- Consumer confidence in the UK banking system is stabilising
- 85% of consumers trust banks to some degree but only 26% have complete trust
- The UK still lags most global markets in terms of confidence and trust
- The number of unhappy customers who plan to close their account has doubled
The UK banking industry lags most global markets in terms of restoring trust, but, after years of decline, consumer confidence in the banking system is stabilising according to the EY Global Consumer Banking Survey.
Despite this, banks are still struggling to build brand loyalty. In the low interest rate environment, consumers are highly price-sensitive and increasingly likely to change their banking provider because of rates and fees.
EY surveyed 32,000 banking customers across 43 countries, including 767 consumers from the UK. The interviews took place in the autumn of 2013.
Almost two-thirds of UK consumers said their confidence in banks decreased in both 2011 and 2012. But in 2013 confidence began to stabilise. 52% of consumers said their level of confidence had not changed; 37% said their confidence decreased; and 11% said confidence increased – broadly double the percentage who said their confidence increased in 2011 (6%) and 2012 (5%).
Omar Ali, UK banking and capital markets leader says: “After hitting rock bottom in 2012, consumers’ confidence levels for 2013 show a massive improvement. This is largely due to the improving economy and increased financial stability, but is also a reflection of the steps banks are taking to deal with legacy issues and to improve customer experience. However, we can’t get ahead of ourselves. Confidence levels are stabilising, not increasing, and banks still have a lot of work to do. Confidence and trust in UK banks lags most markets globally, including the US, who arguably suffered a comparable crisis.”
Eighty-five percent of UK consumers trust their bank to some degree. But, of those, just 26% have complete trust; 59% have moderate trust – a neutral position that could swing positive or negative over time; and 15% of consumers have minimal or no trust in their bank. This is double the level of mistrust found in the US, Germany, France and Switzerland and puts the UK industry on a par with Spanish and Russian banks.
Bad press is the key driver of distrust for banks
The survey showed the influencing factors for the different levels of (dis)trust consumers have for their bank. For those with minimal or no trust, the main driver is recent news articles (67%), followed by financial stability (51%) and interest rates on their accounts (49%).
However, people who do trust banks do so because of the way they are treated by their individual bank and because they are confident their money is safe. 68% of people with complete trust in their bank cite the way they are treated as the key driver of trust, followed by the ability to withdraw money (56%), security (51%) and financial stability (50%). Good service overrides concerns caused by bad press by this group (an influencer of trust for just 6% of consumers with complete trust in their bank), or anecdotes from friends and family (7%).
Trust does not translate into loyalty; twice as many customers looking to switch
The number of disgruntled consumers who intend to close an account increased by 50% this year in the UK. Rates and fees are undeniably the main reason people switch banks in the UK – 66% of those who had switched bank in the last 12 months did so because of rates or fees. Customer experience ranks a distant second as a motive for switching (28%) and, while negative press is the primary cause of distrust in banks, the survey shows that a bank’s reputation has very little to do with customers actually switching. Just 7% cited press coverage as the reason they switched.
The UK consumer is very sensitive to rates and fees. The British are second only to the Germans (68%) in citing fees as the primary reason for switching banks. This is much higher than the global average (39%) and higher than other comparable markets such as the US (47%), France (51%) or Switzerland (45%).
Penney Frohling, financial services strategy lead in the UK for EY, says: “Consumers are more interested in their own financial well-being than in the reputation of an individual bank and are increasingly voting with their feet over fees, rates and charges. Despite the energy being put into rebuilding trust at all major retail banks in the UK, improving trust is not (yet) converting into business benefit for banks.”
Banks need to start treating people as individuals as well as delivering on the basics
Getting the basics of banking right is still very important. In the UK, 90% of customers rank convenience as the most important aspect of customer service, followed by security (78%), rates and fees (66%), relationship (66%) and personalisation or consultation (62%).
But when asked about what would make them increase their deposits or investments, add accounts or services, or even pay a little more, personalisation and customisation ranked highly. Two-thirds of consumers would increase deposits or investment, add accounts or services, or pay more if their bank found new ways to improve their service. 55% would do the same if they respected religious or cultural requirements and 48% would do the same if the bank provided plans to help them reach their financial goals.
Penney says: “People value convenience and accuracy from their banks but this is a basic service that consumers expect banks to get right. Real added value for the consumer will only come from banks recognising them as individuals. There’s a major trend towards bespoke offerings in other sectors from fashion to fitness and people are going to expect similar levels of personalisation from their banks.”
Omar says “The most interesting thing about the responses to what people would pay more for is how they align to broader demographic trends we’re seeing in the UK. People want financial advice, which reflects the ageing population and savings gap. People want products and services that suit their culture and religion, which reflects how ethnically diverse the UK market is becoming. Banks can and should be anticipating these trends. And banks will need to become part of the movement towards co-creation of products if they want to win customers over in a market as diverse and competitive as the UK.”
UBX appoints new Chief Investment Officer
In line with its strategy to explore and invest in companies and platforms of the future, UBX—the Fintech and Corporate Venture Capital arm of Union Bank of the Philippines (UnionBank) — is announcing the appointment of Matthew Kolling as the company’s Chief Investment Officer (CIO).
As CIO, Kolling will be managing UBX’s Corporate Venture Capital (CVC) fund. He will also play a key role in raising capital for UBX while assisting the company in key corporate transactions, including the structuring of joint ventures and acquisitions.
Prior to his appointment at UBX, Kolling has been Head of Venture Investments at Aboitiz & Company since 2019, wherein he had been working with UBX on investment portfolio decisions. Before that, he held senior positions in Private Equity, Venture Capital, and Investment Banking at firms such as Providence Equity Partners and Morgan Stanley in New York.
Kolling has more than 20 years of experience in managing investments and deals in the Technology and Telecommunications industries and is active in Venture Capital and startup communities in the Philippines and the Southeast Asian region. He currently chairs the Manila Angel Investors Network, among others.
“We at UBX are excited to welcome Matt as our new CIO. We firmly believe that Matt will be instrumental in driving value creation opportunities, both within the CVC fund and our corporate ventures. We look forward to working with him as we fulfill UBX’s vision of a future where banking services are embedded into everyday experiences that matter,” said UBX president and CEO John Januszczak.
Meanwhile, UnionBank president and CEO Edwin Bautista said, “The addition of world-class talents in our pool reinforces our strategy to future-proof the organization and our business as we prepare for many new opportunities that come with the changing times.”
It’s all relative: Older generations feel helping out the family financially is more important since the Covid-19 outbreak
Before Covid, 23% of people prioritised helping younger generations out financially, that increased to a third as a result of the pandemic
A recent survey* conducted by Hodge has revealed that the Covid pandemic has led to more people wanting to help younger family members financially.
A third (31%)** of those questioned said that since the Covid outbreak giving a financial gift to children or grandchildren is more important to them, compared to 23% who said it was a priority before the pandemic.
The traditional “Bank of Mum and Dad” is still very much open for financial help, with parents being responsible for 72% of the gifts, but the study also revealed that financial gifts can come from all corners of the family – including children (14%) and siblings (14%).
The survey also found that a third of people have received a financial gift from family, with those aged between 25-34 as the most likely to receive
The most popular reason for gifting money to family is for special occasions such as a quarter of gifts were given for weddings and birthdays but 11% of people have received money to help with big purchases such as cars and houses. In addition, 19% of people have received help with day to day finances, with around 14% of those receiving a gift have done so to pay off debt.
Emma Graham, Business Development Director at Hodge, said of the research: “Our study showed that, as a nation, we all want to help our family out when it comes to money. And whilst we all think of the Bank of Mum and Dad or Gran and Grandad as a traditional source, we were surprised to see that 14% of brothers and sisters are also helping out.”
The findings come from a recent intergenerational study conducted by Hodge, who interviewed over 3000 people about their attitudes towards finances and their aspirations for the future. The full research findings can be found at https://hodgebank.co.uk/2020/05/19/money-its-all-relative/.
As part of the study, people were also asked about paying back the gift, with 40% of beneficiaries expecting to pay their parents back, but this dropped to 28% if the gift came from grandparents.
From the gift donor’s perspective, 26% expect the gift to be paid back, however just 15% of grandparents expected the money back.
Hodge has produced a set of guides on how families can navigate the tricky subject of giving financial gifts within a family, as well as the considerations and steps that be families should think about taking before a gift is given, such as is it a loan or a gift and thinking about contingencies if the family member’s circumstances change. The guides can be found here: https://hodgebank.co.uk/news/
Emma continued: “It’s clear that families feel strongly about offering financial support to each other if they are able and this has increased since the Covid pandemic. Before Covid, 23% of people prioritised helping their families out financially in the next five years. Since the Covid-19 outbreak that has increased to a third of people saying helping a family member financially had become more important.
“So, it is clear that the Covid-19 lockdown and subsequent predicted economic downturn, has led to more families looking to share wealth to help younger children or grandchildren during this difficult time. Many people may look to Later Life mortgages, where many products have reduced their rates and have flexible lending criteria, to help out a loved during these difficult times.”
New report identifies the factors which will determine SMEs’ chances of a successful COVID recovery
· Analysis of the performance of over 1,000 UK small and medium-sized businesses by Allica Bank provides roadmap for SMEs
· Regular training, an openness to innovation, and a clear vision all contribute heavily to an SMEs’ chances of success
· Allica Bank has launched a programme of free workshops to expand on the findings and support business owners
Business bank, Allica Bank has combined data and insight from over 1,000 UK SMEs with a multiple regression analysis to determine what factors most closely aligned with an SMEs’ chances of success and separated the highest-performing businesses from their peers. These ‘rules for success’ have been compiled from the research data to support British businesses as they look to chart a course to post-Covid recovery.
The full report identifies six behaviours for small and medium businesses to follow, to maximise their chances of a successful COVID recovery. The six top-line rules emphasised by the data were:
Rule 1: SMEs should regularly train staff
Of the top-performing businesses analysed, 47% provided training for employees at least on a quarterly basis, compared to just 32% of other businesses. Regular employee training was linked closely to success by the model.
Despite this, many small businesses have neglected training and nearly half (46%) of the small businesses analysed only provide training for employees about once a year or less often. This included 15% that never provide employer-funded training. This discrepancy could represent a significant opportunity for small businesses to unlock the potential of their employees and thrive in the post-Covid economy.
Rule 2: SMEs need to focus on innovation and technology
Looking again to the best performing businesses, 76% were found to either continually (39%) or often (37%) be considering new opportunities for technology in their business. This is compared to only 51% for businesses considered to be outside of the top ranks, out of which only 27% admitted to continually looking for new technology opportunities.
Rule 3: Small business must have a formal, long-term vision
Nearly two thirds (66%) of the most successful businesses in the survey had a formal, long-term vision, compared to just 50% of businesses outside the top 100. Looking to the businesses that scored the lowest on the SME Performance index, only 37% claimed to have a formal, long-term vision.
Rule 4: SMEs should broaden their customer reach and find new markets
Of the top-performing businesses, 65% of these have overseas customers compared to just 40% of the worst performing businesses. Among the best performing SMEs, over a third (34%) identified international expansion as one of the top three drivers for their success.
Rule 5: SMEs need to develop reinvestment plans
22% of the best performing SMEs reinvested some of their profits into the business in the past three years with an average 9% of profits being redeployed. Tellingly, this is nearly double what other businesses admit to reinvesting in their business (5%).
Rule 6: SMEs should engage with local business organisations and networks
Of the top 100 SMEs, 30% had obtained external credit to expand over the past three years (compared to 24% of other businesses). Meanwhile, only 16% of all other SMEs had engaged with local enterprise partnerships or growth hubs in the past three years (compared to 23% of the top 100 SMEs).
Chris Weller, Chief Commercial Officer, Allica Bank, said:
“All small businesses are different, as are all small business owners, but one trait they share is an innovative resilience. Whilst the coming months and years will undoubtedly continue to present extreme challenges, there is no doubt that small and medium sized businesses across the UK will rise to meet them head on.
“To give them the best chance to succeed, though, they need to be equipped with the right tools. There is certainly no silver bullet or panacea for every small business, but as this study has found, there are a number of common factors found in the most successful businesses that allow small enterprises to thrive and that they can consider individually for their business.
“This research has identified common ‘rules for success’ that speak to every aspect of running a business, not just the financials. Once we saw these results, we wanted to use them to help small businesses begin to re-build and prosper, by outlining common factors and then examining how best they can be practically applied to businesses in all sectors of the economy.
“Small business owners and their employees have been hit hard by the crisis, but they have the drive and resourcefulness to breathe new life into the economy and bring energy to post-Covid Britain. Our commitment at Allica Bank is to give them the support they need to do so, every step of the way.”
The full report contains a wealth of additional data and insight into each of these topics. As part of its mission to empower small businesses, Allica Bank is making the findings freely available and running a series of free online workshops with relevant partner organisations for businesses to attend.
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