Insight Report: Current Accounts – Emerging Trends, Product Insights and Case Studies

Due to changes in regulatory frameworks and competitive dynamics, retail banking and its current account business have changed gradually during the last decade. Despite initiatives taken by banks to retain customers, the current accounts market in developed economies recorded growing instances of account switching. Improved customer service, attractive reward programs and financial incentives offered by banks are the main factors encouraging customers to switch their primary banks.

In emerging economies, pricing has been the primary reason for the low volume of banking customers. As pricing is affected by cost pressures and changing customer expectations, banks are adopting a number of product and pricing strategies in the form of loyalty programs, incentives, packaged current accounts and customized product offerings to entice customers. Furthermore, with increasing technological advancements, banks are encouraging customers to use low-cost banking channels to conduct banking transactions, resulting in reduced operating costs and improved profitability.

With rising competition and regulatory pressure, banks in the US are increasing charges on current accounts in order to maintain profitability. Consequently, the percentage of free checking or current accounts dropped from 76% in 2009 to 38% in 2013. This has led customers to switch to banks offering no, or low, monthly fees on basic checking accounts. The UK current account market also recorded a high number of customers switching accounts. Robust customer service mechanisms, branch proximity, flexible banking hours and attractive reward programs are factors enticing customers to switch banks. The switching of accounts was further intensified with the introduction of the Current Account Switch Service by the Payments Council on September 16, 2013, which allows fast and seamless switching to new banks. For the six-month period between October 1, 2013 and March 31, 2014, 609,300 UK current accounts were switched, a 14.0% increase compared to the equivalent period in 2012 when there were 532,500 switches.

Due to firm’s capitalizing on this trend, the current account market has recorded a number of new entrants. T-Mobile, a provider of wireless voice, messaging, and data services launched a mobile-based checking account in the US in January 2014, with low banking charges. Similarly, UK-based retailer Tesco is also launching current account products in the UK through its banking arm, Tesco Bank.

Scope

• GlobalData's 'Insight Report: Current Accounts – Emerging Trends, Product Insights and Case Studies' report highlights the key trends arising in key current account markets following the global financial crisis.

• The report gives an insight into current accounts offered by banks in countries such as the US, Canada, Brazil, the UK, Germany, India, Australia, the UAE and South Africa.

• The report outlines the various factors affecting consumers' choices of current accounts in these markets.

• The report also discusses the key drivers, issues and challenges faced by retail banks when offering current accounts in these countries.

Key Highlights

• Free checking accounts (accounts with no charges) are diminishing as banks impose fees to improve profitability. According to Bankrate, free checking accounts in the US dropped from 76% in 2009 to 38% in 2013. The average monthly fee of non-interest bearing checking accounts up 25% in 2012 with a monthly fee of US$5.48 with an average balance of US$723 to be maintained to waiver the surcharge fees.

• The use of overdraft protection by account holders is rising rapidly in the US, making overdraft protection a major revenue-generating component for banks. Overall, 13 million consumers used overdraft protection in 2010 in the US, generating revenues of US$35.0 billion for banks. Banks offer overdraft protection to avoid the bouncing of checks, or insufficient funds in cases of debit card transactions.

• According to the German Bundesbank and IMF forecasts, the German economy is expected to be relatively stable over the next five years, despite the financial uncertainties faced by most European countries. Consequently, consumer spending is expected to grow over 2014−2018. The promotion and development of payment cards will offer substantial growth for the industry. As a result of the Bundesbank’s decision to outsource more of its cash-recycling facilities to private companies, cash is likely to be less attractive for retailers, as cash-handling services were previously provided by the Bundesbank at little or no cost.

Reasons to buy

• Gain insights into the current accounts markets of developed and emerging economies in the Americas, Europe, Asia-Pacific, and the Middle East and Africa.

• Gain an understanding of the amendments brought about in current account markets following the global financial crisis.

• Gain analysis of current account markets based on strategies adopted to improve products and product portfolios.

• Gain insights into key operational and regulatory trends in key current account markets.

Companies mentioned

JPMorgan Chase Bank

Wells Fargo

Citibank

Bank of America

U.S. Bank

RBC Royal Bank

TD Canada Trust

CIBC

Scotiabank

Bank of Montreal

Banco do Brasil

Bradesco

HSBC Bank Brazil

Itau

Barclays

HSBC

RBS

Lloyds Bank

Santander

Deutsche Bank

Commerzbank

GLS Bank

Postbank

National Australia Bank

Westpac

The Australia and New Zealand Bank

Commonwealth Bank

Suncorp Bank

HDFC Bank

Axis Bank

ICICI Bank

ING Vysya Bank

Kotak Mahindra Bank

Abu Dhabi Commercial Bank

Union National Bank

Dubai Islamic Bank

Emirates NBD

Barclays Bank UAE

Nedbank

Absa Bank

First National Bank

Capitec

Table of Contents

1 Executive Summary

2 Global Snapshot – Current Account Market Dynamics

2.1 Assessment of Market Trends

2.2 Key Drivers

2.3 Challenges

3 The Americas

3.1 Emerging Trends

3.2 Product Comparison

3.2.1 Product comparison – the US

3.2.2 Production comparison – Canada

3.2.3 Product comparison – Brazil

3.3 Strategies

4 Europe

4.1 Emerging Trends

4.2 Product Comparison

4.2.1 Product comparison – the UK

4.2.2 Product comparison – Germany

4.3 Strategies

5 Asia-Pacific

5.1 Emerging Trends

5.2 Product Comparison

5.2.1 Product comparison – Australia

5.2.2 Product comparison – India

5.3 Strategies

6 The Middle East and Africa

6.1 Emerging Trends

6.2 Product Comparison

6.2.1 Product comparison – UAE

6.2.2 Product comparison – South Africa

6.3 Strategies

7 Case Study

7.1 First Direct – Upfront Incentives Encourage Customers to Switch to its Current Accounts

7.2 Bank of America – “Keep the Change” Initiative to Acquire Customers

7.3 T-Mobile – Mobile-Based Checking Accounts in the US

7.4 Union Bank – Empowering Customers to Create their own Current Accounts

7.5 HDFC Bank – Implementation of Effective Customer Segmentation and Distribution Strategies

7.6 Absa Bank – Introduction of Packaged Current Accounts

8 Appendix

8.1 Methodology

8.2 Contact GlobalData

8.3 About GlobalData

8.4 GlobalData’s Services

8.5 Disclaimer

List of Tables

Table 1: Global Current Market Snapshot – Emerging Trends and Strategies Adopted

Table 2: Economic Conditions in Key Markets, 2009 and 2013

Table 3: Debit Cards – Volumes in Key Countries (Million), 2009–2018

Table 4: New Businesses Registered in Key Countries, 2009–2012

Table 5: Unbanked Populations in Key Developing Economies, 2013

Table 6: Open-Loop Prepaid Cards Segment Value (US$ Billion), 2009–2018

Table 7: Canada – Current Accounts With Low Charges

Table 8: The US and Canada – Online and Mobile Penetration, 2013

Table 9: The US – Checking Account Types, March 2014

Table 10: The US – Basic Checking Accounts, March 2014

Table 11: The US – Premier Checking Accounts, March 2014

Table 12: The US – Student Checking Accounts, March 2014

Table 13: Canada – Checking Account Types, March 2014

Table 14: Canada – Everyday Banking and Checking Accounts, March 2014

Table 15: Canada – Unlimited Banking Current Accounts, March 2014

Table 16: Brazil – Current Account Types, March 2014

Table 17: Brazil – University Current Accounts, March 2014

Table 18: Brazil – Business Current Accounts, March 2014

Table 19: The UK – Current Account Types, 2014

Table 20: The UK – Basic Current Accounts, March 2014

Table 21: The UK – Graduate Current Accounts, March 2014

Table 22: Germany – Current Account Types, 2014

Table 23: Germany – Basic Current Accounts, March 2014

Table 24: Germany – Premium Current Accounts, March 2014

Table 25: The UK – “With Benefits” Current Accounts

Table 26: Asia-Pacific – Current Accounts With Low Banking Charges

Table 27: Australia –Transaction Account Types, March 2014

Table 28: Australia – Everyday Banking, March 2014

Table 29: Australia – Everyday Business Accounts, March 2014

Table 30: India – Current Account Types, March 2014

Table 31: India – Regular Current Accounts, March 2014

Table 32: India – Agri-Current Accounts, March 2014

Table 33: Asia-Pacific – Current Accounts for Specific Customer Segments

Table 34: The Middle East and Africa – Economic Indicators, 2013–2018

Table 35: The UAE – Current Account Types, March 2014

Table 36: The UAE – Current Accounts, March 2014

Table 37: The UAE – Business Current Accounts, March 2014

Table 38: South Africa – Current Account Types, March 2014

Table 39: South Africa – Basic Current Accounts, March 2014

Table 40: South Africa – Small Business Current Accounts, March 2014

Table 41: The Middle East and Africa – Specific Current Accounts for High-Income Customers

Table 42: The Middle East and Africa – Specific Current Accounts for Students and Young People

Table 43: HDFC Bank – Current Accounts for Specific Customer Segments

List of Figures

Figure 1: Percentage of Respondents Forming New Primary Relationships With Banks, 2013

Figure 2: The US – Free Checking Accounts (%), 2009–2013

Figure 3: The Americas – Open-Loop Prepaid Card Growth Rates, 2009–2018

Figure 4: Europe – Users of Mobile Banking, July 2013

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