The Changing Face of Retail Savings

Published by: Datamonitor

Published: Oct. 2, 2009 - 62 Pages

Table of Contents

Overview

Catalyst

Summary

Methodology

Table of Contents

Table of figures

Table of tables

Introduction

Economic events have driven consumers into heightened states of concern over their savings

Increased concerns over job security, household finances and the state of the economy have led to anxieties among consumers about the value of their savings

Globally unemployment is high and set to continue to rise into 2010, driving anxiety

Bank collapses and reduced trust in the banking sector as a whole have caused consumers to become concerned about the security of their savings

Household savings rates have risen since 2007 and are expected to remain at an elevated level throughout 2010

Some countries have more serious savings rate concerns than others

Nearly 70% of consumers are intending to increase saving in the next six months

The Future Decoded

Trend: Interest rates across the globe have fallen to a historic low

Lower interest rates depress incentives to save

Insight: Consumers lack financial awareness and therefore struggle to find suitable products, but they are attempting to rectify this

Poor general financial awareness is reflected through a very inaccurate estimation of national interest rates

Consumers are attempting to gain more information about their financial products in a bid to steer themselves through the crisis, but this has not spread to a large increase in interest for the financial world as a whole

Consumers are now paying significantly more attention to banking literature, and savings institutions should take note

Interest in banking literature is likely to be driven by a heightened focus on finances and value for money, and consumers will respond negatively if these needs are not met

Insight: Familiarity leads consumers to save with their primary bank

Geographically there are large differences in savings channel preferences

Banks remain the chief point of call for savers

Building societies have a strong presence in the UK and Australia, but elsewhere have little representation

Japan and Russia are embracing specialist online savers

Asian countries favor insurance companies

Government-run savings schemes remain underused with the noted exception of India

Stock market saving is hugely popular with Chinese consumers

Trend: Price is a less competitive driver than before the downturn

In today's conditions, competition between financial services companies is fierce

Financial service providers must look past price to compete successfully in today's market

Consumer empowerment means banks must get some 'basics' right to attract and retain customers

Insight: Consumers are more appreciative of the financial stability of their savings institutions

The global economic crisis has lead to the stability of the financial organization featuring heavily in decision-making

Consumers want savings products to supply a reasonable return but retain flexibility of access and security from risk

Trend: Consumers are apathetic concerning action for the financial future

Insight: Consumer now prioritize short-term savings over long-term security

Over a third of consumers are not intending to invest more for the long run

Insight: Primary banks can take advantage of their existing consumer relationship and more efficiently cross-sell

Consumers are unwilling to pay for financial advice up-front, and instead use the internet as a free resource

Consumers are showing a preference for going to their primary banks for financial advice, presenting important opportunities for banks

Insight: Consumer have a level of saving loyalty towards their primary bank

Consumers who are looking to switch banks are generally more worried about the economy

Insight: Affordability is given as the strongest reason for not saving

INSIGHT: There exists a considerable segment of consumers that have the means and yet are still reluctant to save, both now and in the long run

Financial services institutions must encourage these key consumer segments to ask themselves: "can I afford not to save?"

Consumer segment 1: Apathetic consumers

Consumer segment 2: Struggling consumers

Financial institutions need to view the other two segments as targets for acquisition and thus align their marketing strategies with the segmentations revealed

Consumer segment 3: Comfortable consumers

Consumer segment 4: Die-hard consumers

Country segmentation analysis: UK, Australia, Singapore, USA and Germany

Insight: Online savings are now used by 43.9% of consumers with internet access

INSIGHT: Online banking market reveals untapped potential

Consumers check balances online but fail to make the move to some of the other banking activities

Heavy online use by price-driven consumers and those who are more optimistic about their household finances

Action Points

ACTION POINT: Savings institutions must alleviate concerns if they are to hope to increase deposits

ACTION POINT: Savings institutions need to counter consumer apathy through effective marketing

Struggling consumers

Apathetic consumers

ACTION POINT: Savings institutions need to develop strategies to engage their acquisition targets

Comfortable consumers

Diehard consumers

ACTION POINT: Savings institutions need to adapt their products to suit the flexibility required to meet consumers' short-term anxieties

ACTION POINT: Savings institutions need to meet consumer demands for information or be prepared to face the consequences

ACTION POINT: Savings institutions that do not provide for general financial education cannot complain when consumers fail to react to deals or better financial options.

ACTION POINT: Savings institutions must not become complacent, or they will see an outpour of deposits once sentiment improves

ACTION POINT: Savings institutions must be prepared to compete on more than just price alone

ACTION POINT: Online banking interfaces must be improved to provide service and security to rival in-house arrangements

APPENDIX

The financial services Megatrends framework

Datamonitor has identified 10 Megatrends in consumer behavior

Megatrends are a tool for capturing the drivers of consumer behavior

A Megatrend framework is a vital tool for analyzing and structuring consumer attitudes and behaviors

A trend framework is used for generating and selecting ideas

A Megatrend framework is vital for financial services

Customer retention as well as customer acquisition must be considered

There are inherent obstacles in financial services that limit innovation in customer targeting

Greater customer understanding can help to overcome the obstacles found in targeting and communicating to customers

The Megatrend framework enhances an analysis of the deposit market

There are 10 Megatrends that impact on the actions and attitudes of financial services customers

The six behavior trends identify the benefits that consumers wish to gain from a product or service

The four complexities are areas within which traditional assumptions or measures of behavior no longer apply

Tables

Methodology

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Household savings rates by country, 2009

Table 2: Characteristics of consumers showing bank savings switching behavior: comparison of response averages and percentage breakdown of consumer segment representation

Table 3: Major central bank interest rates, August 2007 to August 2009

Table 4: Global household savings rate, 1991-2010 (% of income)

Table 5: Household savings rate by country (% of income)

Table 6: Percentage of respondents who hold different savings products in different countries

Table 7: Mean and standard deviation of interest rate estimates and actual values for US, UK and Japan

List of Figures

Figure 1: Consumers are very concerned about the value of their savings

Figure 2: Rising unemployment rates across the world drive consumer anxieties

Figure 3: Global average household saving rates (% of income) fell up to the onset of the economic crisis

Figure 4: Consumers are making attempts to save more money

Figure 5: Consumers want to pay more into savings but it is a mixed response, with nearly a third not intending to save more

Figure 6: Global interest rates are at record lows, suffocating saving incentives

Figure 7: Consumers are grossly uninformed when it comes to general financial knowledge

Figure 8: Consumers fail to look more interested in the financial world in general

Figure 9: Although the financial world in general has failed to inspire consumers interests, consumers are paying more attention to banking literature than before the downturn

Figure 10: Consumers are no longer passive about their finances; they are very conscious of their importance and as such will devote time to their analysis

Figure 11: Banks remain the dominant force in retail saving, followed by insurance companies and the stock market

Figure 12: The financial stability of the organization is the most important consideration before making a financial purchase

Figure 13: Easy access, competitive rates and low risk appear to be the most attractive qualities of savings products

Figure 14: Consumers appear apathetic, with a low likelihood of action across the board

Figure 15: Consumers fail to show any strong move towards their bank for savings advice

Figure 16: Consumers lack motivation to invest more for the long term in the next six months

Figure 17: Consumers hold more products where ease of access to funds outweighs return

Figure 18: Consumers remain resistant to paying for advice up-front and still use their primary bank as their source of financial advice

Figure 19: Consumers are unlikely to switch their savings accounts to another bank

Figure 20: Non-savers view saving as unaffordable

Figure 21: Four distinct consumer segments have emerged within the savings market

Figure 22: There exists variation in segment distribution across different countries

Figure 23: Nearly 44% of consumers are registered for some form of online savings

Figure 24: Consumers regularly check their online bank balance, with few consumers neglecting internet services

Figure 25: Consumers highlight branch and security issues as the two main reasons for not using online banking

Abstract

Introduction

The global downturn has changed the saving behavior of consumers, making it necessary to identify people's new saving priorities in this low-return environment and ascertain the best ways for competitors to distinguish themselves and their offerings to attract high-value consumers

Scope

• Strategies for success in the savings market are discussed in the context of market trends, drawing out key conclusions and insights
• Innovative consumer segmentation is used to present a clear cross section of observed savings behavior.
• Built on this analysis, action points highlighting best practice are explored to present a framework of recommendations.

Highlights

In the current economic environment consumers are looking beyond simple price competition in choosing their savings product. In fact, many have had their fingers burnt and are rating financial security over price in their choice of saving product.

When consumers go to their primary bank they are giving the institution the perfect opportunity to gain information and thus more expertly tailor appropriate savings products to meet their needs. Other financial services providers need to be more proactive in encouraging saving in a way that can compete with the advantages enjoyed by the banks.

Consumers are currently under pressure both financially and emotionally. The anxieties faced in the present are outweighing concerns for the future. This brings about a focus on getting by in the present rather than worrying about the long run, a fact reflected in the lack of interest in increasing long-term investments.

Reasons to Purchase

• This report provides a comprehensive analysis of consumer attitudes towards savings products against the backdrop of the changing economic climate
• It provides strategies for providers looking to boost their levels of engagement with consumers in the savings market.

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