers with little sign of a new wave of challengers. Part of the reason is that while the digital transformation of banking is generating considerable high-profile Fin-tech activity and absorbing increasing amounts of capital as new banking start-ups emerge, the human aspects of banking are too easily overlooked; which is why access to a branch network and qualified professionals will continue to be the key to being designated a main financial services provider”

Last Updated ( 04 Nov 2015 )
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