Page 1

UK RETAIL BANKER w www.rfigroup.com t twitter.com/RFiMediaGRB

CEO & Co-Founder, LendInvest

Mastering The Balance Of Fin and Tech in home loans

RFi INSIGHT

INTERVIEW

INTERVIEW

PAYMENTS & DIGITAL

06 The furure of the UK mortgage market

09 Christian Faes, LendInvest

12 Thomas Simpson, YBS

34 Contactless usage on the rise


CONTENTS FEBRUARY 2017

06

09

RFi GROUP INSIGHT

THOUGHT LEADER INTERVIEW

The future of the UK mortgage market

Christian Faes, LendInvest

16

18

SAVINGS

MORTGAGES

Savings rates beginning to climb

The New Year brings opportunities for buyers

28

30

SME & COMMERCIAL

PAYMENTS & DIGITAL

Barclays to offer instant SME loans

Contactless usage on the rise


12

14

YOUNG PROFESSIONAL OPINION

CURRENT ACCOUNTS

Thomas Simpson, YBS

House of Fraser invests £35m in neobank Tandem

22

26

CARDS

PERSONAL LOANS

Amazon launches new rewards card

Did a colleague forward you the UK Retail Banker? Subscribe to receive YOUR FREE monthly copy by clicking here

Christmas financial struggles


Welcome to the February edition of the UK Retail Banker, a newsletter designed to give you an update on news and trends within the UK retail banking market, contextualised by RFi Group data. With Spring almost around the corner, this edition is themed mortgages, ahead of the busiest time of the year for the property market. Our insight piece looks at movements in this market in 2016 in order to predict how the market will evolve in 2017. Our Thought Leader Interview comes from Christian Faes of LendInvest, a tech-enabled lender for property entrepreneurs, and one of the few genuine innovators in this space. The Young Professional Opinion piece conveys another angle. Thomas Simpson of YBS provides the view of a more traditional lender, but one that is prepared for the evolution of the market.

Our mortgages news section provides more context, as well as lots of other exiting news across all product sectors. February also sees RFi Group formally launch www.rfigroup.com, a brandnew website offering extensive original and aggregated thought leadership and insights, via a global media platform. Please follow this link and scroll to the bottom of the page to subscribe for your free monthly global insights and as always, we welcome any feedback you may have. I hope you enjoy this issue. Best Wishes,

Sarah Hollinshead Editor, UK Retail Banker shollinshead@rfigroup.com


RFi Group is pleased to announce the second annual:

GLOBAL DIGITAL BANKING CONFERENCE - EUROPE THURSDAY 11TH MAY

LONDON

RETAIL BANKING REINVENTED In the wake of the World Economic Forum 2017, we are pleased to announced our first keynote speaker – Jesse McWaters, Financial Innovation Lead, to share the latest insights from Davos.

DIGITAL IDENTITY The route cause of a multitude of problems in digital banking is a bad identity structure. Perfecting digital identity will create an abundance of opportunity.

CALLING ALL SPEAKERS If you are a thought leader in the space, have an exciting announcement to make, or are interested in participating, please get in touch. We provide a great platform for industry leaders to discuss the most pertinent issues within the industry. Please contact: Sarah Hollinshead Events and Media Manager EMEA shollinshead@rfigroup.com +44 203 862 2154

CLICK HERE TO REGISTER NOW!


RFi GROUP INSIGHT

2

016 was an eventful year for the UK property and mortgage markets. Brexit, and the huge amount of uncertainty it created, caused instability in the market, as did regulatory and taxation policy changes. At the same time, several new competitors started to enter the market, introducing a new, digital, breed of lender. With so much happening in the UK property market, now seems like a good time to step back and take stock of some of these changes, in the hope of providing insight into what to expect in 2017.

WORDS GEORGINA GALVAN MEDINA

28% of first-timers chose 30 or 35-year mortgage terms in 2016...This trend is likely to continue in 2017.

06 RFi MEDIA

The end of 2016 saw the UK property market experience a slowdown because of the economic uncertainty brought about by Brexit and recently introduced tax and regulatory changes. One such regulatory change was the introduction of a stamp duty increment of 3% for those buying a second property, which was introduced in April 2016. This change was introduced with the objective of reducing competition between buy-to-let landlords and first-time buyers in the starter home market. Looking forward, additional changes could be on the cards, with several housing and mortgage industry figures calling for further reforms in stamp duty, particularly for sellers to pay the tax rather than buyers, which should help counter the decline in homeownership. In addition, as of the end of 2016, HM Treasury has now closed its top programme, the Help to Buy mortgage


RFi GROUP INSIGHT

guarantee scheme. Over 86,000 households took advantage of this programme to get onto the housing ladder since it was launched back in 2013, with RFi Group data showing that 11% of borrowers who took out a mortgage in the last 12 months, had used the Help to Buy mortgage guarantee scheme. RFI Group’s Q4 2016 data also shows that future first time buyers (FTBs) expressed a growing preference to take out a mortgage under a government-backed scheme such as Help to Buy. Therefore, the removal of this scheme will mean a number of first home buyers will need to find a new savings vehicle, and may mean it will be harder for them to reach the deposit they need to enter the market. While the UK government has pulled back from the Help to Buy scheme, they have announced action to help increase supply of affordable housing. The National Productivity Investment Fund (NPIF) has announced it will fund two housing initiatives: The Housing Infrastructure Fund, which will make £2.3 billion available by 2020-21 to deliver up to 100,000 new homes; and an additional £1.4 billion to deliver an extra 40,000 affordable housing starting 2020-21, which includes affordable rent and low cost ownership. With 17% of those who plan to take out a mortgage in the next 12 months to buy a new build, according to RFi Group data, such a program could really help consumers get onto the property ladder. High house prices, affordability pressures and difficult economic conditions have also influenced customers to

choose longer mortgages with lower monthly payments, as Halifax figures reveal: 28% of first-timers chose 30 or 35-year mortgage terms in 2016, up from 11% in 2006. This trend is likely to continue in 2017, with house prices expected to continue rising.

2016 also saw many banks and financial institutions change course on their interest rate offering... in response to movements in global financial markets. 2016 also saw many banks and financial institutions change course on their interest rate offering, with a number of banks and building societies increasing the rates on their mortgages in response to movements in global financial markets. Particularly for riskier borrowers and those new to the market, these changes have been huge. Virgin Money for example, previously one of the cheapest lenders in this area, has already increased the cost of several of its mortgages for borrowers with 5% deposits by up to 10%. UK RETAIL BANKER 07


RFi GROUP INSIGHT

As well as these regulatory, consumer and bank led changes, 2016 saw the introduction of new fintech solutions in the UK. ‘Trussle’, an online mortgage broker, is one such provider. Trussle focuses on digitising the broker process by selecting mortgages from more than 11,000 deals from 90 lenders, and aims to provide a recommendation within 24 hours. Another fintech, ‘Habito’, also an online-only mortgage broker, launched in April 2016, uses an automated service to find suitable mortgages for borrowers. It claims to find customers the best mortgage option by analysing all offers in the market from over 100 lenders. A consumer can then apply for a mortgage in under 30 mins, it is claimed. Such developments, along with many others, will help add some additional competition to the mortgage market. These new digital solutions could prove popular with those experienced within the property market, particularly movers and re-mortgagers, who have gone through this process previously and now want a fast and simple application. Despite this, not all consumers will immediately jump to a digital solution. FTBs, despite being more likely to consider a digital channel for their mortgage application, are still far more likely to apply in person, with 49% looking

08 RFi MEDIA

to apply in branch with their lender and a further 12% looking to apply in-person with an intermediary. This is largely driven by their concerns about the mortgage application process and the huge financial commitment they are about to make, with face-to-face contact seen as the best option to provide the required guidance.

These new digital solutions could prove popular with those experienced within the property market, particularly movers and remortgagers Overall, 2017 is likely to be another exciting year for the UK property market, with ongoing policy changes expected, as well as huge changes in the market in terms of bank offerings, consumer demands, and new market entrants. Whether these changes will ignite growth in the mortgage market remains to be seen, but whatever occurs, RFi Group will be watching closely.


THOUGHT LEADER INTERVIEW

CEO & Co-Founder, LendInvest

MASTERING THE BALANCE OF FIN AND TECH IN HOME LOANS WORDS SARAH HOLLINSHEAD

I

t is remarkable to think that, in 2017, the £1.2 million mortgage market is almost entirely offline. Innovation and disruption have affected unsecured consumers, SME and business lending but the home-loan market has seen very little change. RFi Group’s Sarah Hollinshead sat down with one of the few true innovators in this space, Christian Faes, CEO and Co-Founder of LendInvest, to understand what is required to take on traditional lenders and how the mortgage market will evolve. UK RETAIL BANKER 9


THOUGHT LEADER INTERVIEW

The success of LendInvest and Faes’ impressive leadership can be attributed to his comprehension of what is takes to be a fintech business. Working within a highly regulated and capital heavy environment, Faes is realistic and smart in his intentions to change the mortgage business model slowly. With a lack of trust being detrimental to many new lenders in the past, Faes has a different ethos. “This isn’t Deliveroo, who although they are a great company, do not face huge repercussions if they do not get their £20 delivery right. We are dealing with much larger sums of money, so we have to tread more carefully. Financial services is about trust and the longer term, if you can get that right, you can build a really competitive business.” Fintech as a term has been used to bundle together techenabled companies working within the full spectrum of financial services. Yet arguably, the difference between a fintech company and a ‘TechFin’ company, as coined by Jack Ma of Alibaba last year, can be huge. “It is important to understand what comes first, the Fin or the Tech. We are finance first. Financial services are what we do, and we use technology to make more of an impact on how we can deliver that”. With LendInvest born out of the economic crisis of 2008, Faes remembers a world before fintech entered the dictionary, recalling an event he attended called “London’s New Finance”. Recent years have proved very interesting to their business however.

At the end of the day, it is just finance, using a bit of technology; what industry doesn’t use technology? “It has been exciting to see fintech grow in acknowledgment over the last couple of years, and we have been a huge beneficiary of that, in raising money and significantly growing our business. However, I feel of late, we have almost come full circle, and there is a bit of scepticism around all the hype. At the end of the day, it is just finance, using a bit of technology; what industry doesn’t use technology?” Faes is refreshingly candid about the real struggle of running a company that combines the best in both

10 RFi MEDIA


THOUGHT LEADER INTERVIEW

financial services and technology. Culture is often cited amongst leaders of new digital companies as their biggest differentiator and driver of innovation, and whilst Faes admits this is true, he also reveals some of the challenges involved. “You have the traditional finance and fund management folk coming into work in full corporate attire, as they have done for many years. They are now working next to people in T-shirts and flip flops. You have to ensure the merging of these cultures to make the finance people understand the importance of technology, and the tech people understand the importance of traditional finance and, more importantly, compliance.” The underwriting process behind LendInvest is still achieved through highly-trained individuals. The automation element of the business surrounds the work involved in underwriting a mortgage, to improve the efficiency of the decision-making process. This has given them significant weight when approaching investors and other institutions for support. “We are not claiming to have cracked some magic algorithm and telling institutions who have been doing mortgages for hundreds of years that they are wrong. We are happy to reinvent everything else, but the core of what we do is the same. Although I would say that our underwriting is one of the best out there.” LendInvest’s efficiency allows them to process a mortgage, on average, within a fortnight, as opposed to the usual 6-8 weeks. As processes continue to mature, the company hopes to be able to limit this to a couple of days. Another reason behind LendInvest making gains on the industry is their niche and specialist focus. They currently provide short-term bridging loans for property entrepreneurs, a largely underserved market by the traditional lenders, but aspire to expand the product set, taking on buy-to-let mortgages before hitting a much wider consumer audience within the UK. “We work in an area where there is not a lot of institutional expertise. This helps open doors with larger institutions who we want to work with. It is my biggest recommendation for all technology companies, even outside financial services, to try and leverage off a niche, get really good at it, and then that opens up the spectrum for other opportunities.” Faes is a firm believer that the mortgage process will, one day, be entirely online. Currently, his professional customer set has benefited from technological changes as they view the process as far more transactional than emotional, borrowing on average 5-6 times a year. For the average person, however, more support is usually expected and desired. Yet Faes believes that market practice change will come, albeit slowly.

It is my biggest recommendation for all technology companies, even outside financial services, to try and leverage off a niche, get really good at it, and then that opens up the spectrum for other opportunities. “People are used to filling out paper work repeatedly for a bank which hasn’t been pre-populated, despite the fact that the bank already has all of their details. But over time, people will realise how ridiculous the process is and change their own behaviours.” Whilst the mortgage market remains largely undisrupted, LendInvest is not alone in innovation. LandBay for example, has entered the market with a peer-to-peer model in buy-tolet mortgages. Although it does not have the same historical foundation to leverage off, it has already made huge impacts and investments in the space. Yet, Faes welcomes a more competitive landscape if it means a shift in the current stagnant eco-system. “There is never going to be an “Uber” of mortgages. The more players that enter the space and offer a good customer experience, the more that will help gradually change market practice change. This in turn, helps us with acquisition.” The other long established model to be disrupted is the broker system. Much of home loan business is still driven largely through brokers, removing a level of interaction from the lender to the customer. However, Faes argues that increasingly this could move online. “If existing brokers do not become tech-enabled fast, they could get left behind.” So, change may not come as rapidly to the home-loan market as it has to other areas of lending, but existing players had better be prepared.

To keep up to date with the latest news, interviews and information at RFi Group, follow @RFiMediaGRB on Twitter.

UK RETAIL BANKER 11


YOUNG PROFESSIONAL OPINION

THOMAS SIMPSON Head of Compliance and Oversight, YBS

WORDS SARAH HOLLINSHEAD

12 RFi MEDIA


YOUNG PROFESSIONAL OPINION

Tell me a bit about your career, and how you first became interested in finance and compliance.

On the subject of regulation, how do you see PSD2 change the economies of the mortgage industry?

After I graduated from Leeds University I began my career at HBOS working within the complaint handling department. There I discovered a passion for helping customers which has never left me. I enjoyed identifying exactly what had gone wrong and ensuring things were put right for customers. From there I moved on to a strategy consulting role at Navigant Consulting where I had the opportunity to do things such as helping large financial services firms redefine their approach to complaint handling or promoting products to customers. This experience proved invaluable when I joined Deloitte as the Director of the conduct and compliance team in the North of England and the Midlands. Working at Deloitte gave me a fantastic opportunity to work in different financial services sectors and lead to some high profile regulatory projects. When I joined Yorkshire Building Society in my current role, I was able to put this insight into practice within a fantastic customer focussed firm.

I think the impact will be most keenly felt on the deposits side, which is a key source of funding for mortgages. PSD2 has the potential to transform the economics of the retail funding market, in the same way that digital technology transformed the pre-recorded music industry; firms will need to respond to this accordingly. I potentially foresee a degree of disruption in terms of how mortgages are distributed but I think it would be difficult for tech innovators to become scale product providers due to funding implications; acquisition of tech innovators by established firms is a more likely scenario.

What is the biggest challenge for mortgage lenders today? The most significant challenge for the majority of lenders is having to compete with the big banks who are able to access funding at a much cheaper rate. In a market that is becoming increasingly commoditised and price-led, the challenge of differentiation really comes to the fore. In a digital world where customers are seeking fast and seamless experiences, how can you ensure the best customer experience, whilst giving the customer the appropriate amount of information? I believe in starting with what really matters for the customers - thinking about the key pieces of information they really need to understand and designing the process in a way which requires customers to engage with this. The secret is to do this in a way which feels intuitive rather than onerous and intrusive. I think there are opportunities for firms to consider how information is communicated so that customers really take the key aspects on board and understand them. For example, communicating information via video can often be more impactful and engaging than through reams of text. Sample based testing of customer understanding post-sale can be a good way of testing whether customers have understood key products and features to allow processes to be refined to deliver the right outcomes for customers whilst keeping things as simple as possible. I think this is an area that the Financial Conduct Authority are thinking about and considering as advances in digital technology occur - my sense is that if firms keep customers at their heart and can demonstrate how fair customer outcomes will be delivered then the regulator is open to engaging on new approaches.

So do you see technology transforming the traditional broker model? I think brokers will still have a key role to play. We have many valued partners in the broker industry and we anticipate that we will continue to do so in an increasingly digitised world. Many customers value the independence a broker can offer. I do think that brokers will need to consider how they can digitise their businesses in order to respond to changing customer demands - the ones who can do this in a way which most aligns to customer needs and preferences will continue to be successful. And do you think traditional lenders are at risk of being disrupted by new tech-enabled players? In allowing customers to transact with the firm in the way they want to, we will find that many customers will still value a face to face experience. However, I believe firms have to ensure they can respond to the changing needs of their particular customers. From a digital perspective, keeping products and processes really simple, aligning these to the overall home buying process to best meet customer needs and keeping interactions within the online channel, i.e. without the requirement to provide hard copy paper information, is a good set of objectives. Are existing ‘products’ sufficient for today’s consumer? How do see them evolving? I think there is a real need for firms to consider how the needs of the UK population are changing. Older customers are increasingly enjoying a good quality of life and remaining in their homes for longer. With younger people, we need to think about their specific needs and how they can best be supported. This remains challenging as the chronic undersupply in the housing market continues to keep prices of housing at a level many younger people will simply never be able to afford and there is little prospect of this changing until these underlying market factors are addressed. The evolution of the employment market in the UK remains an area where more focus is required in my opinion, particularly around underserved segments such as self-employed customers.

UK RETAIL BANKER 13


CURRENT ACCOUNTS

Current Accounts WORDS SIMON HADDAD

House of Fraser invests ÂŁ35m in neobank Tandem

U

K department store House of Fraser has spent ÂŁ35m with challenger bank Tandem to develop an app-only banking service with the aim to offer its shoppers an exclusive banking tool and payment method. Tandem, which received its banking license in 2016, is one of a number of digitalonly neobanks challenging the high street institutions in the UK. Tandem has so far rolled out its mobile app, which includes a savings account with special budgeting features, to more than 10,000 customers and plans to launch current accounts and credit cards later in 2017. The department store already has a loyalty and credit card scheme with NewDay, but the link-up with Tandem could mark the start of a new trend for high street retailers.

The link-up with Tandem could mark the start of a new trend for high street retailers.

14 RFi MEDIA


CURRENT ACCOUNTS

Monzo chooses Global Processing Services (GPS) as processor Monzo, a UK challenger bank based in London, has chosen GPS as its processor. GPS is a market leading processor platform for emerging payments companies and innovative fintech businesses which is accredited globally by Visa and MasterCard. GPS offers a global solution with access to banking schemes including BACS and SEPA. Monzo, which received its UK banking licence in August 2016, will offer customers a bank account managed entirely via a mobile app. Currently, Monzo only offers prepaid debit cards with real-time push notifications whenever customers spend, transaction data that helps them understand where and what they’ve spent, and fee-free travel abroad. Customers can expect Monzo to launch its current accounts early this year. Monzo’s decision to only offer a mobile banking app is backed by recent consumer trends that show a rapid increase in mobile banking in recent years. Almost 1 in 4 consumers conducted their day-to-day banking activities at least once a week via a mobile app in H2 2016, up from 15% in H2 2014, according to RFi Group data.

Monese raises $10m to expand mobile banking service Monese, a London-based digital banking service targeting immigrants that have trouble opening accounts with traditional high street players, has raised $10 million to help it expand into mainland Europe. The service launched in the UK in September 2015, promising instant account opening via a mobile app, a fullyfeatured current account interface, cheap global payments and a contactless debit card. The firm says that it has now signed up over 40,000 customers from over 179 different countries who have collectively made over 1.8 million transactions, moving £150 million. The plan now is to move into mainland Europe and become the service of choice for expats, migrants and those seeking an alternative to

% OF CONSUMERS WHO USE A MOBILE BANKING APP AT LEAST ONCE A WEEK TO CONDUCT DAY TO DAY BANKING ACTIVITIES 30% 25%

24%

20% 15%

15%

10% 5% 0% H2 2014

H2 2016

Source: RFi Group UK Priority & Retail Banking Council H2 2016

The plan now is to move into mainland Europe and become the service of choice for expats, migrants and those seeking an alternative to traditional banks. traditional banks. Noris Koppel, Founder and CEO of Monese, said on the planned expansion that: “The money raised will be key in helping us launch Euro current accounts and become available to customers in other European markets as well as a host of new features like direct debit and credit services to ensure customers have everything they need to stay in complete control of their finances.”

UK RETAIL BANKER 15


SAVINGS

Savings WORDS SAM GOLDFINCH

Savings rates beginning to climb

A

number of UK ‘challenger banks’ are increasing the rates on their savings accounts to market leading levels in an attempt to take on the sector’s largest players. French provider RCI Bank recently pushed up its easy access account to a market-leading 1.02%. Nottingham Building Society has also raised the rate on its easy access account to 1.02% but requires a minimum deposit of £1,000 instead of RCI Bank’s £100. Post Office Money has also pushed up its online savings account to 1.01%, from 0.9%. Challenger brands may have timed their market push well, with many savers disillusioned with

The average decrease in savings interest rates after the Bank of England’s base rate decline of 0.25 percentage points, was 0.31 percentage points. the major banks due to the large rate decreases that followed the latest base rate decrease by the Bank of England. According to RFi Group data, the average decrease in savings interest rates after the Bank of England’s base rate decline of 0.25 percentage points, was 0.31 percentage points.

% OF ACCOUNTS THAT HAVE SEEN A REDUCTION OF INTEREST RATE IN THE LAST 12 MONTHS AND THE DROP IN PERCENTAGE POINTS By account type

Regular savings account

Cash ISA (Variable rate)

Instant access account

-30.86%

-30.12%

Notice account

Web saver

Total

-27.33%

-31.42%

0.00 -0.10 -0.20 -0.30 -0.40

-28.91%

-40.74%

-0.50 Source: RFi Group UK Savings Council 2016 Q4

16 RFi MEDIA


SAVINGS

UK not saving enough for the future According to a survey conducted by Zurich UK, 17% of survey respondents have no savings or investments whatsoever. This lack of savings is likely to have a negative impact on their lifestyles in the future, with 26% of those surveyed having neither a private or workplace pension, and 8% believing the state pension will provide them with enough to live on. This is backed by RFi Group data with just 30% of savers looking at retirement as one of their savings goal which falls to 10% for savers aged under 35. The survey also found that those with a clear goal for their retirement are more likely

Financial Services Compensation Scheme (FSCS) protection limit increase The FSCS protection limit is expected to increase from ÂŁ75,000 to ÂŁ85,000 on the 30th of January. The FSCS protects consumers in the event that their bank goes bust by guaranteeing their deposits up to the limit held with one institution. Savers have been warned that it may take many months for banks and building societies to increase the limit, so an immediate increase in savings in response to this change is unlikely. Furthermore, RFi Group data indicates that

17% of survey respondents have no savings or investments whatsoever. to save, on average saving 7.25% of their income for retirement, compared to just 5.36% for those without any clear plans in place. The most popular retirement savings vehicles are cash (18%), with 45% keeping cash in current accounts and 47% favouring savings accounts - ISAs (38%), National Savings bonds or certificates (13%), stocks and bonds (11%), and NS&I (6%).

Only 17% of savers would change the way they save due to changes in the protection limit, indicating that the changes to...are unlikely to have a major impact... only 17% of savers would change the way they save due to changes in the protection limit, indicating that the changes to the protection limit are unlikely to have a major impact on consumer behaviour.

UK RETAIL BANKER 17


MORTGAGES

Mortgages WORDS MEERA PANCHASARA

The New Year brings opportunities for first time buyers

A

ccording to the property website Rightmove, the number of homes on the market with 2 or less bedrooms has risen by 1.9% in the beginning of 2017 compared to a year ago. This may provide an opportunity for first time buyers when compared to the start of 2016, which saw buy-to-let landlords purchasing homes ahead of the stamp duty surcharge for second home purchases, which was implemented on April 1st. First time buyers may face less competition from landlords, but they may still need to save a larger deposit compared to the previous year, with the property website revealing that the average asking price (across England and Wales) for a typical first time buyer dwelling in January was

Santander for Intermediaries introduces a retention procuration fee of 0.2% in March Santander for Intermediaries will pay a procuration fee of 0.2% to mortgage brokers on retention business. The procuration fees are to be paid on all retention business placed through its online portal, with the lender to begin payments from 1st of March across networks and mortgage clubs, which will then be fully implemented by July. Santander Managing Director for Intermediaries, Brad Fordham said, “After a successful pilot run last year with London & Country, I am delighted

18 RFi MEDIA

First time buyers may face less competition from landlords, but they may still need to save a larger deposit compared to the previous year. £188,612, almost a 3% increase compared to the figure in January 2016 of £183,900. Miles Shipside, Director of Rightmove said, “Those planning to buy their first home in 2017 have more choice of properties and less competition from other buyers than their counterparts a year ago. Some sellers of firsttime-buyer properties may be over-optimistic with their pricing, giving an opportunity for budget-strapped first-time buyers to negotiate, especially if they act now while there’s still more choice available.”

The procuration fees are to be paid on all retention business placed through its online portal, which will then be fully implemented by July. to announce plans to pay procuration fees on retention business, intermediaries play a key role in what we do and we look forward to working even more closely together in 2017 and beyond.” It would be beneficial for Santander in general to introduce these rates and we’ll be looking forward to see the effects on the overall market.


MORTGAGES

UK RETAIL BANKER 19


MORTGAGES

20 RFi MEDIA


MORTGAGES

More than 48,000 starter homes to be built in 2017 The UK government has revealed that more than 48,000 new starter homes will be built in 2017 on brownfield land across the country. The new homes, aimed at potential home buyers aged between 23 and 40 are available at a 20% discount of the market price. Funding of £1.2bn will be given to the first wave of 30 local authority partnerships under the government’s ‘Starter Homes Land Fund.’ Housing minister, Gavin Barwell added, “This government is committed to building Starter Homes to help young first time buyers get on the housing ladder. This first wave of partnerships shows the strong local interest to build thousands of Starter Homes on hundreds of brownfield sites in the coming years. One in three councils has expressed an interest to work with us so far.” This is the second house building plan announced

The new homes, aimed at potential home buyers aged between 23 and 40, are available at a 20% discount of the market price. by the government in the 1st week of January, whereby plans to build England’s first ever garden villages, which will also deliver over 48,000 homes, were announced earlier this month. This project will have access to £6m during the next 2 financial years. RFi Group data from its UK Mortgage Council Q4 2016 survey shows that 12% of future first time buyers are planning to take out a mortgage under the government’s ‘Starter Homes’ scheme in the next 12 months, an increase of 2% since Q3 2016.

DO YOU PLAN ON TAKING OUT YOUR MORTGAGE UNDER ANY OF THE FOLLOWING GOVERNMENT-BACKED MORTGAGE SCHEMES? Future first time buyers Q3 2016

Q4 2016

39% 40%

40% 30% 20%

20% 10%

18% 15% 15% 10%

9%

12% 7%

9% 2%

4%

0% Help to Buy equity loan scheme

Right to Buy/ Right to Acquire

Starter Homes

Shared ownership

First Steps London

N/A

Help to Buy mortgage guarantee scheme

None of the above

Source: RFi Group UK Mortgage Council Q4 2016

UK RETAIL BANKER 21


CARDS

Cards WORDS KALLIA MANIKA

Amazon launches new rewards card

Rewards and cashback are the number one reason for cardholders to recommend their credit card provider.

A

mazon has launched a new credit card in the UK, the Amazon Platinum MasterCard, which comes with several rewards for heavy Amazon shoppers. Cardholders will be able to earn 1.5 Amazon reward points for every £2 spent at Amazon. co.uk and 1 point for every £2 spent everywhere else. Once 1,000 Amazon reward points are collected, a £10 Amazon gift card will be added to the customer’s Amazon account. In addition, there is no annual fee and those who take up the card will receive a £10 Amazon gift card when the card is activated. RFi Group

research shows that rewards and cashback are the number one reason for cardholders to recommend their credit card provider. The launch and initial promotion has been lowkey, however, suggesting that Amazon may be relying on word-of-mouth promotion to drive take-up of this product.

WHAT MAKES YOU LIKELY TO RECOMMEND YOUR CREDIT CARD PROVIDER? Top 10 reasons

Rewards/cashbacks

26%

Customer service

10%

Fees and charges

10%

Online access

9%

Interest rate

7%

Merchant acceptance

5%

Product features

4%

Repayment methods

4%

Application experience

3%

Security features

2%

0%

5%

10%

15%

20%

25%

Source: RFi Group UK Priority & Retail Banking Council H2 2016

22 RFi MEDIA

30%

35%

40%


CARDS

UK RETAIL BANKER 23


CARDS

Consumers don’t understand their credit cards

Survey data shows that 13% of cardholders do not know how much interest they pay on their card, while 8% check their statements once a year or less.

A new study by Moneysupermarket has found that there are significant gaps in consumers’ understanding of how their credit cards work, which could result in a number of them experiencing financial difficulties. Survey data shows that 13% of cardholders do not know how much interest they pay on their card, while 8% check their statements once a year or less. Additionally, consumers are largely unaware of how the banking industry views their financial situation, with 21% unaware of how they can check their credit score, and 44% knowing how to check their score, but choosing not to do so in the last year. These behaviours are occurring at a time where credit card debt is rising at its fastest rate since 2005, according to the Bank of England. Kevin Mountford, banking expert at MoneySuperMarket, comments: “With almost two-fifths of credit card holders owning more than one card, and many admitting they don’t truly understand the terms and conditions, it’s easy to see how debt could spiral out of control.”

Enigma encryption technology to protect credit cards In an attempt to combat fraud and protect its credit card customers, Barclays Bank has patented a new encryption technology based on Enigma, an encryption machine that was used during World War II. The new encryption technology will be used to replace CVV numbers. A keypad will be attached to the credit card, with the cardholder using this pad to enter a PIN that will produce a code. A timetable has not been set for the technology to be released as of yet.

24 RFi MEDIA


CARDS

UK RETAIL BANKER 25


PERSONAL LOANS

Personal Loans WORDS CELINE Ă˜DEGAARD

Christmas financial struggles

A

n increasing number of people had trouble repaying unsecured loans and overdraft in the last three months of 2016, with the Bank of England’s Credit Conditions survey showing that default rates increased. Debt charities also saw signs of increased stress in late 2016, with the Money Advice Trust (MAT) stating that their National Debtline service had its busiest December in four years, taking an average of 715 calls a day and helping more than 40,000 people online. The Trade Union Congress (TUC) and debt charities have warned that an increasing number of people could find their debts unmanageable in 2017 if a squeeze on employment or spending were to occur.

National Debtline service had its busiest December in four years, taking an average of 715 calls a day and helping more than 40,000 people online.

26 RFi MEDIA


PERSONAL LOANS

Unsecured debt at an all-time high

RFi Group data shows that 36% are worried that changes in interest rates will affect them in the next 12 months, suggesting that any increase in interest rates could have a big influence on the market.

According to a new report from the Trade Union Congress (TUC), total unsecured debt reached £349bn in September 2016, a record high. This equates to £12,887 per household. The report also showed that unsecured debt as a percentage of household income reached 27.4%, the highest figure for eight years. Despite these increases, officials at the Bank of England have indicated that they are not worried about the debt levels, with the Bank’s Chief Economist, Andy Haldane, stating that: “Interest rates are still very low, and are expected to remain so for the foreseeable future, so there are fewer concerns on debt servicing than there were in the past”. This confidence is not shared with consumers, with RFi Group data showing that 36% are worried that changes in interest rates will affect them in the next 12 months, suggesting that any increase in interest rates could have a big influence on the market.

Personal loans cheaper than mortgages Fierce competition in the personal loan space has seen rates fall dramatically in the last five years to the point that, for the first time, loan offers are now available with rates under 3%. Rates at this level are lower than many mortgage offerings, with the average standard variable rate on home loans standing at 4.62%. Sainsbury’s Bank is one of the institutions leading this charge, offering 2.9% to borrow a total amount of £7,500 to £19,999, and 2.8% to customers with a Nectar card borrowing for a term longer than three years.

HOW CONCERNED ARE YOU ABOUT THE FOLLOWING AFFECTING YOU OVER THE NEXT 12 MONTHS? Not at all concerned 1

2

100% 14%

80%

22%

14%

3

4

Very concerned 5

9%

9%

18%

15%

22% 30%

60%

40% 35%

35%

40% 20%

17% 18%

15%

15%

14%

14%

16%

Changes in interest rates

Inflation

Instability of the banking sector

29%

0% Unemployment

Source: RFi Group UKPRBC 2016 H2

UK RETAIL BANKER 27


SME & COMMERCIAL

SME & Commercial WORDS SIMON HADDAD

Metro Bank to lend £1bn to businesses

M

etro Bank has revealed that it has set aside £1bn in funds for business and commercial customers for 2017. The challenger bank lent £551m in the first three-quarters of last year to its business and commercial customers and hopes these new funds will increase lending over 2017. “Businesses are the very bedrock of the UK economy and it’s absolutely vital that lenders do what they can to support their growth,” said Mark Stokes, Managing Director of commercial banking at Metro Bank. “Despite the immediate uncertainty following the EU referendum, our customers remain confident about the future and we remain committed to supporting them as they go from strength to strength.”

SME loan applications drops 13% OakNorth, a challenger bank that focuses on lending to fast-growing businesses and entrepreneurs, has become the first challenger bank to collaborate with the British Business Bank on their ‘Help to Grow’ programme. This programme allows fast growing SMEs to take out loans of up to £2m in order to increase their operating capabilities, which can range from developing new products and processes to targeting new export markets. The ‘Help to Grow’ programme is available to businesses across all sectors with firms in manufacturing, creative industries, and technology expected to benefit the most. OakNorth hopes to help support the growth

28 RFi MEDIA

The challenger bank lent £551m in the first three-quarters of last year to its business and commercial customers and hopes these new funds will increase lending over 2017. According to Metro Bank, it is their use of traditional relationship banking supported by state-of-the-art technology that allows it to be a true banking partner for its customers. Ian Walters, Managing Director of business banking at Metro Bank, said: “Our common sense approach to lending has enabled some really great companies to prosper, and we hope that today’s announcement will provide even more customers with the helping hand that they need to grow and succeed in 2017.”

This programme allows fast growing SMEs to take out loans of up to £2m in order to increase their operating capabilities ambitions of businesses, with Rishi Khosla, the CEO and Co-founder of OakNorth, saying: “We’re very excited to be the first challenger bank to join the programme and are already in conversation with a number of eligible businesses who may be able to benefit.”


SME & COMMERCIAL

Barclays to offer instant SME loans Barclays has become the first UK financial institution to offer nearly instantaneous small business loans via a mobile app. The mobile app provides a small business with a questionnaire to assess the borrower’s risk, after which approval for up to £25,000 can occur within an hour, as can the transfer of funds into a small business bank account. Barclays have said that currently 1 million SMEs use their mobile banking services; although, only a quarter qualify for this new lending solution, with the SME required to have strong credit history and growth potential. Customers also need to have at least a six-months history of banking with Barclays and must have the app to access this service.

UK RETAIL BANKER 29


PAYMENTS & DIGITAL

Payments & Digital WORDS MANISHA NOBEEN

Contactless usage on the rise

A

ccording to the UK Cards Association, 325 million purchases were made via contactless credit and debit cards in November 2016, capturing 25% of all card payments within the month. These purchases were made on the 101.8 million contactless credit and debit cards circulating the UK now. The increase in contactless payments has led to an approximate £2.9 billion being spent using the technology, rising from £1 billion last year. According to Richard Koch, Head of Policy at The UK Cards Association, “With 125 taps every second in the UK, it’s clear that people are opting for contactless when they are at the till. Consumers are using their contactless cards wherever they go.” RFi Group data has shown that over the last 18 months, contactless ownership and usage has continually increased, with usage jumping from 28% in H1 2015 to 53% in H2 2016. RFi Group forecasts contactless card usage to reach near ubiquity (around 70% usage among all consumers) by late 2017.

30 RFi MEDIA

CONTACTLESS AWARENESS, OWNERSHIP, AND USAGE IN THE UK H1 2015

100% 88%

H2 2015

H1 2016

H2 2016

92% 92% 93%

80% 69%

74%

62%

60%

55%

53% 47% 37%

40% 28%

20% 0% Awareness

Ownership

Source: RFi Group UK Payment 2016 H2

Usage


PAYMENTS & DIGITAL

UK RETAIL BANKER 31


PAYMENTS & DIGITAL

32 RFi MEDIA


PAYMENTS & DIGITAL

CMA flags concern over MasterCard’s VocaLink take over The Competition and Markets Authority (CMA) has raised concerns over payment competition levels following MasterCard’s acquisition of payment infrastructure service provider VocaLink. While MasterCard currently owns several payment services, it also aims to supply infrastructure services to the UK payment system, hence its investment in VocaLink. However, the CMA stated that provided MasterCard and VocaLink can address and fix such concerns by the 11th of January 2017, the investigations will be withdrawn. In response, MasterCard says it will adhere to the related concerns within the given timeframe, insisting that the VocaLink acquisition will help bring greater choice and innovation to the payments landscape.

Fintech company Curve launches ‘Curve Rewards’ Fintech company Curve has announced the launch of its loyalty programme: Curve Rewards. Users can get up to 5% cashback on Black Curve cards (requires a one-time only cost of £50), and 2.5% on Blue Curve cards (fee-free card), at over 50 participating retailers including House of Fraser, M&S and Boots. According to Curve, Curve Rewards is unlike any other loyalty scheme available today and works through their own app. Users can gain rewards through any of their cards via the Curve app, where the points are applied to the Curve Rewards account instantly. Consumers can also collect additional reward points by referring a friend to the Curve platform, with both the referrer and referee receiving a £5 credit. Rewards can only be used where MasterCard is accepted.

UK RETAIL BANKER 33


ABOUT RFi GROUP

RFi Group is a global intelligence and digital media provider focusing exclusively on financial services. We specialise in data and information gathering, customer based insight generation and business decision support for the world’s leading financial service providers. Our aim is to combine global intelligence and local knowledge to provide insightful, valuable and actionable recommendations, with a core focus on the provision of exceptional client service. OUR BRANDS

Covering 44 key global markets with regional offices in San Francisco, Toronto, London, Singapore, Hong Kong and Sydney, RFi Group consistently provides clients with tailored advice and independent intelligence relevant to their specific markets and business needs. EXCLUSIVE FOCUS ON BANKING AND FINANCE RFi Group’s expertise and deep understanding of the banking and finance sector delivers high-value outcomes. Our areas of expertise include: Retail Banking Mortgages Transaction Accounts Savings Accounts Consumer Lending Cards and Payments

For any advertisement enquiries, please contact your regional RFi office or email your enquiry to agrisaffe@rfigroup.com For more information, visit: www.rfigroup.com www.globalretailbanker.com

34 RFi MEDIA

Mobility and Banking Technology SME and Business Banking Private Banking Wealth Management Banking Regulation

RFi AUSTRALIA & NZ

RFi NORTH & LATIN AMERICA

Level 12 70 Phillip Street Sydney NSW 2000 Australia

One Embarcadero Center Suite 500 San Francisco, CA 94111, USA

P +61 2 9126 2600

P +1 415 315 1690

RFi NORTH ASIA

RFi ASIA

Unit 740, 2 Exchange Square 8 Connaught Place Central Hong Kong

Level 12, 9 Battery Road Straits Trading Building Singapore 049910

P +852 2297 2427

P +65 6597 7028

RFi EMEA

RFi CANADA

2nd Floor, Saxon House 48 Southwark Street London SE1 1UN United Kingdom

100 King Street West Suite 5600 Toronto, Ontario M5X 1C9

P +44 203 862 2166

P +1 416 644 8524


ABOUT RFi GROUP

RFi GROUP ACTIVE IN 44 INTERNATIONAL MARKETS

Our markets include Australia, Argentina, Belgium, Brazil, Canada, Chile, China, Colombia, Egypt, France, Germany, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Lebanon, Malaysia, Mexico, Netherlands, New Zealand, Nigeria, Peru, Philippines, Poland, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Switzerland, Taiwan, Thailand, Turkey, UAE, UK, Uruguay, USA and Vietnam.

SOME OF OUR CLIENTS AROUND THE WORLD

GLOBAL

AU / NZ

ASIA

EMEA

AMERICAS

UK RETAIL BANKER 35


RFi Group’s syndicated research RFi Group is a global intelligence and media provider focused exclusively on financial services. We specialise in data and information gathering, customer based insight generation and business decision support for the world’s leading financial service providers. Our syndicated research is delivered via our Financial Councils model. Upcoming UK Financial Council research includes:

RESULTS OUT NOW 2016 H2 UK Payments and Innovation Council 2016 H2 UK Retail Banking Council Survey 2016 H2 UK Premier Banking Council Survey

COMING SOON 2016 Q4 UK Savings Council survey 2016 Q4 UK Mortgage Council survey 2016 H2 UK SME Banking Council 2016 H2 UK Commercial Banking Council

2016 H2 UK Travel Council

Find out how you can access RFi Group’s latest business intelligence! For further information, contact Jonathan Withers on jwithers@rfigroup.com or +44 (0) 203 862 2166

Profile for Adelle Grisaffe

UK Retail Banker - February 2017  

An RFi Group publication

UK Retail Banker - February 2017  

An RFi Group publication