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UK Direct Banks 2007: Competitors for deposit-based funding

Product Type: Market Research Report
Published by: Datamonitor
Published: January 2008
Product Code: R313-30023
Description
Introduction

Higher interbank money market rates, which have resulted from the credit squeeze, are putting significant pressure on lenders to source funds. Unlike some traditional banks, direct banks may more insulated because they have large, fast growing deposit bases upon which to draw. This report explores their offerings.

Scope

Presents a comparative analysis of variable deposit rates of direct banks, high street banks and building societies; Presents a comparative analysis of fixed deposit rates of direct banks, high street banks and building societies; Compares the features of variable and fixed rate savings products offered by UK-based direct banks.

Highlights

Between June and December 2007, Smile has consistently offered lower rates than its competitors, while Sainsbury's Bank has been the most consistent market leader by rate, with the exception of the months of July and August when Tesco offered the best rate, and November and December when the AA took the lead. A comparison between rates of high street banks and the accounts of direct banks suggests that, among traditional banks, only Abbey and, to a lesser extent, Lloyds TSB, are holding their own against their newer rivals. A comparison of average rates across the three categories of providers reveals that high street banks have consistently offered the highest average fixed rates, although since November, the gap between their average and that of rival direct banks and building societies has been narrowed.

Reasons to Purchase

Assess the competitive threat posed by direct/online savings banks; Benchmark your pricing and product propositions; Use our insights to plan your strategies for targeting deposit customers.
Table of Contents
OVERVIEW
Catalyst
Summary
Methodology
EXECUTIVE SUMMARY
Direct banks present strong rate-based competition, particularly in the variable rate savings market
VARIABLE & FIXED DEPOSIT RATE TRENDS - DIRECT BANKS, HIGH STREET BANKS AND BUILDING SOCIETIES
Since August, deposit rates have stagnated
The market for fixed deposits sees increasing competition
VARIABLE AND FIXED RATE PRODUCT FEATURES - DIRECT BANKS
Online banks offer similar product features
Direct banks are developing their fixed investment ranges
APPENDIX
Definitions
Methodology
Further reading
Ask the analyst
Datamonitor consulting
Disclaimer
TABLE OF FIGURES
Figure 1: Since August 2007, most direct banks have held their savings rates constant
Figure 2: Abbey’s internet savings account offered the highest rate among high street banks
Figure 3: Only Abbey compares favorably to the top three direct banks by rate
Figure 4: Bradford & Bingley’s e-savings account holds its own against direct banks
Figure 5: Building societies offer strong rate-based competition in direct banking
Figure 6: Two direct banks have introduced new fixed rate deposits since June
Figure 7: High street banks offer comparable rates on fixed investments
Figure 8: Nationwide and Bradford & Bingley offer rates in excess of the average of direct banks’ rates
Figure 9: High street banks offer strong rate-based competition on fixed investments
TABLE OF TABLES
Table 1: Highest deposit rates offered by direct banks, gross % p.a., monthly interest, Jun-Dec 2007
Table 2: Highest internet savings deposit rates offered by high street banks compared to the top three direct banks, gross % p.a., yearly interest, Jun-Dec 2007
Table 3: Highest internet savings deposit rates offered by building societies compared to the top three direct banks, gross %, p.a., yearly interest, Jun-Dec 2007
Table 4: Average variable deposit rates offered by direct banks, high street banks and building societies, gross % p.a., yearly interest, Jun-Dec 2007
Table 5: Highest fixed deposit rates offered by direct banks, gross % p.a., Jun-Dec 2007
Table 6: Direct banks’ variable rate savings account features - interest terms
Table 7: Direct banks’ variable rate savings account features - eligibility and access terms
Table 8: Direct banks’ fixed investment account features - interest and terms
Table 9: Direct banks’ fixed investment account features - eligibility and access terms


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