Packaged Accounts - Bundling Boosts Business

• Publication date: April 2012
• Report size: 59 pages

Synopsis • This VRL report assesses the evolution in account presentation by banks, and how they aim to respond to increasing customer churn by offering a number of services to account holders • Banks are walking the line between offering inducements, which have a cost, and at the same time trying to increase average profitability per customer • Declining customer satisfaction will lead to increasing churn unless attractive ...

Synopsis
• This VRL report assesses the evolution in account presentation by banks, and how they aim to respond to increasing customer churn by offering a number of services to account holders
• Banks are walking the line between offering inducements, which have a cost, and at the same time trying to increase average profitability per customer
• Declining customer satisfaction will lead to increasing churn unless attractive deals are offered and taken up by customers
• The recession is putting more pressure on the retail divisions of banks – this report assesses how

Summary
It is not just the aftermath of the global financial crisis that is applying pressure to the balance sheets of the world’s retail banks. Increasing public anger against what are perceived as punitive penalty charges has seen the UK industry regulator take a test case to the UK Supreme Court, while the US legislature has passed laws that require banks to obtain customers’ permission in order to take part in overdraft protection programmes, which will blow a massive hole in the $35 billion the banks earn from such programmes. In the past, banks have been able to depend on the ‘loyalty’ of customers who felt that switching a bank account was a prohibitively complicated and time consuming process. However, the proliferation of comparison and switching websites in countries such as the UK means consumers can not only compare offerings from different banks, but also move their account to a new provider relatively easily.

Scope
• Historically US and UK bank account holders have enjoyed free banking. This report suggests what might change to alter the balance in the banks favour
• Bundled accounts provide customers with additional services like car breakdown insurance, travel insurance and credit card protection for a fee
• Banks are looking at allowing customers to choose the features they want from a list of benefits
• The UK and US markets differ significantly – the UK banks bundle additional services, while US banks reward customers proportionally to the amount of business the customers provide
• The UK, US and South African markets are examined, including interviews with Citibank, Lloyds and Nedbank

Reasons To Buy
• Find out how banks across the world have introduced packaged accounts
• Compare the accounts currently on offer
• Assess the likely future prospects for the market
• Put the packaged accounts market in context

Key Highlights
• Banks can no longer rely on customer apathy to minimise account churn
• The proliferation of comparison websites and switching services makes it much easier for consumers to switch accounts
• For the banks it means they will increasingly incentivise customers to keep their accounts in their existing banks
• Even in countries where ‘free’ accounts are the norm, customers ought to be thinking about what they forgo in interest income or what they are paying out in overdraft fees

Companies Mentioned

Lloyds
Santander
Citibank
Barclays
Natwest
HSBC
Wells Fargo
Bank of America
Bank of Montreal
Commonwealth Bank of Australia

Accounting And Corporate Finance Industry

Table of Contents
Executive Summary
1 Holding the banks to account
1.1 Winning over wary customers
1.2 No such thing as a ‘free’ account
1.3 Overdraft interest rate still well above base rate
1.4 ‘Free-in-credit’ accounts not the only option
1.5 More than just an academic issue
1.6 Bulk buying key factor in benefits bundle
1.7 Recession increases pressure on banks retail divisions
1.8 Bye-Bye to free banking?
2 Pushing the package
2.1 Banks need to make more money from our money
2.2 Overdrawn customers pay the price in the UK…
2.3 Few banks currently offer bespoke packages
2.4 A bespoke account from the Co-op
2.5 Information facilitates selling of additional services
2.6 The value of cross-selling
2.7 Increased deposits vital to bank lending capacity
2.8 Refining the customer base
2.9 Questioning the value of packaged accounts
2.10 Travel insurance a fundamental part of the offer
2.11 Packaged accounts impact standalone insurance policies
2.12 Dedicated loyalty schemes unlikely to appeal
2.13 Packaged accounts present cross-selling opportunity
2.14 Information is power in banking
3 Packaged accounts – the global experience
3.1 UK – packaged account offerings now more prevalent
3.2 Why do customers want to switch accounts?
3.3 Account holders changed their behaviour post the banking crisis
3.4 HSBC banks on customer appetite for additional services
3.4.1 Building on success – the HSBC Premier Account
3.5 Halifax – latecomer with tempting proposition
3.6 Natwest accounts travel well
3.7 Santander rewards switchers
3.8 Barclays protects home comforts
3.9 US – Free accounts diminishing, fees rising
3.10 Bank of America tests future offerings
3.10.1 Reduced card fees blamed for checking charges
3.10.2 Bank of America looks to recoup ‘lost’ card fees
3.11 US Bank overcomes reluctance to impose fees
3.12 Chase doubles monthly account fee
3.13 Wells Fargo links checking and savings accounts
3.14 Canada
3.15 Vancity – no avoiding fees
3.16 CIBC pushes credit card savings
3.17 BMO Bank of Montreal balances key to ‘free banking’
3.18 Australia
3.19 Commonwealth Bank of Australia keeps costs low
3.20 ANZ tries to offer something for everyone
3.21 South Africa
3.22 Asia
3.23 Key takeaways
4 Case studies
4.1 US banks look to packaged accounts to fill fees void
4.2 CitiBank
4.3 Key takeaway
4.3.1 CitiBank bundled options:
4.3.2 Basic Banking
4.3.3 Citibank
4.3.4 Citigold
4.4 UK customer sentiment towards packaged accounts improves
4.5 Lloyds Banking Group
4.5.1 Key takeaways
4.5.2Lloyds bundled options
4.6South Africans face package comparison difficulties
4.6.1 Nedbank
4.6.2 Key takeaways
4.6.3 Nedbank bundled options
4.6.4 Everyday Account
5 Unpicking the package – what have we learned?
5.1 Customer confidence shaky
5.2 Flipping the switch
5.3 Rewarding relationship
5.4 Selling opportunities
5.5 Incentives vital
5.6 Keeping customers happy
5.7 Packaged customers more valuable
5.8 Engaging the customer?
5.9 Co-op leads, few follow
5.10 Lifestyle choice
5.11 Benefits travel well…
5.12 Loyalty schemes fail to appeal
5.13 Marketing cost savings
5.14 Online option waives fee
5.15 Pilot programme
5.16 Changing mind-set
5.17 Motivations for innovation
5.18 First account benefit bundle
5.19 Customers will demand value for money


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