w www.rfigroup.com t twitter.com/RFiMediaGRB
UK RETAIL BANKER
TRANSPARENCY NOVEMBER 2016 ISSUE RFi THOUGHT LEADER INTERVIEW Mark Mullen, Atom Bank Page 12
RFi GROUP INSIGHT
08 Realising the Opportunity of the UK Prepaid Travel Card Market
21 Housing market activity improves as consumer sentiment and confidence rises
23 New smart fraudless credit card launched
CONTENTS NOVEMBER 2016
RFi GROUP INSIGHT Realising the Opportunity of the UK Prepaid Travel Card Market
CURRENT ACCOUNTS Lloyds Banking Group continue to make cuts on their current accounts
22 CARDS Brits are struggling to pay off their credit card debts
12 THOUGHT LEADER INTERVIEW Mark Mullen, Atom Bank
18 SAVINGS Childrenâ€™s savings accounts face large cuts
PERSONAL LOANS Millennials relying on borrowing for everyday essentials
14 YOUNG PROFESSIONAL OPINION Jan Skoyles, Barlings Consulting
MORTGAGES 19% of borrowers have been passed on the base rate reductions
26 PAYMENTS & DIGITAL Mastercard sets up ‘selfie pay’ in UK
Did a colleague forward you the UK Retail Banker? Subscribe to receive YOUR FREE monthly copy by clicking here
#RFiGroupDailyStats BASED ON RFi GROUP'S LINKEDIN PAGE (DAILY STATS FROM 1 OCT 2016 - 31 OCT 2016)
TOP 10 OCTOBER STATISTICS
35% The biggest driver of savings account switching in the UAE is customer service (35%)
In Singapore, the biggest driver of main bank status is the proximity of ATMs (43%)
In Australia, only 24% of those with an iPhone 6 or newer are highly likely to use Apple Pay
41% of Australian smartphone owners are using Facebook messenger services at least once a week
A stable family life (32%) is the most important financial goal in Thailand
of Japanese SMEs still use cash for their expenses
41% 41% of SMEs in Hong Kong make online payments at least once a week
In Indonesia, the biggest driver of frequent credit card use is the ease of making repayments (43%)
In New Zealand, 15% of banking customers currently hold a personal loan, and 31% have held one in the past
10% of mortgage applications in New Zealand in the last year were conducted online
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 banking market, contextualised by RFi Group data. In anticipation of the launch of RFi Groupâ€™s UK Travel Council later this month, this edition opens with an evaluation of the huge opportunity surrounding the prepaid travelcard market in the UK. Through analysing the potential interest from UK consumers, as well as looking to a more mature market, Australia, to understand how this space can evolve, we can determine the potentials of prepaid travelcards and how to keep ahead of the curve. In product news, this edition also continues to explore the repercussions of the Bank of Englandâ€™s base rate cut in August, with peer-to-peer lenders altering their rates, further current account conditions changing and the breadth of saving products diminishing. In light of yet another challenger bank, Redwood, applying for a bank license from the FCA, I caught up with one of the most established, digital-only banks, Atom. Mark Mullen, CEO, shares his view on how banks are failing their retail and SME customers and how Atom aims to service them differently, pathing the way for banking of the future. The Young Professional Opinion comes from Jan Skoyles this month, a leader in alternative financing, who explains how the global financial crisis, partnered with current financial and geo-political uncertainties, has allowed gold to re-surface and blockchain technology to emerge. If you have been forwarded this issue from a colleague or friend, please subscribe here for your own complimentary subscription. I hope you enjoy this issue.
Sarah Hollinshead Events & Media Manager, RFi Group email@example.com
RFi GROUP INSIGHT
REALISING THE OPPORTUNITY OF THE
UK PREPAID TRAVEL CARD MARKET BY KATE WILSON, RFi GROUP
08 RFi MEDIA
RFi GROUP INSIGHT
he introduction of contactless cards and mobile payments appears to have hastened the decline of cash to the point that, for some, the rise of a cashless (or at least less-cash) society seems inevitable. Already, we are seeing cards beginning to disrupt cash in the low value space, with preference for cash for low value payments decreasing significantly over the last 12 months, according to RFi Group data, and regular cash usage following a similar downward trajectory. But there is one area where cash still remains, undoubtedly, king; in the wallets of international travellers.
There is one area where cash still remains, undoubtedly, king; in the wallets of international travellers.
UK RETAIL BANKER 09
RFi GROUP INSIGHT
Prepaid travel cards have already had a degree of success in convincing users to pay with their card in store, rather than using it as a simple cash access mechanism.
Thinking again about your most recent overseas trip, please indicate how you paid for the following purchases? Cash
Prepaid travel card
Travel related expenses
Tickets to attractions
Meals in restaurants
Food/drinks in cafĂŠs/ bars
Purchases at small retailers
Purchases at larger retailers
Source: RFi Group UK Payments and Innovations Council â€“ 16 H1 Results
According to RFi Group data, UK consumers who have travelled abroad in the last 12 months spent more on average using cash than any other payment method., and this is across almost all payment scenarios, other than accommodation where credit card takes preference. The dominance of cash in this space presents both a challenge and an opportunity for those institutions looking to capture traveller spend. In particular, prepaid travel card providers have the potential to offer consumers a product differentiated from debit or credit cards with features designed to meet the specific needs of travellers. While breaking the relationship travellers have with cash may not be easy, the opportunity for travel card providers to capture spend is huge. And while it appears that travellers do not see any real advantages to using their debit or credit cards over cash while abroad, prepaid travel cards have already had a degree of success in convincing users to pay with their card in store, rather than using it as a simple cash access mechanism. In the UK, uptake of prepaid travel cards has remained relatively muted so far, with just 11% of consumers who have travelled in the last 12 months indicating that they have used a prepaid travel card to make purchases or withdraw cash while abroad. In comparison, in Australia a third of recent travellers used a prepaid travel card. However, while usage of prepaid travel cards is currently low, part of the opportunity in the UK is the potential size of this market. According to RFi Group data, 51% of consumers in the UK have travelled abroad in the last 12 months, this equates to a potential customer base of 27.3 million people. In comparison, there are 5.3 million Australians who have travelled abroad in the last 12 months, 28% of the adult banked population. The number of consumers travelling in a 12 month period is almost three times higher in the UK than Australia. This means that despite Australians being much more likely than UK travellers to have used a prepaid travel card, the actual number of consumers who have used a prepaid travel card in the last 12 months is higher in the UK. Consumers in the UK are also much more 10 RFi MEDIA
RFi GROUP INSIGHT
% OF ADULT BANKED POPULATION WHO HAVE TRAVELLED ABROAD IN THE LAST 12 MONTHS
51% ~ 5.3 million people
likely to travel frequently, creating further opportunities for driving re-usage of prepaid travel cards. By looking at a more mature market for prepaid travel cards, such as Australia, we know that a provider that offers consumers a strong travel card proposition can succeed in winning spend from not only cash, but also from debit and credit cards. The best products also drive repeat usage and retention of customers, overcoming the belief among some consumers that a travel card is a one-time use product to be thrown away following a trip. Looking to a market such as Australia also gives us an indication of how drivers of prepaid card usage are likely to change as a market matures. Currently, being able to carry less cash is the primary driver of prepaid travel card usage in the UK. It is also one of the key drivers in Australia. Being able to carry less cash speaks to security, which is always an important factor in driving payment choice but has an even greater impact for payments made while travelling. In fact, the key drivers of prepaid travel card usage in the UK all tend to be related to security and these security related features are more likely to drive usage in the UK than Australia. Meanwhile, Australians are more likely to be driven by cost related factors, like locking in exchange rates, or features, such as the ability to load multiple currencies. This suggests that while security is definitely a key lever for travel card providers, it is additional features and propositions that will become more important as the market matures. Moreover, current market conditions like the falling pound compared to most currencies may influence the prepaid travel card market in the UK sooner than later. Already there are a number of competitive prepaid travel card offerings in the UK. There are also products like the Travelex SuperCard, which isn’t technically a prepaid card but rather
~ 27.3 million people linked to a current account, as well as the Monzo prepaid card, which isn’t technically a travel card but does give consumers a prepaid option other than their standard debit card. Yet it remains to be seen who will dominate this space as usage increases. With awareness of prepaid travel cards increasing, potentially removing a key barrier to prepaid travel card usage, there is massive potential to be realised in this market. As a result of increasing client demand, RFi Group is excited to announce the launch of the UK Travel Council. Launching in November 2016, this new program will take an in depth look at the payment behaviour of recent travellers, in particular focusing on the role of prepaid travel cards in the traveller wallet, with the aim of helping our clients to best realise the opportunity in this space. With a robust sample of recent prepaid travel card users, key areas of focus for the program will be drivers of prepaid travel card use, drivers of provider choice and retention and re-use of prepaid travel cards. Payments has been a key area of focus for RFi Group for a number of years and this new focus will allow us to continue servicing our clients’ needs and answering key business questions. For further information on the UK Travel Council please contact: Olivia Cosgrove Business Development Manager – EMEA RFi Group Email: firstname.lastname@example.org Main: +44 203 862 2166 Mobile: +44 749 124 0893
UK RETAIL BANKER 11
THOUGHT LEADER INTERVIEW
MARK MULLEN CHIEF EXECUTIVE OFFICER Atom Bank
016 has been a very exciting year for the CEO of Atom Bank, Mark Mullen. April saw the official launch of the mobile-first bank to pre-registered customers (30, 000 of them!) with its fixed-term savings account and small business loan program. As of October, Atom has opened its doors to all savers and small businesses with iPhones/iPads in the UK and is rumoured to be breaking into the mortgage market imminently. Mullen took time out of his no doubt busy schedule to sit down with Sarah Hollinshead and share his viewpoint on the anachronistic nature of the banking system and how Atom Bank aims to re-shape the industry. When asked what specifically banks were doing wrong, Mullen dryly stated: “that is an entire encyclopaedia”. Firstly, his loathing of extensive fees on various services, such as current accounts and overseas transactions is apparent. Highlighting the excessive revenue generated from overdraft charges and transaction fees, Mullen feels banks are fleecing their customers, but dressing it up as being fair and transparent. “It is poor behaviour and they are taking customers for granted; accepting and abusing the fact that customers usually do not have enough time to sort out foreign money, or check their spending habits, and they take advantage of it.” The charges themselves, Mullen argues, are to fund a huge and obsolete infrastructure which was built 20-30 years ago, for a completely different market.
12 RFi MEDIA
THOUGHT LEADER INTERVIEW
“Here is the irony, most customers today use some form of self-service; ATMs, which have been used for decades, internet banking and now mobile banking. So why are customers paying for a service they are not receiving, or even asking for? They are paying for the distribution system of the past, a weight of our history”. Atom Bank, on the other hand, has built its organisation with a view of the future, remaining lean and cost-efficient to ensure customers are not having to fund it. Their offices are located in a modest ex-council premises on the outskirts of Durham in the North-East of England, fitting the entire team in a space that is a quarter of the size of most bank’s foyers in the centre of London, and probably a fraction of the cost. “If you enter with mindset that you need to keep the costs down as the customers are paying the bills; it reshapes what you think is acceptable.” Although Atom Bank has not broken into the current account space just yet, Mullen disagrees with the use of attractive offers from big banks on current accounts, such as joining rewards and returns on transactions, as they are encouraging inertia amongst customers, on which the bank can benefit further down the line through cross-selling products. “This is not clear, transparent or fair to the customer. It is a Trojan Horse, and then bankers tell themselves they have done a great job, but in reality, they have bribed their customers to join them, to later exploit them”.
The digital world is an increasingly transparent and comparable world, one you cannot hide in. Therefore, you have to think differently about building a transparent business model. Claiming you are the best is not worth anything. Innovation PR and claim advertising is no longer good enough, claims Mullen, as in the digital economy, it is increasingly difficult to fake it. Whilst plenty of banks preach their superior service and customer centricity, with multiple social media forums and comparison sites, it is up to the customer to decide if a bank’s offering is reputable. “The digital world is an increasingly transparent and comparable world, one you cannot hide in. Therefore, you have to think differently about building a transparent business
model. Claiming you are the best is not worth anything. Detach yourself, come down to earth and actually be confident enough to build a high quality produce and process. Marketing still has a role, but it is about telling people you are there, not claiming you are the best”. Mullen acknowledges that a total revolution is difficult within larger institutions, having spent 26 years in the industry himself. The challenge lies in transforming the legacies of the past, whilst simultaneously adapting the cultural heritage across thousands of staff members. As Mullen explains “How can you have the technological skills to architect a business model for the 21st century, but never lose site of the fact that there is a human being at the end of it?” Mullen modestly outlines the key metrics behind’s Atom revolutionary business model: “There is not a magic potion here, but I do think that building a simple set of products, being very transparent, being simple, intuitive, reliable, keeping things secure and fundamentally keeping your promises. That is what sits at the heart of Atom.” Atom Bank does not rely on fees, and drives its revenue through the very simple and classical means of lending money. Currently only in the small business market, but they intend to move into personal loans, home loans and maybe credit cards in the foreseeable future. Multiple digital banks have emerged over the last few years, with Starling, Monzo and Tandem all receiving banking licenses this year. Whilst unsure of the rival offering that any of these companies will introduce, Mullen welcomes the competition. “I am not worried about competition. I think the banking industry needs more of it. You cannot be in my seat and say we need more competition, and then say we want no one else but us.” A bright future lies ahead for Atom Bank, as their app continues to evolve and their product set widens. As a fan of analogies and evocative language, Mullen’s closing statement quite nicely sums up his chief goals for Atom Bank as it continues to grow and evolve. “Banking is like going to the dentist. You want it to be painless, fast and not expensive.” To keep up to date with the latest news, interviews and information at RFi Group, follow @RFiMediaGRB on Twitter.
UK RETAIL BANKER 13
YOUNG PROFESSIONAL OPINION
JAN SKOYLES PARTNER Barlings Consulting
S Finance should be a lot more democratic and there should be greater freedom to choose what you do with, and what happens to your money.
14 RFi MEDIA
ince blockchain became the newest buzzword in technology, banks have been paying close attention to its development. Often described as the ‘new internet’, blockchain technology is universally recognised as a potential disruptor to the entire financial services system, with many organisations creating labs, joining consortiums and trialling transactions to keep ahead of the game. Navigating through the hype to understand its full impact however, is the challenge. Sarah Hollinshead sat down with Jan Skoyles, who has dedicated her career to alternative finance, to get her opinion on the future of not only blockchain, but also gold, in the global financial services sector. Unlike the internet-era, Skoyles explains “it is now very easy to collaborate and bring together the best minds across companies in order to get the best application, or solution - whatever it is that the banks decide they want to focus on…
YOUNG PROFESSIONAL OPINION
so I think we will see significant blockchain applications in place over the next 2-4 years.”
Gold plays an excellent, and important role, in a diversified portfolio.”
Skoyles highlights the relatively high levels of openness and quick acceptance of this tech development, primarily due to the incredible tech drive around the world and the excellent marketing tool that was Bitcoin, as a way to show off just some of the potential of blockchain technology. The financial crises, Skoyles states, has also played a role in increasing engagement.
Acknowledging that gold is fairly “irrelevant to most people below the age of 70”, Skoyles set about co-founding a forwardthinking company, The Real Asset Co, a gold trading and investment platform aimed at making this type of investment accessible to all.
“The financial crisis has made regulators, government and businesses realise that there does need to be some major changes in the financial system and much of this has to come through innovation and transparency. Governments and businesses want to be seen as supporting tech companies as well as laying the ground for the future. Blockchain is a great way to achieve both of these things” Understanding different forms of currency and investment is crucial in times of financial instability, which ties into Skoyles other area of expertise, gold. To partner blockchain, a complex and contemporary technology with gold, an archaic and declining form of currency, may seem counter-intuitive. Yet, having studied the financial crisis for her final paper in her International Business and Economics Degree, Skoyles realised that both forms of currency provide a level of transparency and security which could prevent a similar situation happening again in the future. Bitcoin’s increasing popularity highlights a shift in consumer behaviour and how they people now wish to spend or invest their money. “When it came to doing my dissertation I realised that I didn’t like the way that most of the economic theory was not that relevant in the real world. As Einstein said ‘“In theory, theory and practice are the same. In practice, they are not.” I was studying in the aftermath of the financial crisis and it seemed that all of these highly paid analysts and economists had just encouraged the behaviour that led to those events.” Under the current geopolitical uncertainty, from the US presidential election, Brexit, negative interest-rates, bail-ins all the way through to the horrendous refugee crisis and ISIS, gold has seen a huge uptick in demand.
“Finance should be a lot more democratic and there should be greater freedom to choose what you do with, and what happens to your money. Finance doesn’t have to be a mixture of a few bank accounts, a stock portfolio and an IFA who send you a Christmas card with your portfolio statement, once a year.” Now truly entrenched in the fintech world, Skoyles has started to see great synergies with bitcoin, and enjoyed being part of the initial stages of the crypto movement, working with startups, regulators and institutions in London. “You look back now, just a couple of years on and realise how ahead of the game the city was.” Now living in Dubai, Skoyles is a partner in a fintech and investment consultancy business, Barlings Consulting, working with Coisilium Group (where she previously worked in London) and Goldcore. In her years working in the alternative finance space, Skoyles has seen a shift in response from the traditional financial organisations towards new technologies and currencies. “A younger me would have said ‘we’re coming to get you!’ Now though, this seems unfair, as the finance sector, particularly in London (and to some extent, Dubai) has been very welcoming to disruption and FinTech start-ups.” As a young executive herself, Skoyles advises people starting their own careers in the financial sector that they needn’t accept the status quo, and to stay ahead of the game, one needs to “think like a combination of a finance nerd, a techie, an entrepreneur and a customer.” To keep up to date with the latest news, interviews and information at RFi Group, follow @RFiMediaGRB on Twitter.
“Throughout history we see that in periods such as this, where there are serious murmurs of discontent and instability, people turn to gold. Brexit propelled people to look at their portfolio and consider how they can diversify their investments.
UK RETAIL BANKER 15
CURRENT ACCOUNTS BY SIMON HADDAD
LLOYDS BANKING GROUP CONTINUE TO MAKE CUTS ON ITS CURRENT ACCOUNTS Lloyds has announced that it will be cutting the interest rates on its leading current account, Club Lloyds. Currently this account pays 4% on balances between £4,000 - £5,000, 2% on balances between £2,000 - £3,999 and 1% on balances between £1,000 and £1,999. However, as of January, the bank will be offering a flat rate of 2% for all balances up to £5,000. The monthly fee for the account will also be reduced from £5 to £3, but will continue to be free for holders that pay in at least £1,500. This announcement comes shortly after Halifax, which is also owned by the Lloyds Banking Group, announced the reduction of the benefits paid to its Rewards account holders. These announcements come after the banking group stated in August that it would be reviewing its rates due to changing market rates. These rate cuts may drive customers to leave Lloyds in search of banks with better rates as according to RFi Group data, 11% of consumers that ever switched their current account did so to receive higher interest rates.
WHY DID YOU SWITCH YOUR MOST FREQUENTLY USED CURRENT ACCOUNT? 25% 20% 16%
5% 0% I took advantage of a switching reward
The interest rate was higher on the new account
Source: RFi Group UK Priority & Retail Banking Council 16 H1
16 RFi MEDIA
The location of branches
...according to RFi Group data, 11% of consumers that switched current account did so to receive higher interest rates.
NORWICH AND PETERBOROUGH SUSPEND CURRENT ACCOUNTS Norwich and Peterborough Building Society, which is owned by the YBS Group, has decided to stop offering current accounts to potential new customers; however existing customers will remain unaffected. This suspension will include its popular Classic Gold account, which offers no extra fees for purchases or cash withdrawals abroad. Classic Gold is the only widely available account to offer such perks. In the UK market, Norwich and Peterborough has said that it is “currently looking closely at the wider current account market.” The announcement from the building society comes in the wake of the Bank of England’s base rate cut. It remains unclear if this suspension will be permanent or if Norwich and Peterborough will roll out new accounts to replace the previous ones.
NEW CHALLENGER BANK REDWOOD SEEKS FCA APPROVAL
New challenger bank, Redwood, has applied to the Financial Conduct Authority (FCA) for its banking licence. Redwood Bank expects to receive its licence early 2017 and is being funded by Acorn Global Investments, which has previously been involved in the recapitalisation of the Icelandic bank Kaupthing. Redwood hopes to become a market leading bank for SMEs and commercial property lenders in the UK, and is aiming to fill a potential void leave vote left by mainstream banks following the Brexit vote.
Initially Redwood Bank will focus on SMEs based in Hertfordshire, Bedfordshire and Buckinghamshire; offering business deposits and secured loans to owner-occupied companies and experienced property investors. Redwood Bank’s chairman, Jonathon Rowland, believes that it “is an ideal time to apply for a full banking licence; the major banks have not returned to anywhere near their pre-crisis business lending level and the uncertainty caused by leave vote is likely to worsen the situation.”
UK RETAIL BANKER 17
SAVINGS BY SAMUEL GOLDFINCH
CHILDREN’S SAVINGS ACCOUNTS FACE LARGE CUTS Despite children’s accounts often holding higher interest rates and having been protected from severe rate cuts in the past, interest on these accounts has now been slashed by many major banks. Halifax for example has cut its children’s savings account in half, from 4% down to 2%, which is eight times more of a decrease than the 0.25% base rate cut. The average children’s savings account now sits at 1.39% down from 1.61% one year ago in October 2015. Andrew Hagger, director of savings website, Moneycomms, said: “The younger generation should be given higher rates in order to encourage saving, but government should also chip in to redress the intergenerational unfairness so apparent in today’s society.” According to RFi Group data, 13% of savers aged 25-34 hold a children’s savings account. This is significantly higher compared to the total market level of 5%. Gavin Barwell, the housing minister, has recently urged grandparents to leave their inheritance to their grandchildren to help them get their way onto the housing market to combat Britain’s housing crisis.
CHILDREN’S SAVINGS ACCOUNT HOLDERS By age
12% 10% 8% 7%
55 - 64
0% 18 - 24
25 - 34
35 - 44
Source: RFi Group UK Savings Council 16 Q3
18 RFi MEDIA
45 - 54
ONLINE LENDER ZOPA CUTS RATES Zopa, the UK’s largest peer-to-peer online lender, has cut the rates it pays to its investors by 0.2%. This is a similar move made by the high street banks, following the Bank of England’s interest rate cut to 0.25%. Zopa lends out £1.6bn of consumer’s money to borrowers online. Rates from its access account will be dropped to 3.3% from 3.5%, while its classic account will drop to 4.1% and the riskier Zopa plus account will fall to 6.5%. These rates still far exceed the majority of savings account interest rates currently available on the market. Zopa says that the decrease in its interest rate is causing this high demand from investors due to lack of competition from other savings providers and a lack of supply of borrowers, as current lending rates are so low. Another way of increasing the number of people borrowing with Zopa was to increase the acceptance rate. It now accept 20% of applicants compared to 1% when it first started. This, however, is increasing the risk associated with the loans.
HUNDREDS OF SAVINGS ACCOUNTS WITHDRAWN FROM THE MARKET Due to the decrease in the Bank of England’s base rate, savings providers have pulled out over a hundred savings products, diminishing the choice of products in the market quite significantly. Banks and building societies have decided that it is better to remove the products, instead of dropping the interest rates to close to 0%. In total, 127 products have been pulled out since August this year with another 147 products that had been removed in the first 6 months of 2016, according to Moneyfacts. There are now 1,445 accounts for savers to choose from, compared to 2,093 back in April 2012, when the market was at its highest. With so many accounts being withdrawn, some small building societies have found themselves edging up the best buy tables and having to also withdraw some of their accounts as the influx of sudden demand was too excessive.
UK RETAIL BANKER 19
MORTGAGES BY MEERA PANCHASARA
RFi Group data from its latest UK Mortgage Council Survey reveals that only 1 in 5 mortgage holders are aware of that the base rate reduction has been passed on since they were cut on the 4th of August. 20 RFi MEDIA
RFi GROUP DATA REVEALS THAT ONLY 19% OF BORROWERS ARE AWARE THAT THE BASE RATE REDUCTION HAS BEEN PASSED ON
THE BANK OF ENGLAND CUT INTEREST RATES FROM 0.5% TO 0.25% IN AUGUST, HOW LIKELY IS YOUR MORTGAGE LENDER TO PASS ON THE RATE REDUCTIONS TO YOU? 100%
RFi Group data from its latest UK Mortgage Council Survey reveals that only 1 in 5 mortgage holders are aware of the base rate being passed on since they were cut on the 4th of August. Nationwide, Cheltenham & Gloucester, NatWest, HSBC, Santander, Lloyds, Coventry Building Society, Barclays and Virgin Money were among the first lenders to announce passing on the rate cut to their borrowers. This will help homeowners to save on monthly repayments, where RFi Group data shows that just over 1 in 5 mortgage holders may struggle to meet future repayments. However, The Financial Conduct Authority (FCA) will write to all mortgage lenders to establish the changes made by each lender, as some banks have failed to pass on the base rate cut to borrowers despite cutting interest rates on savings accounts.
Very likely (8-10)
Very unlikely (0-2)
My lender has already passed on the rate reductions
19% 20% 19% 0% Q3 2016
Source: RFi Group UK Mortgage Council 16 Q3
HOUSING MARKET ACTIVITY IMPROVES AS CONSUMER SENTIMENT AND CONFIDENCE RISE
12% OF SELF-EMPLOYED CUSTOMERS REJECTED FOR MORTGAGE APPLICATIONS
Housing market activity has picked up over the summer, with mortgage lending and buyer confidence rising. Banks lent £12.2bn to recent homeowners in August, an increase of 14% from the initial shock of the leave vote period in July. Director General of the Council of Mortgage Lenders, Paul Smee, said “House purchase activity bounced back from a dip in July, reflecting resilience in first-time buyer activity,” where he feels cheap mortgage deals as a result of the base rate cut to 0.25% will continue to support demand in the future. Furthermore, The UK Residential Market Survey (RICS) also bounced back in September, with enquiries from new buyers rising for the first time since February, predicting price and sales volumes to rise in the next 3 to 12 months. RFi Group research also found that consumer sentiment improved regarding the housing market, where there has been a slight increase in first time buyer activity. Moreover, consumer sentiment on now being a good time to purchase a home significantly increased in Q3 2016 from Q2 2015.
According to research conducted by the Nottingham Building Society, self-employed customers are struggling to get a mortgage, with 12% having their application rejected for first time purchases or re-mortgaging. The findings conclude that almost half of the self-employed segment said they earned around the same or even more compared to that of their previous employment, suggesting problems in proving income and affordability amongst those who are not working full-time. However, the research shows that it is not only mortgages that are being turned down, as 14% of recently self-employed customers have been rejected for credit cards and 10% for unsecured loans. Senior Mortgage Broking Manager at the Building Society, Ian Gibbons said, “Lenders are responding with new mortgage deals for self-employed customers being launched regularly so there are options available and demand.”
UK RETAIL BANKER 21
CARDS BY KALLIA MANIKA
BRITS ARE STRUGGLING TO PAY OFF THEIR CREDIT CARD DEBTS Research conducted by the comparison website Gocompare.com found that 6.7 million UK credit card holders have been unable to pay the debt on their cards for 3 years or more. 10% are even carrying their debt for 5 years or more. The same proportion admitted that credit cards, as well as other unsecured debt, was their greatest financial concern. The study also revealed that 6% of British adults use their credit cards in order to make ends meet. This correlates with RFi Group data which shows that almost 1 in 3 credit card holders failed to pay the full amount on their last credit card statement, with only 8% of those paying the minimum amount required.
WHICH STATEMENT BEST DESCRIBES THE LAST PAYMENT YOU MADE ON YOUR LAST CREDIT CARD STATEMENT?
40% 56% 20%
0% Q3 2016
Source: RFi Group UK Priority & Retail Banking Council 16 H1
22 RFi MEDIA
I didnâ€™t make any payment
I paid the minimum payment required I paid a portion of the amount due on the current statement (i.e. more than the minimum required but not the full amount) I paid the amount due on the current statement (i.e. the entire due amountbut not any balance not yet due) I paid the outstanding balance in full (i.e. the entire due amount plus any additional balance not yet due)
SANTANDER’S NEW ALL IN ONE CREDIT CARD
NEW SMART FRAUDLESS CREDIT CARD LAUNCHED
The 123 Credit Card by Santander, which used to offer tiered rates of cashback, has been pulled out from the market. Instead, the All in One Credit Card is the new option for customers who wish to get cashback based on their spending. Regarding its features, the credit card comes with 0% on purchases for 6 months from the account opening date and 0% on balance transfers for the first 40 months, with 1% transfer fee. Moreover, customers will get 0.5% cashback on all of their purchases, across the UK as well as abroad, while there are no foreign transaction charges on purchases or withdrawals in the local currency when travelling. Finally, card holders can get 5 welcome cashback retail offers that range from 5% to 25%. The new All in One Credit Card has a £3 fee per month.
Motion Code card, by Oberthur Technologies, is a new type of credit card that aims to prevent fraudulent activities, through the generation of a three-digit security code every 60 minutes. The idea is to replace the traditional permanent security code on the back side of the credit card with a digitised screen that reveals new codes every hour. The screen’s thin lithium battery is expected to last 3 years. British Banks are currently in talks with Oberthur, working to introduce this card in the UK. Based on data from UK’s Financial Fraud Action, fraudulent acts on credit cards have been increasing, reaching £755m in 2015. Professor Alan Woodward, a cybersecurity expert from the Surrey University, explained “The technology has existed for some time so now it will be a case of persuading card processors that it is worth doing”. One inevitable disadvantage of the technology is that card holders will not be able to remember their security code anymore and will need to look at their card everytime for online payments.
The All in One Credit Card is the new option for customers who wish to get cashback based on their spending.
Based on data from the UK’s Financial Fraud Action, fraudulent acts on credit cards have been increasing, reaching £755m in 2015.
UK RETAIL BANKER 23
PERSONAL LOANS BY CELINE Ă˜DEGAARD
MILLENNIALS RELYING ON BORROWING FOR EVERYDAY ESSENTIALS Research by the comparison site Totallymoney.com shows that many millennials are relying on borrowing to pay for their everyday essentials. As many as 1 in 4 millennials under the age of 25 are borrowing to pay for their utilities and the same proportion are said to be borrowing money for nights out. 1 in 4 also admitted to having missed required monthly payments in the past years. This behaviour might explain why the rejection rate when applying for loans for this age group exceeded all others, with 1 in 5 being rejected. This could lead to a bad credit score, which in turn could make this generation less attractive to lenders when applying for mortgages, loans or credit cards in the future. RFi Group research demonstrates that an increasing number of millennials have personal loans. In 2016, 13% of millennials reported to have at least one personal loan.
% HOLDING PERSONAL LOANS IN THE UK H1 2015
5% 0% 18-24
Source: RFi Group UK Priority & Retail Banking Council 16 H1
24 RFi MEDIA
As many as 1 in 4 millennials under the age of 25 are borrowing to pay for their utilities.
EQUIFAX SUPPORTS THE LAUNCH OF STREET UK ONLINE LENDING PLATFORM
SAINSBURYS BANK OFFERS THE CHEAPEST PERSONAL LOAN ON RECORD
Equifax supports the launch of Street UK, an online lending platform for short-term personal loans. Street UK claims to be the first ethical provider of online shortterm loans in the UK, offering between £100 and £500 for up to six months, aiming to cover unexpected financial expenditure. Street UK will now utilise a number of Equifax solutions to mitigate the need for manual checks and excessive documentation. The CEO at Street UK, Kashaf Ali said that “The Equifax solutions will enable us to provide high quality online services, providing an excellent customer experience while maintaining robust affordability checks.” The lender is also backed by four big charities aiming to eliminate poverty, making it able to provide less expensive loans. Street UK, who only charges 0.2% a day, claims that 90% of its loans are repaid in full. This initiative is to decrease the number of people having problems with payday loans and prevent them from going to commercial lenders, loan sharks or doorstep lenders.
With strong competition in the personal loan market, Sainsburys bank has cut rates to the lowest on record for its Nectar cardholders. By cutting rates on loans between £7,500 and £20, 000 by 0,1% APR, the successful loan applicants will only be charged a rate of 3.1% per year. This demonstrates the strong competition in the UK personal loan market, where providers are cutting rates to attract new borrowers. According to RFi Group data, ‘a competitive interest rate’ is considered extremely important for consumers with 50% ranking it as the most important factor when selecting a new personal loan.
‘A competitive interest rate’ is considered extremely important for consumers with 50% ranking it as the most important factor when selecting a new personal loan.
UK RETAIL BANKER 25
PAYMENTS & DIGITAL
PAYMENTS AND DIGITAL BY MANISHA NOBEEN
PAYPAL ARRIVES ON VODAFONE PAY
According to RFi Group data, 13% of consumers in the UK currently use a mobile wallet, with 31% of those using PayPal on a regular basis, suggesting a huge opportunity for Vodafone and its existing customers.
As of early October, Vodafone has launched its own mobile wallet, ‘Vodafone Pay’, for Android smartphone users via their PayPal accounts. Vodafone has used a different approach by using NFC SIM cards that allow users to make payments, even when the device is switched off. Prior to its partnership with PayPal, Vodafone Pay only accepted Visa and MasterCard accounts. According to Kate Wright, Head of Consumer Services at Vodafone, including PayPal was of high importance to their customers and now offers a greater choice of providers compared to any other mobile payment service. According to RFi Group data, 13% of consumers in the UK currently use a mobile wallet, with 31% of those using PayPal on a regular basis, suggesting a huge opportunity for Vodafone and its existing customers. The wallet is available to use at all retailers accepting contactless payments, including London underground and National Rail networks. Transactions can be viewed on the users’ PayPal accounts or via the Vodafone Wallet app.
MOBILE WALLET USAGE IN THE UK Mobile wallet users
Non-mobile wallet users
33% of mobile wallet users, use PayPal on a regular basis
13% Source: RFi Group UK Payments and Innovation Council 16 H1
26 RFi MEDIA
PAYMENTS & DIGITAL
MASTERCARD SETS UP ‘SELFIE PAY’ IN UK After being trialled in the US and Canada, Mastercard plans to launch ‘Identity Check Mobile’ in the UK and Europe, a service which allows users to pay for a purchase online using face recognition technology. Users simply download the Identity Check app on to their smartphone, take a selfie and upload the photo to Mastercard, who then create a digital map of the user’s face, ready for their next purchase. Following the setup, when purchasing products/services online, a notification is sent to the shopper’s phone asking for a selfie. By holding the phone and blinking or showing signs of movement, avoiding potential fraud, the app will then authenticate the payment. According to Ajay Bhalla, President of Enterprise Risk and Security at Mastercard; “Shopping in person has been revolutionised thanks to advances like contactless cards… now we are making Identity Check Mobile a reality for online shopping in Europe and soon the world.”
ALIPAY PARTNERS WITH ZAPPER China’s leading mobile payment platform AliPay has partnered with Zapper, a mobile enabled consumer insights and marketing platform, to help provide to over 250,000 Chinese tourists the ability to pay for their purchases via their mobile wallet in over 1,000 locations nationwide. Over 85% of mobile payments in China are currently made through Alipay, allowing a seamless transition when using the app in the UK. Grey Hooper, the CEO of Zapper remains confident in the partnership and its development in “enabling Chinese tourists to seamlessly continue using the highly popular Alipay app when travelling to the UK.”
UK RETAIL BANKER 27
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 worldâ€™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 43 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 Groupâ€™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 email@example.com For more information, visit: www.rfigroup.com www.globalretailbanker.com
28 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
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
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 43 INTERNATIONAL MARKETS
Our markets include Australia, Argentina, 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
AU / NZ
UK RETAIL BANKER 29
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 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. Covering 40 key global markets with regional offices in San Francisco, Toronto, London, Hong Kong, Singapore and Sydney, RFi Group consistently provides clients with tailored advice and independent intelligence relevant to their specific markets and business needs. RFi Group delivers business intelligence via both proprietary and syndicated research programs. Our syndicated research is delivered via our Financial Councils model. Upcoming North American Financial Council research includes: H2 UK Payments and Innovation Council – Coming soon Q3 UK Savings Council survey – Out now Q3 UK Mortgage Council survey – Out now H2 UK Retail Banking Council survey – Coming soon H2 UK Premier Banking Council survey – Coming soon
Find out how you can access RFi Group’s latest business intelligence Please contact Jonathan Withers for further information: Jonathan Withers Sales Director - EMEA firstname.lastname@example.org +44 (0) 203 862 2166