2015 will be remembered as the year banking was reshaped by past and present building societies. The culture and values of building societies appear to be winning the hearts and minds of consumers.
In the Q1 2016 JGFR UK Banking Barometer current and former building societies occupy 2 of the Top 3 main financial services providers (MFSPs) positions, and 3 of the Top 6 positions. This compares with none in the Top 3 MFSPs, and 2 in the Top 6, in Q1 2015. Overall in the Q1 Banking Barometer, named past and present building societies had a 35% MFSP share, up from 28% a year ago.
For the first time since the survey began in 2003, brand Halifax edged ahead of sister brand Lloyds Bank as an MFSP, and into second place behind MFSP leader in Q1, Barclays. Slightly fewer people (90%) cited having an MFSP, down from 93% in Q4 and Q1 2015, and slightly above the long term average of 89%.
Of people having an MFSP, the vast majority (89%, 90% Q4) cite one of the top 10 banking brands (including Nationwide), well 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-with banking brands.
Share of people with a top 10 main financial services provider brand 2003-2015
The top 5 MFSP brand share is 62%, up slightly on Q4 and unchanged on a year ago. It is notable for the shift in its composition over the period, with Halifax in second position as an MFSP and Santander third. A year ago Santander and Halifax were equal 4th.
There is little evidence of any of the new current account-offering brands in the survey – Tesco Bank, Virgin Money, M&S Money and the Post Office. Together they have a 0.6% MFSP share.
Over the past year Santander, Nationwide and Halifax are the main gainers, NatWest, Royal Bank of Scotland and HSBC the main losers.
Santander is alongside Barclays the leading MFSP in 2015, although the former’s MFSP share has fallen back in the latest survey. This may reflect a new charging policy on its flagship 123 Account.By banking group, Lloyds Banking Group maintains its leading position as an MFSP with a share of 27% (26% September) well ahead of RBS (15%, 12% September) in second position.
Regionally Santander, Halifax and Nationwide have made inroads into the territory of the high street banks, especially in the North, Midlands and Northern Ireland.
In the South East competition is particularly fierce with 6 MFSPs each having between 9-14% share. With 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. first direct and Nationwide have the most active customer bases in prospect.
Product demand among customers varies greatly between MFSPs. Demand for savings, investment & life & pension products is greatest among first direct, Co-operative Bank and Nationwide customers; HSBC has the highest proportion of borrowing customers; first direct and NatWest have the highest proportions of customers intending repaying / paying down debt.
With competition set to intensify as more challenger banks are launched, several existing banks are set to change hands including the branch-based Clydesdale and Yorkshire brands with an MFSP share of around 1.5%.
As several banks consider re-entering the financial advice space, potentially becoming main financial services advisers (MFSA) in addition to their MFSP status (in 2015, 9% of MFSPs are also regarded by customers as their MFSA), one new challenger MFSP has emerged from the self-directed / advisory investment community – Hargreaves Lansdown - eclipsing new current account based challenger banks and seemingly well placed to grow, given the shift to people having control of their pension pots.
Commented John Gilbert, CEO of JGFR:
“Further evidence of the shift in banking underway is found in the Q1 UK Banking Barometer. Past and current building societies turned banks have been the success story of 2015 taking MFSP share from the ‘Big 4’ high street banks. Part of this may be due to strong demand for mortgages and savings products requiring branch-based face-to-face contact, the demand for which is set to continue."