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UK Savings 2019: Review, Forecasts, and Future Opportunities

  • ID: 4858727
  • Report
  • November 2019
  • Region: United Kingdom
  • 49 pages
  • GlobalData
1h Free Analyst Time

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FEATURED COMPANIES

  • AJ Bell
  • Cleo
  • Gatehouse Bank
  • Marcus by Goldman Sachs
  • PCF Bank
  • Squirrel
  • MORE
UK Savings 2019: Review, Forecasts, and Future Opportunities

Summary

The UK savings market has been characterized by a mixture of factors during 2019. Lower GDP and higher real wage growth have created a willingness and ability to save. Similarly, uncertainty over Brexit has led to a flight to safety from stocks and shares ISAs into cash ISAs. In terms of Net Promoter Score (NPS), First Direct leads the way, Nationwide has steadily fallen since 2017, and TSB collapsed in 2019. Meanwhile, new entrant Marcus by Goldman Sachs (Marcus) plans to introduce a budgeting and money management app for 2020 for upper emerging and mass affluent consumers. Its well-known brand and market-beating rates will put pressure on smaller banks in the short term and larger incumbents in the long term.

This report provides information and insights on the UK savings market, including details of the recent savings macro market, the competitive environment among incumbent and challenger players, customer behavior and sentiment, an analysis of recent regulatory changes and proposals and a look at the most innovative new players in the savings industry.

Scope
  • Total deposit growth is forecast to be half of the preceding five years amid falling APRs.
  • Cash ISA growth rates are set to outperform non-cash ISAs for the forecast period (2019-23).
  • Sustained growth in average real weekly wages of 2.4% - combined with low growth and a fall in consumer spending - has meant an increased appetite for saving.
  • The main savings providers have lost approximately 8% market share to newer rivals since 2012. Their total market share now stands at 67.5% and continues to fall.
Reasons to buy
  • Gain insight at both the micro and macro level of the UK savings market.
  • Learn about threats to savings providers, as well as potential opportunities such as new products.
  • Assess the latest trends and innovations in UK savings.
  • Compare the performance and strategic direction of your firm against competitors.
Note: Product cover images may vary from those shown
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FEATURED COMPANIES

  • AJ Bell
  • Cleo
  • Gatehouse Bank
  • Marcus by Goldman Sachs
  • PCF Bank
  • Squirrel
  • MORE
1. EXECUTIVE SUMMARY
1.1. Market summary
1.2. Key findings
1.3. Critical success factors

2. MARKET ENVIRONMENT
2.1. Economic conditions have led consumers to save more in spite of falling APRs
2.2. Total deposit growth over the forecast period will be half that of the preceding five years
2.3. Increased uncertainty has led to a small renaissance for cash ISAs
2.4. The cash ISA market is forecast to outperform non-cash ISAs
2.5. The outcome of Brexit will heavily influence interest rate policy
2.6. The mortgage price war has also led to falling APRs for depositors
2.7. Real wage growth has generated higher levels of saving
2.8. UK consumers are actively trying to save
2.9. Stringent rules and complexity have led banks to avoid lifetime ISAs
2.9.1. LISAs will need to change for incumbent banks to take up the product
2.10. Innovative finance ISAs face a similar fate to LISAs as P2P lenders experience a difficult year
2.10.1. Caution around P2P lending has led to low take-up of innovative finance ISAs
2.11. Pension freedom withdrawals remain popular
2.11.1. A cocktail of factors has caused the decline of annuities
2.11.2. Customers prefer the freedom and liquidity of cash savings over a pension
2.11.3. The FCA believes older consumers are being too cautious with their pension savings
2.11.4. Banks should explore a gap in the pension savings market

3. COMPETITIVE ENVIRONMENT
3.1. The market share of the main providers continues to fall
3.2. Challenger brands are competing aggressively for new business
3.2.1. OakNorth Bank
3.2.2. Atom Bank
3.2.3. Charter Savings Bank
3.2.4. Shawbrook Bank
3.2.5. Al Rayan Bank
3.2.6. PCF Bank
3.2.7. Marcus

4. CONSUMER BEHAVIOR
4.1. Incumbent banks have closed a third of UK branches in five years
4.1.1. Older consumers are least likely to change provider or behavior when affected by closures
4.2. First Direct leads customer sentiment while TSB flounders
4.2.1. Nationwide is first among the incumbent providers but its NPS has fallen 17 points in two years
4.2.2. Support for TSB has collapsed in 2019
4.2.3. Low channel satisfaction drags down Santander and Halifax
4.3. Assisted saving tools lack support from even keen savers
4.4. There are early signs that mobile and IM saving are set to grow

5. REGULATORY ENVIRONMENT
5.1. The FCA believes savers are being penalized for loyalty
5.1.1. A basic savings rate is likely to be detrimental to the savings market
5.1.2. Savers and banks could both benefit from a savings account switching service

6. INNOVATION
6.1. Budgeting and auto-saving features can help consumers save without conscious effort
6.1.1. Innovators are using a simple combination of open banking, customer transaction data, and contemporary banking infrastructure
6.1.2. Selling financial and other products to customers is innovators' main revenue source
6.2. Cleo has grown the fastest of the innovators
6.2.1. As well as its level of insight, Cleo's big advantage is its social media savvy
6.3. Plum has positioned itself for users who want to save without economizing
6.3.1. Plum Plus is mandatory for the investment features
6.4. Chip customers can earn up to 5% interest
6.5. Oval Money offers behavioral budgeting and saving
6.5.1. Oval Money's rules are unlikely to help customers accumulate large, regular savings
6.6. Squirrel caters for a niche market
6.7. Tally Money threatens banks' easy access deposits with older, affluent consumers
6.7.1. A decade of low interest rates has spawned inflation-protection products
6.8. Raisin is expanding across multiple physical and online markets
6.9. Incumbent providers have already begun to copy the innovators
6.9.1. Santander Wallet
6.9.2. Lloyds Banking Group's Save The Change
6.9.3. NatWest's Mimo
6.10. Other innovative news
6.10.1. Nationwide PayDay SaveDay
6.10.2. Monzo offers salary sorter and budgeting tools

7. APPENDIX
7.1. Abbreviations and acronyms
7.2. Methodology
7.2.1. 2019 Banking and Payments Survey
7.3. Secondary sources
7.4. Further reading

List of Figures
Figure 1: Cash ISAs are forecast to grow faster than non-ISA deposits over the forecast period
Figure 2: For the last 18 months, consumers have made neutral or positive deposits in cash ISAs
Figure 3: As both ISA and non-ISA APRs fall, the gap between them widens
Figure 4: Cash ISA and non-ISA deposit growth is set to slow over the forecast period
Figure 5: Market expectations have varied significantly due to the perceived likelihood of a no-deal Brexit
Figure 6: Rates on easy access and fixed-rate bonds have fallen since January 2019
Figure 7: Rising real wages and weak growth will lead consumers to save more
Figure 8: Low inflation, rising wages, and heightened uncertainty have assisted consumers' ability to save
Figure 9: Skipton Building Society holds the lion's share of LISA accounts
Figure 10: Several P2P lenders have ceased operations in the last few years after their business model failed
Figure 11: Lloyds remains dominant, but it has lost 4.4pp market share over the review period
Figure 12: Al Rayan Bank offers the best rate for one-year fixed-rate bonds
Figure 13: Most incumbent banks have closed hundreds of branches since 2015
Figure 14: The majority of customers use digital channels to manage their savings
Figure 15: First Direct and Nationwide lead in terms of consumer sentiment
Figure 16: Customers exclusively choosing a bank for saving is a useful proxy for a good savings provider
Figure 17: Money saving tools are the most popular of the savings features, but still lack support
Figure 18: Online banking remains the dominant method for managing a savings account
Figure 19: Supply and demand side propositions from the FCA
Figure 20: Potential savings account switchers are the same demographic as potential current account switchers
Figure 21: The Cleo chatbot has been designed to be witty, informative, and appealing to 20-30 year olds
Figure 22: Consumer reviews said they were put off by the constant memes and notifications from Chip
Figure 23: Consumers investing in cash have faced a decade of almost constant negative real returns
Note: Product cover images may vary from those shown
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  • Marcus by Goldman Sachs
  • NS&I
  • Lloyds Banking Group
  • HSBC
  • Skipton Building Society
  • Hargreaves Lansdown
  • Nutmeg
  • AJ Bell
  • Moneybox
  • Zopa
  • RateSetter
  • Quackle
  • Encash
  • GraduRates
  • First Great National
  • Fruitful
  • FundingSecure
  • Santander
  • Nationwide
  • Barclays
  • RBS Group
  • OakNorth
  • Monzo
  • Atom Bank
  • Charter Savings Bank
  • One Savings Bank
  • Shawbrook Bank
  • Al Rayan Bank
  • PCF Bank
  • Bank of London and Middle East
  • Gatehouse Bank
  • Ikano Bank
  • ICICI UK
  • State Bank of India
  • Axis Bank
  • Zenith Bank
  • QIB UK
  • Masthaven Bank
  • Union Bank of India
  • Nottingham Building Society
  • Swansea Building Society
  • Coventry Building Society
  • Bank of Scotland
  • Yorkshire Building Society
  • Halifax
  • Clydesdale
  • Ulster Bank
  • First Trust
  • Bank of Ireland
  • Dankse Bank
  • Virgin Money
  • Cleo
  • Plum
  • Amazon
  • Facebook
  • Google
  • Chip
  • Oval Money
  • Squirrel
  • Tally Money
  • Raisin
  • ING
  • Yolt.
Note: Product cover images may vary from those shown
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