DUBLIN--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/research/gtvwvr/feebased_banking) has announced the addition of the "Fee-Based Banking in the UK: Sizing the Market Opportunity" report to their offering.
With the viability of the free-if-in-credit model under threat, banks need to increase their focus on the fee-based banking market. Creating more direct revenue streams from current accounts will be vital to banks, especially given the onus on cost control. Fee paying accounts not only generate higher revenue but can also lead to greater customer engagement, cross-selling, and differentiation.
Highlights
- Net interest margins, insufficient fund charges, and overdrafts charges have historically been the chief sources of direct personal current account income for providers. However, banks will increasingly looking to raise the income generated by monthly fees of paid-for accounts as revenue from these sources comes under pressure and costs rise.
- Fee-based accounts have the realistic potential of making up 36% of the overall current account market. To maximize revenue generation, providers must demonstrate the value consumers can derive from such accounts and emphasize the convenience afforded by fee-paying accounts.
- Datamonitor has identified six distinct consumer segments based on usage of, and attitudes towards fee-based current accounts. Each segment displays different characteristics, and banks consequently need to employ very different strategies to reach out to each group.
Key Topics Covered:
OVERVIEW
SIZING THE MARKET OPPORTUNITY
- Fee-based accounts offer the opportunity to usher in a new era for UK retail banking- Fee-based current accounts are moving from niche toward the mainstream
- Banks are under pressure to raise fee income to maximize profitability of retail banking
- The profitability of the retail banking division is becoming more important to banks
- Regulators question the validity of the free-if-in-credit model
- Regulatory costs are marginal in the context of revenue generated by fee-based accounts
- Acquiring fee-paying customers will be made easier with new switching rules
- Providers will benefit by moving toward a fee-based banking strategy- Fee-based accounts enable greater differentiation from rivals
- Paid-for account customers are more engaged with their provider
- Fee-based accounts increase cross-selling opportunities
- Utilize consumer demand for more transparent and simple banking
- Consumer demand for convenience will boost uptake of fee-based banking
- Providers can afford to offer competitive interest rates
MAXIMIZING THE OPPORTUNITIES
- The present state of the UK fee-based current account market- Fee-based accounts have become mainstream with a 15% market share
- Fee-based current accounts can expect to generate £2.9bn in annual fee income
- A significant proportion of consumers will continue using free banking
- Added value needs to be demonstrated to justify charging a fee for current accounts
- Providers need to rethink their fee-based strategy- Small- and medium-sized providers have an opportunity to increase market share of fee-based accounts to match overall market share
- Change fee-based approach from ""push"" to ""pull""
- Banks' priority must be to address the value concerns over packaged accounts
- Providers need to make a greater effort to explain account details at the point-of-sale
- Providers need to make a greater effort to market fee-based accounts
- Online is an effective channel in acquiring fee-based account customers
- However, branches remain the main channel of opening
- Providers must employ distinct strategies for each consumer segment
- Premium account holders are a lucrative but demanding segment of the market- Providers need to offer investment advice
- Premium account holders will appreciate an enhanced telephone service
- Premium account holders are willing to pay more for PFM
- Premium account consumers demand preferential treatment
- Competitive interest rates are an attraction for premium account customers
- Non-cash alternatives can incentivize premium customers
- Standard account users' convenience attitudes increase cross-selling opportunities
- Standard account customers' heavy usage of mobile offers marketing opportunities
- Preferential rates and exclusive access to other products will appeal to standard account customers
- Standard account holders will benefit from being informed about investments and pensions
- Mobile loving entry level customers will be more engaged with their provider
- A seamless transition between channels will appeal to entry level customers
- Cash incentives appeal to entry level customers
- Persuadables are receptive to a convenience-maximizing message
- Providers can use interest rates to convince persuadables to take out a fee-based account
- Persuadables can be won over with tangible incentives
- Overdraft facilities will appeal to persuadables
- Laggards and refuseniks can be persuaded with travel products- Laggards and refuseniks can be won over by travel products
APPENDIX
For more information visit http://www.researchandmarkets.com/research/gtvwvr/feebased_banking