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NOVEMBER 2017 ISSUE

FEATURING AN EXCLUSIVE INTERVIEW WITH REPRESENTATIVES OF

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

CEO & Co-founder, Bud and Co-Head, Emerging Companies, Investec Bank

RFi GROUP INSIGHT

CURRENT ACCOUNTS

CREDIT CARDS

06 SME’s card preferences do not match their current practices

12 First Direct and HSBC offer new cashback incentive

22 Contactless payments turn 10 years old


CONTENTS NOVEMBER 2017

08

10

RFi GROUP INSIGHT

THOUGHT LEADER INTERVIEW

Live chat services and UK consumers, a gap in the market?

Ed Maslaveckas & Devin Kohli

21

26

MORTGAGES

CARDS

Increased interest rates for the first time in a decade

36 PAYMENTS & DIGITAL Bus company to introduce contactless payments

Tandem Bank announced cashback credit card

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14

18

CURRENT ACCOUNTS

SAVINGS

First Direct’s new incentive to switch current accounts

Atom Bank approaches £1 Billion in deposits

30

33

PERSONAL LOANS

SME & COMMERCIAL

UK banks to limit loans over the coming months

Starling Bank to offer business banking accounts


RFi GROUP NOVEMB TEN SELECTED STATISTICS FROM DAILY STATS ON RFi GROUP WEBSITE (www.rfigroup.com)

CANADA

Over half

(54%) of SMEs in Canada apply for their business banking products online

UK

72% of Mass Affluent

consumers in the UK hold multiple credit cards

MEXICO

84% of Mexican

payroll account holders would continue to use the same account for their salary, even if they changed jobs

4 in 5 Mexicans could

be classified as tech-savvy, stating that they like to adopt technologies with they are still new (i.e. vocal innovators, early adopters or fast followers)

SAUDI ARABIA

Almost two third

(62%) of consumers in KSA strongly agree (8+/10) that their main banking relatio has advanced digital bank services (online or mobile)

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BER STATISTICS UAE

61% of SMEs in the

UAE have a relationship manager with their main business bank

ds

t onship king

#RFiGroupDailyStat

MALAYSIA Of those looking to switch their main banking relationship,

22% of Malaysia banking

customers stated ‘wanting access to better internet banking’ as a reason for considering a switch

SINGAPORE

67% of affluent

customers in Singapore are likely to visit comparison websites prior taking up an insurance product

AUSTRALIA

1 in 4

Australian mortgage holders who refinanced their loan in the last 3 years have switched to another lender

INDIA

41% of SMEs in India

intend to take up a new business borrowing product in the next 12 months UK RETAIL BANKER 05


Welcome to the November edition of the UK Retail Banker, a newsletter designed to give you an update on news and trends within the UK retail and commercial banking market, contextualised by RFi Group data. The last month has included some very exciting news, including the Bank of England interest rate hike, for the first time in tens years! Check out what consumers think about the rate change and intended changes of behaviour as per our data. Money management and FinTech company, Bud, also made the headlines with their announcement of ÂŁ150 million raised in funds, as well as signing on HSBC to their platform. Pretty impressive stuff for a company of just over two years old! Ed Maslaveckas, CEO and Co-founder of Bud and Devin Kholi, Co-Head,

Emerging Companies, Investec, one of the Bud’s main investors, share their take on the future of open banking in this edition’s Thought Leader Interview. Our insight piece brings a market overview of the progression of live chat services, what consumers think of the service and therefore where the opportunity lies for financial institutions. I hope you enjoy the issue. Kind regards,

Sarah Hollinshead Editor UK Retail Banker shollinshead@rfigroup.com


RFi GROUP INSIGHT

WORDS JOSEPH SHARANGPARNI

I

n the past, a major barrier to consumer adoption of online services has been their concern about the inability to ask questions. Over the last few years, institutions across industries, including financial services, telecommunications, and utilities, have attempted to overcome this issue by introducing live chat services to their digital platforms. Live chat services allow customers to use an instant messenger tool to have a text conversation with a representative of the service provider. The representative could be a real member of staff or a virtual assistant (VA). Using such services allows banks to scale back branch and call centre operations, while also tapping into a communications channel many consumers use in their day to day lives, with popular tools such as Facebook Messenger and WhatsApp. RFi Group data shows that many consumers in the UK are already using live chat services for a limited range of functions in financial services and that appeal of live chat is high. This suggests that there is the potential for expansion of such services into more complex interactions and products. RFi Group data shows that two out of five UK consumers are already using live chat services. Retailers lead the way in attracting live chat use, with 17% of consumers having used

08 RFi MEDIA

a live chat service with a retailer and financial institutions are not too far behind, at 16%. There is an opportunity in the UK toencourage more use of live chat services as RFi groupdata shows a high proportion of consumers likelihood to adopt such services. 83% of UK consumers who don’t currently use live chat for banking, state that they would be likely (6+ out 10 on a scale of 0 to 10) to live chat with a member of banking staff to complete banking tasks and 45% would be likely to live chat with a VA. Combining the proportion who already use live chat for banking, with those who would be likely to do so, it can be seen that 71% of UK consumers could potentially adopt live chat services, demonstrating the massive potential for this channel. What is also clear from current usage and potential adoption is that consumers are much more likely to use live chat if it is managed by a real person (or perhaps a very convincing VA!) When looking at what tasks consumers would do via live chat, complaint resolution and query handling come out on top. Currently, 64% of UK consumers are likely to use a live chat service to resolve a complaint and 63% would be likely to use it tomake enquiries. This suggests that introducing consumers


RFi GROUP INSIGHT

Where we stand today shows a high volume of UK consumers using live chat services, at 40%.

to live chat tools through query and complaint handing would be the best introduction tactics. Likely services to expand into next would be balance checks and transfers, with 49% and 47% of consumers likely to perform these tasks using live web chat, respectively.

Although adoption of live chat services in the UK has been strong, awareness is still a key barrier to wide spread adoption. In total, only 21% of those who don’t currently use live chat services with a financial institution say they are aware that financial institutions offer these services at all. Although adoption of live chat services in the UK has been strong, awareness is still a key barrier to wide spread adoption. In total, only 21% of those who don’t currently use live chat services with a financial institution say they are aware that

financial institutions offer these services at all. Even among main financial institution customers of the ‘Big 5’ high street banks, four of which offer live chat services, only 23% were aware of live chat services. Therefore, a focus on building awareness could be a key strategy for banks in encouraging the growth of this service. Live chat services clearly represent a huge opportunity for banks and financial institutions. For financial institutions looking to introduce such tools, initially focusing them on complaint and query handling will help drive the greatest use. This approach will be most likely to increase consumer familiarity with the tools and allow them to eventually be used for more complex tasks such as balance checks and transfers. Also, in the early stages of introducing these tools, ensuring consumers have access to a real person may be the best option, or at least making them feel as they do, as the appeal of using live chat with a VA is much lower. Over time, this may change as consumers become more familiar with using live chat tools with service providers. Overall, the high levels of appeal for these services show that investing in live chat services would be a good strategy for financial institutions, especially if consumers can be eased into their use over time.

UK RETAIL BANKER 09


THOUGHT LEADER INTERVIEW

Ed Maslaveckas & Devin Kohli

010 RFi MEDIA


THOUGHT LEADER INTERVIEW

T

he last few weeks have been remarkable, by any standards, for money management platform and FinTech company, Bud. Not only has it announced £1.5 million in funding by Investec and Banco Sabadell, but it also revealed that banking giant HSBC are now using their platform for aggregator services. The news was announced at Money20/20 in Vegas last month, in front of an audience of many FinTechs, who would only dream of making such strides in just over two years, as well as a number of investors looking for a successful fintech partnerships. Both Edward Maslaveckas, CEO and Co-founder of Bud, and Devin Kohli, Co-Head of Emerging Companies at Investec, attended Money20/20 as part of a representation of London’s best innovators. This was spearheaded by London & Partners, which displayed the City of London as a global FinTech centre to the rest of the world. RFi Group’s Sarah Hollinshead, who met with the duo to discuss the coming together of an institutional investor and FinTech organisation and impacts on the ecosystem. How did you find the reception to the London FinTech scene in Vegas?

Ed Maslaveckas, CEO & Co-founder, Bud and Devin Kohli, Co-Head, Emerging Companies, Investec Bank

Devin: I thought it was fantastic! London, more so than ever, has needed to propel itself as a centre of financial excellence. It needs to show that it is at the centre of innovation as well. We have a very open regulator and it was great to have the FCA there with us to discuss open banking, the sandbox etc. The guys behind it all, London & Partners, put together not only a good series of events around the conference, but also encouraged a lot of attraction into the London fintech start up scene. As a FinTech, how have you been able to grow to this level in just over 2 years? Ed: It is interesting to be playing in a space between bank and Fintech and that has worked for us. For us, we think the best outcome for the consumer is giving the best experience wherever they are. Doesn’t matter who they chose, whether it’s a banking app or a fintech app, we want to create a great seamless experience across all those experiences, bringing the best of the both worlds together. That is quite a unique conversation to have with a bank! I think another part is we have quite a savvy team in terms of how you work with big organisations. What to avoid, what not to avoid. Have had great advisory people that help us there.

WORDS SARAH HOLLINSHEAD

Of course, mainly a lot of hard work. There are no short cuts here; we have spoken to plenty of banks that won’t end up working with us as they didn’t have the right vision, or wanted to ‘try and not buy’. As a fintech, I would never undervalue the first couple of bank institution partnerships or big institutional deals you do, even if you don’t think they will be fruitful or long running agreements, because we have done a few that we have not talked about, but were a big learning experience.

UK RETAIL BANKER 011


THOUGHT LEADER INTERVIEW

What about Bud, as a company, encouraged your investment?

While the bank still needs a balance sheet and still has a lot of power in the balance sheet, the new currency is data and how it can leverage data to create value for itself and for its customers. Ed Malaveckas, CEO & Co-founder, Bud and Devin Kohli, Co-Head, Emerging Companies, Investec Bank

Devin: How we source investments is through a network which we trust, and that is how we first initially met Bud, through a trust connection. We then spent a little bit of time with Ed and the gang, understanding what they are trying to do. As a bank ourselves, we are very aware of what regulatory changes are coming through, and therefore knew that the addressable issue of open banking was important. We also realised very quickly, that Ed, George, Pat and the team were able to do this. The leaders had been pretty good mates for a number of years, which is always helpful. They also have very complimentary skillsets and understood how big the problem was and how they could correct it. They’ve got some very good traction with both banks and fintech partners, and we ourselves could validate that through some of the work could end up doing as a client, so it made sense for us to become a full partner. As an institutional investor, this partnership has an interesting dynamic. How have you found this? Ed: Sometimes start-ups like to stay away from institutional investors, but actually, with the pace of change happening in the financial sector, it is beyond where any industry specialist would be able to get a grasp on what is happening in the ecosystem. Some of the VCs we were talking to weren’t up to date on what is happening in the sector, in terms of changing banking business models as well as the emerging fintech scene. The best thing about working with Investec and Sabadell was that they knew what was going on now and could see some of the future. They agreed with our vision and therefore it made sense. We are still an agnostic platform, sitting behind everything and you don’t have to invest to work with us, for example look at HSBC. However, I think sometimes it helps with the relationship. For example,

12 RFi MEDIA

part of the due diligence of investment is a tech deep dive. So potential clients can look at this, look at finances, and make sure everything is good enough, and that the company is not going anywhere over the next couple of years! Devin: For us, we are a small enough organisation that the tech, investment and business banking departments all sit pretty close together, and can discuss the holistic benefits. Whereas in a bigger organisation, usually the investment team is a completely different entity, often in a different geography, and therefore it is cumbersome to deal with. What is to stop us actually using the platform? I mean, that is the biggest validation you can give a business, not only capital but actually using what they offer. Innovation around money management has always been a customer need. Why now are banks paying attention? Devin: I think the regulatory side has pushed the technology change to some degree. The most successful companies will be the ones that have a regulatory tick-box, are working with the fintechs, and working with the person who can navigate all three.

The most successful companies will be the ones that have a regulatory tick-box, are working with the fintechs, and working with the person who can navigate all three. From a consumer sense, there is now that tiredness of ‘I don’t want another app’, they want it all in one. This is partly driven by a maturity in the market but also driven by the likes of AliPay and


THOUGHT LEADER INTERVIEW

Wechat in China, where consumers do everything through those 2 apps. Why can’t the same be applied in the UK with anything to do with finances, or soon to not just be financial products? How does this shift impact competition within the market?

If you are bringing a lot of good experiences into banking apps, does that then destroy competition? Actually, no, for 99% of households, you have now increased the competition for products. Ed: The question now is, if you are bringing a lot of good experiences into banking apps, does that then destroy competition? Actually, no, for 99% of households, you have now increased the competition for products. That ecosystem becomes better, the best customer products will rise to the top of that ecosystem, which provides more intense competition again. What we hope it does, is actually help them find the relevant products. At the moment, if you walk around any city, there are adverts of financial products all over the place. That is just in the hopes that 1 in 50,000 people that walk past might need that product. That is super inefficient, it is crazy marketing. If you can increase someone’s efficiency to find relevant products, you can reduce costs for the producers and therefore, in turn, for the customer. Why would big banks, like HSBC, want to showcase competitive products through aggregator services? Ed: This is about the ecosystem play. So, if you look at what the most

successful companies in the world have been, Google and Facebook, they are aggregators of data. Google aggregates data like no one else and puts it into a searchable format, using that data to create value. Facebook does the same through media. So, this is a new business model for the bank. While the bank still needs a balance sheet and still has a lot of power in the balance sheet, the new currency is data and how it can leverage data to create value for itself and for its customers. It already has great data, it needs to be pulled out and used in a great way. Devin: That is the proactive reason as to why banks need to do it, there is also the massively defensive reason. The thinking is: “I have 20 million users and there is a brand-new generation of users coming up who are expecting a lot more and are seemingly getting better UX from smaller start-ups. I need to be able to target them in an efficient way. I either do that or I lose not only my 20 million, but the next generation too.” Banks need to keep up, so it is proactive and defensive. What are the next changes coming from in customer experience? Devin: The obvious one is AI, machine learning and analytics, and where that is going. You see a lot noise about cryptocurrency as well and how that is going to change the world. I still go back to the point that if you don’t have the regulator on side and fully understand the regulatory landscape, it is very difficult to devise an investment thesis without that. I think our regulators have been as clear as they can about certain areas so that is why we have avoided cryptocurrency. In regards to AI and its applicability to financial services there is an issue around data, how it is captured and how it is transmitted through that needs to be thought through. The concept of aggregation of products as an offering is something that has been seen in other areas of ecommerce for the last 5 years, and needs to be coming into financial services far more.

Who will be the winners and losers of open banking? Devin: We have created the environment for open banking, but no one is expecting a massive take up from January onwards. It will be gradual and modular and by 2020, we will start to see a big difference. The best positioned to succeed are those already starting to work through how they are going to deploy it. We have seen a noticeable difference in the way banks are approaching this; some have started to do this 6-8 months ago, some are just working out the impact of it right now. I believe for a lot of challenger banks, this does pose a potential problem which is that a lot of them have spent big money on a UX, without necessarily trying to cover all bases. Whereas the bigger banks have a much larger capital base, and can now catch-up much more quickly. It has reduced that validity and viability of those challenger banks and I think there is an interesting debate for their future over the next couple of years.

The best positioned to succeed are those already starting to work through how they are going to deploy it. Ed: There is an idea being carried forward that we are entering a ‘winner takes all’ space, which we have seen in big tech. I don’t think that will happen. I don’t think the regulators will allow that to happen and they shouldn’t. So, all that we will see is more competition and it will be a positive outcome for customers. Now, some banks will lose and some won’t. It really depends on how quickly they get to understand what the ecosystem of the future looks like. Follow @RFiMediaGRB on Twitter to keep up to date with the latest interviews and news at RFi Group.

UK RETAIL BANKER 13


CURRENT ACCOUNTS

Current Accounts

First Direct offer new incentive to switch current accounts

DURING THE NEXT 12 MONTHS, HOW LIKELY ARE YOU TO SWITCH YOUR MOST FREQUENTLY USED CURRENT ACCOUNT? By generation

WORDS JOSEPH SHARANGPARNI

F

irst Direct has put itself into a strong position to capture some of the 20% of current account holders that RFi Group data shows are likely to switch their most frequently used current account in the next 12 months, by boosting its cash incentive for switching to £125. The new offer increases the £100 incentive previously on offer, however, the boosted incentive will only be available until the 11th of December 2017. To receive this bonus, new customers must apply through comparison site MoneySupermarket, use First Direct’s Current Account switching service to move their account, and deposit a minimum of £1,000 within the first three months. First Direct have also offered to pay an additional £100 to any switchers who decide they are unhappy with their First Direct account and want to close it, provided they have had the account for more than 6 months but less than 1 year.

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Extremely likely (8-10)

Likely (6-7)

Unlikely (3-4)

Very unlikely (0-2)

100% 23%

60%

14% 11%

80% 22%

Neutral (5)

4% 6% 9% 7%

10%

12% 11% 9% 7%

7%

10%

40%

7%

75% 60%

59%

20%

38%

0% Millennials

Gen X

Baby Boomers

Source: RFi Group UK Priority & Retail Banking Council 2017 H1

Total


CURRENT ACCOUNTS

Monzo to make current account publicly available WORDS ADAM BOTTLE Neo-bank Monzo has announced that it will be making its mobile-only current account publicly available in the coming months, following a 3-month trial period. Over the next 2 months, existing Monzo prepaid cardholders will be offered the opportunity to upgrade to a current account. Prepaid cardholders who transition to the current account will have their account details, balances as well as all other data associated with their prepaid account automatically transferred to the new current account, and a new debit card will be sent to them via post. Consumers who don’t have a prepaid card will have the opportunity to open a Monzo current account after the prepaid transition period. In the meantime, they can add their name to a waiting list to get the new current account. With the release of the current account, Monzo will no longer offer its prepaid card product to new customers and plans to close prepaid accounts entirely, meaning existing prepaid cardholders will be forced to either upgrade to a current account or lose their Monzo account, although no date for this has been set. Monzo also plan to eventually operate the Current Account Switching Service, meaning consumers will be able to easily switch their current account to Monzo.

Monzo Co-founders

UK RETAIL BANKER 15


CURRENT ACCOUNTS

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CURRENT ACCOUNTS

Tesco Bank launches current account in Northern Ireland WORDS JOSEPH SHARANGPARNI Tesco Bank has launched its current account in Northern Ireland. The Tesco Bank current account offer, which has been available in other areas of the UK for the last 3 years, offers Clubcard points when users make purchases with their Tesco Bank Visa debit card and will pay 3% interest until April 2019.

According to Tesco Bank CEO, Benny Higgins, there has been a ‘flurry of interest’ from consumers, with the additional Tesco Clubcard points a specific attraction to consumers. According to Tesco Bank CEO, Benny Higgins, there has been a ‘flurry of interest’ from consumers, with the additional Tesco Clubcard points a specific attraction to consumers. This is consistent with RFi Group data which shows that almost one in four current account holders rate rewards, such as cashback or discounts at retailers, as a key factor in their choice of a current account. Tesco Bank will be holding a series of roadshows across Northern Ireland to celebrate the launch of this product.

WHAT WOULD BE IMPORTANT TO YOU IN SELECTING A SPECIFIC CURRENT ACCOUNT? 60% 50% 44%

40% 34%

33%

31%

30%

29% 22%

21%

Offers me rewards

Debit card access

20% 10% 0% Online banking

Fees and charges

Interest rates

Customer service

Branch location

Source: RFi Group UK Priority & Retail Banking Council 2017 H1

UK RETAIL BANKER 17


SAVINGS

Savings WORDS MARIA URENA

Atom Bank approaches £1 Billion in deposits

A

tom Bank has surpassed £900 million in deposits less than 2 years after launching its first savings product.

Founded in 2014, the app-only bank launched its first savings product in July 2016 and has grown rapidly, with a large proportion of the deposit growth, £400 million, occurring since March 2017. A spokesperson for the bank stated, “Our savings deposits have now grown to over £900 million, with our mortgage and business lending following a similar trajectory. We’re the fastest growing challenger bank in the UK, with cost and efficiency driving our ambition to deliver great value for customers and investors.” Atom Bank may be set for further growth, with its app-only offering increasingly aligning with consumer preference. RFi Group data shows that 1 in 10 savings account holders prefer to interact with their primary saving account provider via mobile app, while 14% of consumers looking to take out a new savings account consider the mobile banking capabilities an important consideration in their account choice.

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SAVINGS

Average Cash ISA rates reach 1% for first time in a year

WHAT TYPE OF SAVINGS ACCOUNT DO YOU PLAN TO OPEN? 2017 Q2

October 2017 saw average interest rates on fixed and variable rate cash ISAs reach 1% for the first time since August 2016. The milestone was reached following a 0.02% increase in average rates in the first week of October. ISA rates have slowly recovered over 2017 after reaching a low of 0.81% in January.

2017 Q3

50% 40% 30% 24%

The increase has been driven by the release of several new products, such as Yorkshire Bank’s Fixed rate bond cash ISA, which comes with a 1.5% rate until the end of January 2019. Savers appear to be responding the rate recovery, with RFi Group data showing that among consumers intending to take out a new savings account in the next 12 months, the proportion looking to take out a fixed rate Cash ISA increased from 18% in the second quarter of 2017, to 24% in the third quarter.

20%

18%

24% 18%

10% 0% Fixed rate ISA

Variable rate Cash ISA

Source: RFi Group UK Savings Council 2017 Q2 & Q3

UK RETAIL BANKER 19


SAVINGS

Pounds and Euros savings account by Moneycorp Moneycorp Bank, the banking arm of foreign exchange specialist Moneycorp, has launched a savings account that allows consumers to save in both pounds and euros. The account, a 90-day notice account, is the first savings product launched by Moneycorp Bank. The account pays 1.3% interest for those saving in pounds, but only 0.05% for those saving in euros. Interest is paid on deposits of more than ÂŁ10,000 up to ÂŁ1 million. Interest is calculated daily and paid in gross on the first business day of each month. Savers can move funds between the 2 currencies, but the 90-day notice period would apply. To apply for the account, customers need to have a deposit account with Moneycorp. The new savings account is otherwise available to both individual and business customers. Savings with Moneycorp Bank will not be covered by the Financial Services Compensation Scheme, but will instead be protected under the Gibraltar Deposit Guarantee Scheme.

20 RFi MEDIA

The account, a 90-day notice account, is the first savings product launched by Moneycorp Bank. The account pays 1.3% interest for those saving in pounds, but only 0.05% for those saving in euros.


MORTGAGES

Mortgages WORDS SACHIN VISAVADIA

Increased interest rates for the first time in a decade

F

or the first time in a decade, the Bank of England have increased interest rates, raising the rate from a record low of 0.25% to 0.5%.

The increase of interest rates is consistent with RFi Group data which shows that 41% of consumers, when asked in September, expected interest rates would rise in some way within 6 months. The Bank of England have however made it clear that any further rise will occur at a “gradual pace and to a limited extent”. The Monetary Policy Committee (MPC) which consists of 9 members, and who are responsible for setting interest rates, voted seven to two in favour of increased interest rates. The increase of interest rates is consistent with RFi Group data which shows that 41% of consumers, when asked in September, expected interest rates would rise in some way within 6 months. The Bank of England have however made it clear that any further rise will occur at a “gradual pace and to a limited extent”. The rise in interest rates will have an adverse effect on mortgage holders, with close to 4 million finding themselves paying higher mortgage bills. Over 2 million Mortgage holders, according to the Bank of England, have generally been unscathed with rises in their mortgage, but now, 46% of mortgage holders hold variable mortgages and are now set to suffer the most with rising cost of monthly repayments. In contrast, savers will receive the slight benefits of this rise. The rise comes after the UK saw inflation rates hit 3%, with the Bank of England expecting it to reach 3.2% this month, driven primarily by the EU referendum which caused the pound to fall. Despite the high inflation rate, the Bank have held off increasing interest rates but now believe the acceleration of the growth will ultimately cause prices to increase rapidly, therefore actioning this move.

UK RETAIL BANKER 21


MORTGAGES

22 RFi MEDIA


MORTGAGES

Broker-only new build team launched by Tesco Bank Tesco Bank has introduced a dedicated team to deal with brokers to help speed up new build application processing speeds. The new service will give brokers who submit a new build mortgage application to Tesco Bank access a specialist team, with the new team to include account managers and underwriters. Valuers will also be instructed immediately upon submission of an application and brokers will be given direct access to Tesco Bank’s intermediary platform. About the new team, Julian Hartely, Director of Mortgages, Savings, and Loans at Tesco Bank said, “We spoke to Intermediaries at length to develop our new service and they stressed that speed, certainty and accuracy were vital when serving customers who are purchasing a new build property. By offering a dedicated team, with specialist case workers and access to underwriters we are confident that this service will be amongst the best available.” Brokers should hope the new service helps them increase client satisfaction, with RFi Group data showing that 70% of mortgage holders who applied directly for their loan in the last 12 months are satisfied with their mortgage, compared to only 64% of those who applied through an intermediary.

HOW SATISFIED ARE YOU OVERALL WITH THE MORTGAGE APPLICATION PROCESS? Recent actives by intermediary vs. direct Very satisfied (8-10) Dissatisfied (3-4)

7.8

Satisfied (6-7) Very dissatisfied (0-2)

Neutral (5) Average

8.1

8.0

70%

68%

25%

27%

4%

2%

3%

Intermediary

Direct

Total

100% 80% 64%

60% 40% 20% 0%

29%

Source: RFi Group UK Mortgage Council 2017 Q2

UK RETAIL BANKER 23


MORTGAGES

Potential new Mortgage product range by M&S Bank M&S Bank have announced plans to launch a new range of mortgage products early next year. The new products will be targeted towards first-time buyers and home movers, with M&S Bank promising competitive interest rates, although full details on rates are yet to be finalised. M&S mortgages will be available directly from the lender and via brokers. The introduction of the new mortgage products means M&S Bank will now operate as a “full-service bank�, as they already offer credit cards, loans, current accounts and general insurance products to consumers. The new product range still requires regulatory approval before being launched. Additional details of the new mortgage deals will be available to the public next year.

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MORTGAGES

New fees-assisted remortgage product released by Kent Reliance Specialist mortgage provider Kent Reliance, who only sell mortgage products through brokers, are now offering a feeassisted remortgage product to residential and standard buy-tolet applicants. When taking out the new product, customers remortgaging a property valued at up to ÂŁ500,000 will receive free standard valuation, with the valuation fee to be refunded within 30 days of taking out the mortgage. In addition, applicants will receive free legal advice relating to the standard legal requirements of a remortgage from Optima Legal. The new product has been designed to help brokers reduce costs and speed up the remortgaging process for their clients.

Kent Reliance’s new product has been designed to help brokers reduce costs and speed up the remortgaging process for their clients.

UK RETAIL BANKER 25


CARDS

Credit Cards Tandem Bank announced cashback credit card WORDS MARIA URENA

T

andem Bank has announced a new cashback credit card offering 0.5% cashback on all purchases over £1, including purchases made overseas.

Cashback earnt on the card will be paid into the customer’s account every month. The new card also features no fees on non-pound spending or cash withdrawals overseas. With RFi Group data showing that 40% of consumers who have travelled abroad in the last 12 months have used a credit card to make purchases or withdraw cash, this feature is likely to prove popular.

The new card also features no fees on non-pound spending or cash withdrawals overseas... With RFi Group data showing that 40% of consumers who have travelled abroad in the last 12 months have used a credit card to make purchases or withdraw cash, this feature is likely to prove popular. Interest rates charged on purchases are 18.9% APR, although customers with lower credit scores will be charged 22.9% or 24.9% APR. Cash withdrawal in the UK will come with a fee of 2.5% or £2.50, whichever is higher. The card also has a £12 fee if a customer makes a late payment or if a payment fails. Consumers interested in the card can currently apply to join a waiting list. Applicants must be 18 years old or over, have three years of residency in England, Scotland, or Wales, and earn a minimum of £13,000 a year. Applications of consumers already using the Tandem app will be prioritised over other applications.

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CARDS

UK RETAIL BANKER 27


CARDS

Lloyds updates low rate credit card offer WORDS ADAM BOTTLE Lloyds Bank has dropped the interest rate on its low rate credit card, the Lloyds Platinum Credit Card, to 5.7% APR, the lowest rate in the market at the time of the move. The Lloyds Platinum Credit Card comes with no annual fees, however, the low rate will not be made available to all borrowers. Only those with excellent credit histories will be offered the 5.7% rates, with borrowers with weaker credit histories offered either 10.9% or 14.9%. The card also offers a no fee balance transfer, if the balance is transferred within the first 90 days, after which a 3% fee applies. RFi Group data shows that consumers aged 35 to

28 RFi MEDIA

44 are more likely than consumers in other age groups to consider interest rates important when deciding which credit card to apply for, suggesting these consumers could be a key market for this product. The card is only available online. The move comes in response to Bank of England warnings that consumer debt is growing at an unsustainable rate and follows Lloyds Bank’s decision to reduce the interest free period on its balance transfer card from 43 months to 38 months.erdraft service for Android users in the coming months.


CARDS

M&S Bank introduce new rewards for new credit card customers WORDS MARIA URENA M&S Bank has made a third introductory credit card offer, Rewards Plus, available to all new credit card customers. The new offer focuses on M&S loyalty point benefits. New cardholders can now choose between the Rewards Plus, Shopping Plus and Transfer Plus introductory offers. The Rewards Plus offer gives cardholders 2,000 M&S loyalty points, worth £20, up from the standard 500 and allows cardholders to earn 2 M&S loyalty points for every £1 spent in M&S for the first 12 months, up from the standard 1 point per £1 spent. The new offer will also feature 0% interest on purchases and balance transfers for 6 months, provided the balance is transferred within 90 days of the card opening. The balance transfer fee is 2.9% with this offer. Shopping Plus, on the other hand, offers 0% interest on all purchases and balance transfers for 25 months, with a 2.9% balance transfer fee. Transfer Plus comes with a 0% balance transfer for 32 months, with a 0.99% transfer fee and 6 months 0% interest on purchases. According to RFi Group data, attractive balance transfer deals and discounts at merchant/ retailers drive credit card choice for around 10% of cardholders, while the interest free period drives choice for 1 in 4 cardholders, showing that these offers could be useful in attracting new cardholders to M&S.

WHICH FACTORS WERE OF CENTRAL IMPORTANCE TO DECIDING TO APPLY FOR THIS CARD?

Attractive balance transfer deals and discounts at merchant/ retailers drive credit card choice for around 10% of cardholders, while the interest free period drives choice for 1 in 4 cardholders, showing that the offers could be useful in attracting new cardholders to M&S.

20% 15%

14%

10% 6%

5%

5% 0% Interest free-period

Attractiveness of balance transfer deal

Discounts received at merchants/ retailers

Source: RFi Group UK Payments Council 2017 H2

UK RETAIL BANKER 29


PERSONAL LOANS

Personal Loans UK banks to limit amount of loans over the coming months WORDS JOSEPH SHARANGPARNI

A

ccording to a recent Bank of England survey, banks and building societies within the UK are planning to substantially reduce the volume of unsecured loans available to consumers over the next three months. The reduction in credit availability will be the biggest since late 2008 during the financial crisis. The move to tighten lending has been driven by concern about consumer indebtedness and slow wage growth, coupled with high inflation putting pressure on household incomes. Increasing delinquencies are also driving the shift, with lenders taking part in the latest survey reporting a large increase in defaults on unsecured loans. The action follows warnings from the Bank of England that British consumer debt has reached dangerously high levels, which, combined with interest rates rising for the first time in more than a decade, suggest many consumers will be stretched in the coming year.

The action follows warnings from the Bank of England that British consumer debt has reached dangerously high levels, which, combined with interest rates rising for the first time in more than a decade, suggest many consumers will be stretched in the coming year.

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PERSONAL LOANS

Zopa partners with Saffron Building Society WORDS ADAM BOTTLE Zopa has partnered with Saffron Building Society to offer loans at 11 branches, in addition to its existing online distribution network. The deal has come about as Zopa looks to find ways to attract more borrowers to match the appetite of investors looking to access the high rates offered by the peer-to-peer lending platform. Zopa is currently closed to new investors due to an imbalance in the number of investors and borrowers, although it hopes to re-open by the end of the year.

Jaidev Janardana, CEO, Zopa

Adding branches to its distribution network is likely to be a good move for Zopa, with RFi Group data showing that branches are the most preferred application channel for consumers. Adding branches to its distribution network is likely to be a good move for Zopa, with RFi Group data showing that branches are the most preferred application channel for consumers, with almost half saying they would choose to apply this way. Saffron Building Society has branches across the east of England, including Hertfordshire, Essex, and Suffolk.

IF YOU WERE TO APPLY FOR A PERSONAL LOAN, HOW WOULD YOU MOST PREFER TO APPLY? 50%

45%

40% 31%

30% 20% 12%

10%

5%

4%

3%

3%

3%

3%

3%

Mobile

Online/ video chat

Webchat/ live chat

Being visited at home/work

Via a tablet browser

Via a tablet app

Social media

0% At a branch

Online

Telephone

Source: RFi Group UK Priority & Retail Banking Council 2017 H1

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PERSONAL LOANS

Unsecured lending rates slow in August WORDS JOSEPH SHARANGPARNI Year-on-year growth in unsecured loans slowed to 1.5% in August, the slowest growth rate since April 2017, following growth of 1.9% in July, according to UK Finance. The slowdown comes after the Bank of England’s Financial Policy Committee warned that banks within the UK have been underestimating potential losses on unsecured loans should the UK enter another recession. Howard Archer, Chief Economic Adviser of the EY Item Club, suggested that the latest results would be ‘warmly welcomed’ by the Bank of England as concerns about financial stability are eased, although the slowdown could also slow growth in the wider economy.

32 RFi MEDIA

The slowdown comes after the Bank of England’s Financial Policy Committee warned that banks within the UK have been underestimating potential losses on unsecured loans should the UK enter another recession.


SME & COMMERCIAL

SME & Commercial Starling Bank to offer business banking accounts WORDS MEERA PANCHASARA

D

igital challenger brand Starling Bank has announced that it will launch a mobile-only business account, initially aimed at entrepreneurs, sole-traders, and Small and Medium Enterprises (SMEs). The new account, which Starling Bank claims will take SMEs 5 minutes to open, will offer several value-add services, including linked invoicing, accounting services, real-time international payments and 24/7 customer service. Registration for the account is currently available ahead of the launch in 2018. By the end of 2017, Starling Bank will invite applicants to join a closed group to pilot

test the product’s features and usability. When discussing the drivers behind the account launch, Anne Boden, CEO and founder of Starling Bank commented, “A huge group of people exist who need more than a personal current account but aren’t quite a small business. This is what we are hoping to solve here by developing Starling for business.” RFi Group data shows that 14% of SMEs would most prefer to use a mobile phone to conduct online banking activities, suggesting that there is some appetite in the market for a mobile only offering, with online via a desktop/ laptop the most preferred channel overall for SMEs.

Anne Boden

WHICH OF THE BELOW WOULD BE THE BUSINESS’ MOST PREFERRED METHOD TO CONDUCT ITS BUSINESS BANKING ACTIVITIES? SMEs 50% 42%

40% 30% 20%

20%

14% 9%

10%

5%

5%

3%

2%

0% Using web browser on a desktop/ laptop

Visiting a branch

Mobile

Phone banking speaking to a real person

Communicating Face to face with Phone banking with the business’ the business’ using an Relationship Relationship automated voice Manager via email Manager service

Telephone with the business’ Relationship Manager

Source: RFi Group UK SME Banking Council 2017 H1

UK RETAIL BANKER 33


SME & COMMERCIAL

Curve launches feature to automate expenses accounting WORDS ELLA TAUTZ-DAVIS FinTech start-up Curve has teamed up with online accounting software developer Xero to help small businesses by automating expenses accounting. Curve, which allows users to link all their bank cards to one contactless Mastercard and track their spending, has partnered with Xero as part of its newly launched ‘Curve Connect’ feature, which will see Curve link with a range of third-party apps and services. The new partnership will mean that business owners have the option of linking their business card spending with their Xero account so that when the user pays for a business expense, they just need to select the business card they wish to use on their Curve account. From this, the data from the purchase will be sent straight to Xero’s cloud-based accounting software. Users will also be able to take a picture of the purchase receipt to instantly sync the receipt with the expense. The new link with Xero is designed to help business owners, accountants, and bookkeepers manage business finances more efficiently by reducing the time spent on manual data entry and transaction reconciliation.

The new partnership will mean that business owners have the option of linking their business card spending with their Xero account so that when the user pays for a business expense, they just need to select the business card they wish to use on their Curve account.

34 RFi MEDIA


SME & COMMERCIAL

UKEP and major 5 banks partner up to boost SME trade WORDS MEERA PANCHASARA Export credit agency UK Export Finance (UKEF) and the 5 major UK banks have formed a partnership that will allows the banks to offer government backed finance to their customers. UKEF provides export finance to SMEs looking to trade internationally in situations where the proposal is considered too risky for banks to lend. Under the old system, SMEs would need to apply to a bank for finance. If the bank did not approve the finance, SMEs would then be able to apply directly to UKEF for finance, with this process often taking weeks. Under the new system, if a proposal does not meet the banks requirements, but does meet UKEFs requirements, the bank will be able to offer up to ÂŁ2 million in finance backed by a government guarantee. The bank will be able to notify UKEF of the finance though a digital platform. The new partnership is expected to increase SME access to export finance and speed up the application process. Access to UKEF backed finance will now also be offered to SMEs that service internationally trading businesses directly in addition to those that trade internationally themselves.

Under the new system, if a proposal does not meet the banks requirements, but does meet UKEFs requirements, the bank will be able to offer up to ÂŁ2 million in finance backed by a government guarantee.

UK RETAIL BANKER 35


PAYMENTS & DIGITAL

Payments and Digital WORDS SACHIN VISAVADIA

Southern Vectis buses to introduce contactless payments

T

he Southern Vectis bus company, which operates on the Isle of Wright, has announced that it will now offer contactless payments on its bus fleet. Southern Vectis passengers will now be able to pay their bus fare by tapping their contactless card, smartphone or other mobile payment device against a card reader. All other payment methods currently accepted on Southern Vectis buses will continue to be accepted. The decision to add the contactless functionality, according to Andrew

Wickham, Managing Director at Southern Vectis, was driven by the desire to make the payment process as quick and convenient as possible. As RFi Group data shows that 55% of UK consumers prefer to pay for public transport using a credit or debit card, the move is likely to be followed by other transport providers across the country over time. The new functionality will be available on the new ADL Enviro 400 MMC double decker buses, with these buses also featuring other new functionality including low emission engines, free WiFi, and USB charging ports.

ASSUMING THAT YOU HAVE ALL OF THE FOLLOWING PAYMENT OPTIONS AVAILABLE TO YOU, WHICH WOULD YOU MOST PREFER TO USE WHEN PAYING FOR PUBLIC TRANSPORT TICKETS? 40% 34% 31%

30%

24%

20% 9%

10% 2%

0% Cash

Debit card

Credit card

Mobile wallet (e.g. Apple Pay, Android Pay, Google Wallet)

Source: RFi Group UK Payments & Innovation Council 2017 H1

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Other


PAYMENTS & DIGITAL

UK RETAIL BANKER 37


PAYMENTS & DIGITAL

Images source: Timex

Timex launch contactless watch Watch manufacturer Timex has partnered with Barclaycard to launch a new watch with contactless functionality. The new watch includes a bPay chip in the leather strap which will allow users to pay by tapping the strap of their watch against a card reader. The new watch, named Fairfield Contactless, will retail at £159, but consumers who already hold a compatible Timex watch will be able to purchase the leather strap including the contactless strip for £30. The watch and the strap was made available for purchase in November. Timex’s new device will compete against watches from Apple, Google, Samsung, and Fitbit, all of which currently offer mobile payment capabilities. Timex hopes to release more contactless watches in the future.

38 RFi MEDIA

The new watch includes a bPay chip in the leather strap which will allow users to pay by tapping the strap of their watch against a card reader.


PAYMENTS & DIGITAL

New mobile payment app by Esso Esso has started the official role out of its mobile payment app after completing a trial period involving 75 service stations. The service is now set to be rolled out across Esso sites in the UK, with the expectation that 300 stations will offer the service by the end of the year, at a rate of 25 new sites a week. To use the mobile payment feature, a customer will need to complete a registration process and select either Apple Pay or PayPal as the payment method. Once completed, customers will be able to open the app at a station, select the pump number they are using and authorise payment; with a cap of £100. Once authorised the customer will then be able to freely use the pump and fill up the desired amount. The app will track how much the customer has filled up and when the nozzle is returned to the pump, the app will confirm the amount paid and send a receipt to the user via email. The app will also include a “Fuel Finder” feature that will direct consumers to sites that offer the mobile payment service.

The service is now set to be rolled out across Esso sites in the UK, with the expectation that 300 stations will offer the service by the end of the year, at a rate of 25 new sites a week.

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UK Retail Banker - November 2017 Edition  

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UK Retail Banker - November 2017 Edition  

An RFi Group Publication