Product Type: Market Research Report
Published by: Key Note Publications Ltd
Published: March 2007
Product Code: R310-1415Description The financial services industry is a customer-focused one: without the customer, financial services providers have no purpose, and good customer service is the goal to which most of these providers aspire.
Documents such as the Banking Code, issued by the British Bankers' Association (BBA), and the Mortgage Code, issued by the Council of Mortgage Lenders (CML), present principles to which providers in the financial services industry have agreed and to which they have committed themselves to comply.
However, the Financial Services Authority (FSA) and the Financial Ombudsman have been set up by the Government to police the industry, and to protect the retail customer, in particular. Notorious failures in selling insurance and investments in the 1990s precipitated the formation of the FSA and, by 2007, it covers almost all of the industry, with the exception of Christmas savings clubs. Although the FSA has been largely accepted by the industry and is seen by consumers as working for their benefit, there are still (in 2007) frequent complaints that customer service is imperfect.
Many customers still believe that financial services providers do not put the customer first. Despite this, a number of consumers believe that the industry has improved in the past 5 years (to 2007), but these tend to be young people: large proportions of older customers have a less sanguine view of their financial services provider.
This Key Note Market Assessment report investigates how far customer services have improved, and how far regulation has gone, as well as the extent to which the Codes have been implemented between 2001 and 2006. The report focuses on the retail sectors, and explores consumer attitudes towards the financial services industry at the end of 2006.
In this report, banks, building societies, insurers and independent financial advisers (IFAs) are dealt with separately, and the effects and future of call centres and the use of the Internet are explored. There is currently a tension between customer preference for face-to-face contact and the adoption of new distribution channels. This has strong implications for the quality of customer service, where customer preferences conflict with the pressure to reduce costs.
Customer-service quality is best gauged by examining consumer perceptions. Exclusive consumer research commissioned by Key Note for this report revealed that 76.4% of respondents like to discuss their financial affairs with trained staff face-to-face. Interestingly, a higher proportion of respondents said that they value friendly staff more than accuracy of service (45.2%) than those who placed speed and accuracy of service above friendly staff (42.4%). Almost half of respondents (48.7%) agreed that customer services have improved over the past 5 years.
Table of Contents - Executive Summary
- 1. Introduction
- BACKGROUND
- DEFINITION
- 2. Strategic Overview
- MARKET DYNAMICS AND SEGMENTATION
- Current Status of the Market
- Total Industry Value and Growth
- The Largest Sector
- The Market with the Highest Growth Rate
- The Market with the Lowest Growth Rate
- ECONOMIC TRENDS
- Inflation
- Table 1: UK Rate of Inflation (%), 2001-2005
- Unemployment
- Table 2: Actual Number of Unemployed Persons in the UK (million), 2001-2005
- Household Size
- Table 3: Households in Great Britain by Size (%, million and number), 1971, 1981, 1991, 2001 and 2005
- Figure 1: Composition of Households in Great Britain (%), 1971, 1981, 1991, 2001 and 2005
- Population
- Table 4: UK Resident Population Estimates by Sex (000), Mid-Years 2001-2005
- Gross Domestic Product
- Table 5: UK Gross Domestic Product at Current and Annual Prices (£m), 2001-2005
- Household Disposable Income
- Table 6: UK Household Disposable Income Per Capita (£), 2001-2005
- REGULATORY CHANGE
- Basic Bank Accounts
- The Banking Code
- Markets in Financial Instruments Directive
- The Financial Services Authority
- Treating Customers Fairly
- Financial Capability
- Financial Advice
- Matters of Concern
- Direct Marketing
- The Financial Services Consumer Panel
- Regulatory Regimes
- Financial Ombudsman
- Distance Marketing
- Financial Services Skills Council
- Credit-Reference Agencies
- DISTRIBUTION
- Table 7: Employment in Major British Banking Groups (000 and index 2002=100), 2002-2006
- Table 8: Employment in Building Societies by Working Status, 2002-2006
- Table 9: Employment in the UK Insurance Market (000 and index 2002=100), 2002-2006
- Figure 2: Employment in the UK Insurance Market (000), 2002-2006
- COMPETITIVE STRUCTURE
- ADVERTISING
- THE CONSUMER
- MARKET OUTLOOK
- 3. Banks
- BACKGROUND AND MARKET SIZE
- MARKET SHARES
- Table 10: Top Nine Banks by Loans and Advances to Customers (£m), 2004-2006
- Figure 3: Top Nine Banks by Loans and Advances to Customers (£m), 2006
- MARKET TRENDS
- Account Aggregation
- Electronic Banking and Customer Relationship Management
- Individual Voluntary Arrangements
- Charges
- CONSUMER TRENDS
- Face-to-Face Contact
- Reliance on Banks
- MARKETING ACTIVITY
- Advertising
- Table 11: Main Media Advertising Expenditure by Banks on Current Account Banking Services by Type of Account (£000), Year Ending September 2006
- DISTRIBUTION
- Branch Distribution
- Table 12: Bank Branch Networks by Number of Branches, Years Ending December 2002-2006
- Automated Teller Machines
- 4. Building Societies and Community Banks
- BACKGROUND AND MARKET SIZE
- Building Societies
- Credit Unions
- MARKET SHARES
- Table 13: Leading Building Societies by Group Assets (£m), as at 31st December 2005
- MARKET TRENDS
- CONSUMER TRENDS
- Reliance on Building Societies
- Financial Services for Local People
- MARKETING ACTIVITY
- Advertising
- Table 14: Main Media Advertising Expenditure by Building Societies (£000), Year Ending September 2006
- DISTRIBUTION
- Table 15: Number of Building Society Branches (number and index 2002=100), 2002-2006
- Figure 4: Number of Building Society Branches, 2002-2006
- 5. Insurance Companies
- BACKGROUND AND MARKET SIZE
- Mis-selling
- MARKET SHARES
- Life Insurance
- Table 16: The Ten Largest Life Insurers by Net Premium Income — Global Life Business (£m and %), 2006
- General Insurance
- Table 17: The Ten Largest General Insurers by Premium Income Receivable — Total World Premium (£m and %), 2006
- MARKET TRENDS
- Life Insurance Regulation
- General-Insurance Regulation
- CONSUMER TRENDS
- Life Insurance
- Belief in Insurance Companies
- Belief in Pension Providers
- General Insurance
- MARKETING ACTIVITY
- Advertising
- Life Insurance
- Table 18: Main Media Advertising Expenditure on Life Insurance by Product Type (£000), Year Ending September 2006
- General Insurance
- Table 19: Main Media Advertising Expenditure on General Insurance (£000), Year Ending September 2006
- DISTRIBUTION
- Life Insurance
- General Insurance
- 6. Independent Financial Advisers
- BACKGROUND AND MARKET SIZE
- Table 20: Total Number of Independent Financial Adviser Firms — All Establishments (number and index 2002=100), 2002-2006
- MARKET SHARES
- Table 21: Leading Independent Financial Adviser Firms by Sales Staff and Turnover (number and £), 2006
- MARKET TRENDS
- Depolarisation
- CONSUMER TRENDS
- Reliance on Independent Financial Advisers
- ADVERTISING
- Marketing Activity
- Table 22: Main Media Advertising Expenditure on Independent Financial Advice (£000), Year Ending September 2006
- ISTRIBUTION
- 7. Automated Teller Machines
- BACKGROUND AND MARKET SIZE
- MARKET TRENDS
- Charges
- CONSUMER TRENDS
- Preference for ATMs
- MARKETING ACTIVITY
- Advertising
- DISTRIBUTION
- Table 23: Number of Cash Machines in the UK (number and index 2003=100), 2002-2006
- Figure 5: Number of Cash Machines in the UK, 2003-2006
- 8. Call Centres
- BACKGROUND AND MARKET SIZE
- Table 24: Number of Bank Accounts Accessible by Telephone (000 and index 2002=100), 2002-2006
- MARKET TRENDS
- Staff Training
- The Future of the Call Centre
- CONSUMER TRENDS
- Call-Centre Confidence
- MARKETING ACTIVITY
- Advertising
- DISTRIBUTION
- 9. Internet Sites
- BACKGROUND AND MARKET SIZE
- Table 25: Number of Personal Customers Registered to Access Their Accounts by Computer (000 and index 2002=100), 2002-2006
- MARKET TRENDS
- Authentication
- Phishing
- Carelessness
- CONSUMER TRENDS
- Confidence in Internet Sites
- MARKETING ACTIVITY
- Advertising
- Table 26: Main Media Advertising Expenditure on Online Financial Services (£000), Year Ending September 2006
- DISTRIBUTION
- 10. An International Perspective
- CONSUMER SERVICES IN FINANCIAL ORGANISATIONS IN THE EU
- Changing Bank Accounts
- Bank Account Features and Charges
- Trust in Internet Transactions
- Trusting in Telephone Transactions
- Ease of Settling Disputes With Banks and Insurance Companies
- Aggressive Marketing
- Clarity of Information
- Protection of Consumer Rights
- Problem Solving
- Expectation of Advice from Financial Institutions
- Conclusion
- 11. PEST Analysis
- POLITICAL FACTORS
- Influence
- Profit Versus Customer Welfare
- Shareholders and Corporate Control
- Pensions
- Financial Literacy
- Regulation
- Competition
- ECONOMIC FACTORS
- Fees and Taxation
- Economic Growth
- The Stock Market
- SOCIAL FACTORS
- Personal Wealth
- The Ageing Population and Pension Funds
- Consumer Education
- Investors
- New Loans Vehicles
- TECHNOLOGICAL FACTORS
- Investment in Technology
- Smart Cards
- Call Centres
- Outsourcing
- Application of Technology
- 12. Consumer Dynamics
- OVERVIEW
- Summary of Results
- Table 27: Summary of Results (% of respondents), 2006
- ATTITUDES TOWARDS STAFF EFFICIENCY AND FRIENDLINESS
- I Value Speed and Accuracy of Service More Than Friendly Service
- I Value Friendly Staff More Than Accuracy of Service
- I Do Not Mind Staff Mistakes If They Make an Effort to Put Them Right
- Table 28: Attitudes Towards Staff Efficiency and Friendliness (% of respondents), 2006
- ATTITUDES TOWARDS CUSTOMER CARE
- I Receive No Customer Services from Financial Institutions
- I Do Not Think Financial Services Providers Care About Their Customers
- I Think That Customer Services Have Improved Over the Last 5 Years
- Table 29: Attitudes Towards Customer Care (% of respondents), 2006
- ATTITUDES TOWARDS THE FINANCIAL SERVICES AUTHORITY
- I Believe That the Financial Services Authority is Committed to Protecting the Consumer
- Table 30: Attitudes Towards the Financial Services Authority (% of respondents), 2006
- ATTITUDES TOWARDS SERVICES FROM FINANCIAL SERVICES PROVIDERS
- I Want My Financial Services Provider to Anticipate My Financial Needs
- I Would Like My Financial Services Provider to Offer Me a Choice of Personalised Services for a Fee
- Financial Services Providers Charge Too Much for the Level of Service They Provide
- Table 31: Attitudes Towards Services From Financial Services Providers (% of respondents), 2006
- ATTITUDES TOWARDS PERSONAL SERVICE
- I Prefer to Deal With a Cash Machine (ATM) Rather Than Go into a Bank Branch
- I Like to Discuss My Financial Affairs With Trained Staff Face-to-Face
- Table 32: Attitudes Towards Personal Service (% of respondents), 2006
- CONFIDENCE IN CALL CENTRES AND INTERNET SITES
- I Feel Confident That Call-Centre Staff Can Handle My Financial Affairs
- I Feel Confident That Internet Sites Can Handle My Financial Affairs
- Table 33: Confidence in Call Centres and Internet Sites (% of respondents), 2006
- RELIANCE ON BANKS, BUILDING SOCIETIES AND INDEPENDENT FINANCIAL ADVISERS
- I Rely on My Bank for Organising My Financial Affairs
- I Rely on My Building Society for Organising My Financial Affairs
- I Rely on an Independent Financial Adviser for Organising My Financial Affairs
- Table 34: Reliance on Banks, Building Societies and Independent Financial Advisers (% of respondents), 2006
- BELIEF IN INSURANCE COMPANIES AND PENSION PROVIDERS
- I Believe My Insurance Company Will Provide Me With the Products I Need
- I Believe My Pension Provider Will Deliver the Service I Need
- Table 35: Belief In Insurance Companies and Pension Providers (% of respondents), 2006
- ATTITUDES TOWARDS COMMUNITY BANKS
- I Think My Own Community Should Set Up a Financial Service for Local People
- Table 36: Attitudes Towards Community Banks (% of respondents), 2006
- 13. Company Profiles
- INTRODUCTION
- ALLIANCE & LEICESTER PLC
- Corporate Strategy
- New Product and Brand Developments
- Advertising
- Distribution
- Profitability
- Table 37: Financial Results for Alliance & Leicester PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- BARCLAYS PLC
- Corporate Strategy
- Barclaycard
- New Product and Brand Development
- Innovations
- Advertising
- Distribution
- Profitability
- Table 38: Financial Results for Barclays PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- HBOS PLC
- Corporate Strategy
- New Product and Brand Development
- Advertising
- Distribution
- Profitability
- Table 39: Financial Results for HBOS PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- HSBC HOLDINGS PLC
- Corporate Strategy
- New Product and Brand Development
- Innovations
- Advertising
- Distribution
- Profitability
- Table 40: Financial Results for HSBC Holdings PLC ($000, % and $), Years Ending 31st December 2002-2005
- Future Company Developments
- LEGAL & GENERAL GROUP PLC
- Corporate Strategy
- New Product and Brand Development
- Advertising
- Distribution
- Profitability
- Table 41: Financial Results for Legal & General Group PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- LLOYDS TSB GROUP PLC
- Corporate Strategy
- New Product and Brand Development
- Innovations
- Advertising
- Distribution
- Profitability
- Table 42: Financial Results for Lloyds TSB Group PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- NATIONWIDE BUILDING SOCIETY
- Corporate Strategy
- New Product and Brand Development
- Innovations
- Advertising
- Distribution
- Profitability
- Future Company Developments
- THE ROYAL BANK OF SCOTLAND GROUP PLC
- Corporate Strategy
- New Product and Brand Development
- Advertising
- Distribution
- Profitability
- Table 43: Financial Results for The Royal Bank of Scotland Group PLC (£000, % and £), Years Ending 31st December 2002-2005
- Future Company Developments
- 14. The Future
- THE ECONOMY
- Population
- Table 44: Forecast UK Resident Population by Sex (000), Mid-Years 2006-2010
- Gross Domestic Product
- Table 45: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2006-2010
- Inflation
- Table 46: Forecast UK Rate of Inflation (%), 2006-2010
- Unemployment
- Table 47: Forecast Actual Number of Unemployed Persons in the UK (million), 2006-2010
- Household Disposable Income
- Table 48: Forecast UK Household Disposable Income Per Capita (£), 2006-2010
- FORECASTS
- Bank Branches
- Table 49: Forecast Number of MBBG Bank Branches in Great Britain (number and index 2006=100), 2006-2011
- Figure 6: Forecast Number of MBBG Bank Branches in Great Britain, 2006-2011
- Building Society Branches
- Table 50: Forecast Number of Building Society Branches in the UK (number and index 2006=100), 2006-2011
- Figure 7: Forecast Number of Building Society Branches in the UK, 2006-2011
- Independent Financial Adviser Firms
- Table 51: Forecast Number of Independent Financial Adviser Firms — All Establishments (number and index 2006=100), 2006-2011
- Figure 8: Forecast Number of Independent Financial Adviser Firms — All Establishments, 2006-2011
- NEW DEVELOPMENTS
- OUTSOURCING
- A NEW MODEL OF CUSTOMER SERVICE
- CONCLUSION
- 15. Consumer Confidence
- METHODOLOGY
- KEY FINDINGS THIS QUARTER
- THE WILLINGNESS TO BORROW
- Confidence Slips Slightly
- Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), November 2005-2006
- Significantly More Adults Are Willing to Borrow
- Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), November 2005-2006
- SPENDING FROM SAVINGS
- Little Change in Spending from Savings
- Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), November 2005-2006
- Saving Grows in Relative Importance
- Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), November 2005-2006
- 16. Further Sources
- Associations
- Publications
- Government Sources
- General Sources
- Bisnode Sources
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