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Retailer Payments, Banking, Insurance and Assistance in the UK investigates the market for financial services organised by over 300 major retail brands in the UK. As well as examining their initiatives in payment cards, banking products, insurance and assistance, the study also examines their involvement in proprietary and coalition loyalty programs, and details the online payment mechanisms accepted by those with an online sales capability. Among other data points, the report and PartnerBASE™ dataset that accompanies it embrace the following information about the retailers covered:

- whether they offer their own credit, debit or prepaid cards and, if so, the card issuers that they work with in this context if they do not issue the cards themselves;

- whether they are linked to one or more loyalty programs and, if so, whether these are proprietary or coalition schemes;

- whether they make non-card point-of-sale finance available to their customers and, if so, the finance providers that they employ for this purpose;

- whether they promote mainstream banking products such as general-purpose personal loans, mortgages and savings accounts and, if so, the partners that they co-operate with;

- whether they distribute accident, dental, health, household, life, motor, pet or travel insurance, or any kind of assistance services and, if so, the insurance or assistance providers used;

- for retail brands with an online sales capability, the payment means and providers that they accept for online purchases with consideration of payment cards, online accounts, mobile payments, bank transfers and other online payment options.

The report and PartnerBASE™ dataset can be used in the following ways:

- to gain access to a comprehensive source of information that provides detailed insights into the involvement of major retail brands in the UK in payments, banking, insurance and assistance;

- to monitor the activity of key competitors in retailer financial services including Barclays Partner Finance, Hitachi Capital (UK), LaSer UK, PayPal and Tesco Bank / Underwriting;

- to understand the potential in the UK for converting proprietary retailer loyalty cards and coalition loyalty schemes into fully-fledged payment cards;

- to evaluate the extent to which consolidation among conventional banks is opening up opportunities for new retailer banks to emerge as ‘consumer champions';

- to appreciate the range of online payment choices open to consumers in the

Table Of Contents

Retailer Payments, Banking, Insurance and Assistance in the UK
TABLE OF CONTENTS

0.0 EXECUTIVE SUMMARY 1

1.0 INTRODUCTION 3

What is this report about? 3
Rationale 3
In many countries, consumers are tending to gravitate to larger retailers and to buy more online 3
which throws up new opportunities in payments, banking, insurance and assistance 3
Methodology 4
Survey of retailers 4
The survey's scope covers 316 important retail brands grouped across ten categories 4
Definitions 5
Payment, banking, insurance and assistance products and services 5
Operating models 7
Weighted shares 7
PartnerBASE 7
Finaccord 8

2.0 MARKET ANALYSIS 9

Introduction 9
Retailer payment cards 11
Credit, debit and prepaid cards 11
A reasonable proportion of retail brands have credit card schemes but few offer debit or prepaid cards 11
A variety of external card issuers are involved in managing retailer credit card schemes 11
A handful of retailers manage credit card schemes internally or via captive entities 12
…and two large brands offer multiple cards through a hybrid distribution model 12
Home Retail Group Card Services continues to sign up new account holders at a steady rate 13
…while the major external partners all reported earning profits in their most recent disclosures 13
Santander Cards is ranked first as an external partner on both a weighted and unweighted basis 13
The majority of retailer cards in the UK are classifiable as private label products 14
with MasterCard's position as the leading network increasing when viewed in weighted terms 15
All fuel retail brands surveyed have introduced their own payment card 16
Pure online retailers are the least likely to promote a payment card 16
Gift cards 18
Just under a quarter of major retail brands in the UK offer a stored-value gift card 18
with initiatives for these products visible across all retailer categories 18
Retailer loyalty programs 20
Over 50% of retail brands surveyed in the UK participate in some form of loyalty program 20
Specialist retailers of consumer electronics are least likely to be involved in a loyalty program 20
Proprietary loyalty programs 22
Just under a half of major retail chains in the UK have launched their own proprietary loyalty scheme 22
Coalition loyalty programs 22
Three coalition loyalty programs are adhered to by retailers in the UK… 22
…with all three supporting a co-branded payment card 22
The newly re-launched Avios joins Maximiles and Nectar on the UK coalition scene… 22
…although all three have experienced erratic profitability in recent years 22
Consumer finance 23
Retailer provision rates for point-of-sale finance are above those for credit or other payment cards 23
Hitachi Capital and Barclays Consumer Finance boast the most partnerships as external providers… 23
… and relatively few retail brands manage consumer finance schemes on a captive or internal basis 24
Viewed in weighted terms, Shop Direct Finance Company assumes greater prominence 24
Barclays Partner Finance and Hitachi Capital (UK) have both experienced rising profitability 25
…while Shop Direct Finance Company has continued to experience difficulty amid reorganisation 25
Almost two thirds of retail brands in one category offer point-of-sale finance to customers 26
Banking products 28
Overview 28
12 retailer brands in the UK offer mainstream banking products to their customers 28
Personal loans, mortgages and savings accounts 28
all of which market general-purpose personal loans 28
Sainsbury's assumed full ownership of Sainsbury's Bank in May 2013 29
MandS Bank was re-launched in 2012 as an expansion of MandS Money 30
Sainsbury's Bank posted higher profits in its final year as a joint venture 31
although the reverse was true of Tesco Bank 31
International payments / remittances 31
Insurance and assistance 31
A total of 31 major retail brands in the UK promote mainstream forms of insurance of the type researched 31
The vast majority of insurance distribution partnerships among retailers involve a single, external partner 32
…although Tesco's offerings involve a range of distributors and distribution models 33
In its first full year, Tesco Underwriting secured gross premiums written of more than GBP 650 million 34
Tesco Compare has had difficulty in achieving both scale and profitability in the aggregation market 34
In a fragmented market, AXA and BDML are the leading insurance providers to retail brands in the UK 35
Department stores and variety retailers display the highest insurance provision rates by a substantial margin 36
Consumer research data illustrates the extent to which retailers are making headway in insurance 37
Online payments 38
Acceptance rates 38
Online accounts are accepted by over a half of major retail brands with an online sales capability 38
Payment cards 39
Nine different payment card brands enjoy online acceptance among major retailers in the UK 39
Online accounts 40
Over a half of major UK retail brands with an online sales capability accept PayPal 40
No supermarkets were found to accept online accounts for payments via the internet 41
Mobile payments 42
No retail brand researched accepts mobile payment services as an online payment means 42
Bank transfers 42
Direct bank transfers are only available as an online payment means in certain retailer categories 42
Other methods of online payment 43
Two major home shopping groups accept payment through direct debit for online purchases 43
Ukash works with over 100 mainly small retail brands in the UK 43

3.0 APPENDIX 44

Major captives and joint ventures 44



LIST OF GRAPHICS / TABLES

0.0 EXECUTIVE SUMMARY 1

Provision rates for key payment, banking, insurance and assistance products, adherence rates for loyalty schemes and online payment product acceptance rates among retailers in the UK, 2013 2

1.0 INTRODUCTION 3

Retailers researched in the UK, segmented by category, 2013 4
Retailers researched in the UK segmented by distribution model, 2013 5

2.0 MARKET ANALYSIS 9

Provision rate for payment cards by retailers in the UK, 2013 11
Retailer payment cards in the UK: provision rate and operating models, 2013 12
Retailer payment cards in the UK: unweighted and weighted issuer share of partnerships, 2013 14
Retailer payment cards in the UK: unweighted and weighted network share of partnerships, 2013 15
Provision of retailer payment cards by retailer category and distribution model in the UK, 2013 17
Provision of retailer gift cards by retailer category and distribution model in the UK, 2013 19
Retailer loyalty programs in the UK: provision rates, program types and links to payment and other cards, 2013 20
Provision of or involvement in loyalty programs by retailer category and distribution model in the UK, 2013 21
Coalition loyalty programs in the UK: unweighted share of retailer brand members, 2013 23
Retailer consumer finance in the UK: provision rate and operating models, 2013 24
Retailer consumer finance in the UK: unweighted and weighted provider share of partnerships, 2013 26
Provision of retailer consumer finance by retailer category and distribution model in the UK, 2013 27
Retailer provision of other banking products and services in the UK, 2013 28
Retailer personal loans, mortgages and savings accounts in the UK: provision and operating models, 2013 29
Retailer personal loans, mortgages and savings accounts in the UK: unweighted and weighted provider share of partnerships, 2013 30
Retailer insurance and assistance in the UK: provision by type of insurance, 2013 32
Retailer insurance and assistance in the UK: provision and operating models, 2013 34
Retailer insurance and assistance in the UK: unweighted and weighted provider share of partnerships, 2013 35
Provision of insurance and assistance by retailer category and distribution model in the UK, 2013 37
Retailer online payment acceptance in the UK: acceptance rates by payment type, 2013 38
Payment cards accepted as an online payment mechanism by retailers in the UK: unweighted and weighted network share of acceptance, 2013 39
Online accounts accepted as an online payment mechanism by retailers in the UK: unweighted and weighted provider share of acceptance, 2013 40
Acceptance of online accounts as an online payment mechanism by retailer category in the UK, 2013 41
Acceptance of direct bank transfers as an online payment mechanism by retailer category in the UK, 2013 42
Acceptance of other types of online payment mechanisms by retailer category in the UK, 2013 43

3.0 APPENDIX 44

Retailer captives and joint ventures in payments, banking, insurance and assistance in the UK: operating models, partners and ownership, 2013 45

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