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The UK Retail Banking Market Outlook: Competitive Advantage Through Customer Retention
Business Insights, May 2004
By market capitalization four of the five largest European banks are based in the UK; the UK retail banking market is buoyant with the consumer credit market producing a record year for mortgages and credit cards in 2003. Low interest rates have made borrowing inexpensive and forced lenders to look to other means to compete than simply price. Which products show most potential and how should they be delivered in order to acquire market share? What other lessons can be learned from this fiercely competitive market. The UK Retail Banking Market Outlook is a new management report that provides a comprehensive overview of the UK retail banking sector placed in a European context. The report analyses the market from an investor, institutional and consumer perspective to provide a complete understanding of the main issues the UK retail banking market. Key European market data is included to allow comparison of the top five UK banks with the size and growth of personal lending, mortgages, pay later cards, current and deposit accounts in France, Germany, Italy, Spain and the UK as a whole.
Key issues addressed in this new management report
- The implementation of 14 EU legislative measures in the UK before 2008
- The effect of historically low interest rates on the major banking products
- Competitive tactics in the personal lending market
- The impact of the EC Consumer Directive on card issuers
- The future strategies of the major European banks
Key issues discussed in this report:
- Competitive tactics in the personal lending market. Who are the new entrants and how are they entering the market? Can new entrants rely on price to compete? Which price acquisition strategy is proving most successful in present market conditions?
- The EC Consumer Directive will affect all card issuers, with new constraints on marketing, pricing and contracts
- The UK housing market boom and Bank of England base rates. How recent and future changes in Bank of England base rates affect the mortgage market
- Consolidation in the UK deposits market. Does size create competitive advantage, or can new technology remove the barriers for new and smaller competitors?
- Future strategies of the major European banking competitors. How have they developed in the past, where do they currently operate, what are their strengths and weaknesses and what can be expected in the future?
This report answers the following questions:
- How large are the personal lending, cards, mortgages and deposits market in UK? How have these markets grown over the last five years and how does this compare to Germany, France, Italy and Spain?
- What are the key characteristics of the leading European retail banks? What operations do they have and where? What strategies lead them to their present position in the market?
- What were the main drivers of recent growth in the UK personal lending market? How will impending regulatory changes affect the profitability of this sector?
- How have low interest rates influenced the UK mortgage market, and what affect will future changes have on the mortgage and other product markets?
- Can profit be maintained in the UK deposits market in a climate of low interest rates? Which is the most cost effective route to market?
Key findings of this report:
- Changes to the UK Consumer Credit Act will affect all lenders not simply smaller and unscrupulous lenders
- Reform of the rules of settlement (abolition of Rule of 78) will introduce a ‘fairer and more accurate’ method of calculating redemption penalties, as the Department of Trade and Industry feels the present penalties charged are excessive
- The key driver of the impressive growth in the UK unsecured loan market was the competition created by new entrants from the US and brand extenders from the UK
- The UK housing boom was not only driven by low interest rates and low unemployment but also increased competition
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