Overview:

Introduction

The status quo of the UK savings market was irrevocably altered by the global financial crisis. Some consumers are now emerging from the recession with new awareness, drive and curiosity about saving. However, confusion and mistrust remain a hangover which must be dealt with, and income constraints and debt repayment are limiting savers' ambitions.

Scope

*This report highlights the attitudes and behaviours of UK savers against a global backdrop.
*Primary data is used to analyse the saving behaviour of key consumer segments as they come out of the recession and into the recovery

Highlights

Rational consumers are currently focusing on debt repayment rather than looking for interest in the savings markets. However, there could be opportunities to combine the two initiatives if FS institutions are innovative in their product design.

Affordability is hugely influential in determining how likely consumers are to be savings account holders: 74% of consumers currently without savings accounts claim that they are unable to hold money back from day-to-day activities in order to save.

The higher propensity to seek competitive rates within the UK market has translated into more UK consumers having switched their savings account provider, or intending do so, than the global average

Reasons to Purchase

*It utilizes attitudinal consumer segmentation to provide strategies for providers looking to boost engagement with consumers in the savings market.
*Primary data is used to profile key consumers in how their savings approaches differ
*The report provides best practice examples of FS providers already effectively appealing to consumer attitudes towards saving.

Overview

Catalyst

Summary

Methodology

Executive Summary

The UK saving market remains in flux

Consumers appear to be reverting to poor savings habits with significant portions of UK consumers currently failing to save

Affordability is the major driver behind a failure to save,for both account holders and those currently disengaged from the market

A minority of consumers have remembered the lessons they learned during the economic slowdown

The UK savings market must cater to a more savvy consumer than elsewhere

Consumers are interested in looking outside of the savings market but find themselves uncertain as to the specifics

Consumers retain an appreciation for the financial stability of their savings institutions but the low-return environment has meant that any differences in rate are significant

Consumers are focusing on paying off expensive debt while the saving alternative remains unattractive

Five consumer segments have emerged during the recession

Diverse motivations are behind the different consumer segments acting together in ceasing to save

Rational consumers are more comfortable making active decisions concerning their finances

Table of Contents

Table of figures

Table of tables

Capturing Consumer Saving

Introduction

TREND: UK saving has historically been worse than the global average

Consumers appear to be reverting to previous poor savings habits

Savings institutions face a challenge to rekindle the fires of UK saving ambitions

The Uk Savings Market

The Recovery from Recession dataset provides in-depth insight into the UK savings terrain

TREND: Significant portions of UK consumers are currently not saving

INSIGHT: Affordability is the major driver behind a failure to save,for both account holders and those currently disengaged from the market

Affordability is a driving factor behind the stalling UK saving market

Three quarters of consumers without a savings account report that they are unable to afford to save

A worryingly large segment of consumers have no savings at all to fall back on

Reductions in real income plus high levels of unemployment make issues with affordability unsurprising

INSIGHT: A minority of consumers have remembered the lessons they learned during the economic slowdown

The global slowdown saw consumers begin to appreciate the importance of saving but income constraints have seen a return to poor savings levels

INSIGHT: The UK savings market must cater to a more savvy consumer than elsewhere

30% of consumers holding savings accounts are looking around to find the best rate

UK consumers are much more likely to switch their savings account than the global average

Damaged brands could expose the savings institutions to more switching behavior

INSIGHT: Some UK consumers are looking to utilize their money outside of the savings market

Nearly one in five UK consumers are looking for alternatives to the saving market

Consumers remain confused as to what alternatives there are to saving accounts

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

Consumers will soon have a source of free financial advice to consult before comparing savings offerings

INSIGHT: Consumers retain an appreciation for the financial stability of their savings institutions but the low-return environment has meant that any differences in rate are significant

UK savers were shaken following high-profile bank defaults

UK consumers are dubious over the security of government-backed savings

The financial market has stabilized but the wider ramifications on consumer incomes may be placing rate of return back at the forefront of consumer decision-making

Consumers are focusing on paying off expensive debt while the saving alternative remains unattractive

The UK emerges from the recession with a weighty debt burden

Consumer Segmentation

Five consumer segments have emerged during the recession and remained present throughout the recovery

The segments

The segments vary in size,from 13% of consumers to 30%

The consumer segments have been fairly static throughout the recession through to the recovery

INSIGHT: Diverse motivations are behind the different consumer segments acting together in ceasing to save

The confused and panicked segments have abandoned accumulating savings

The confused segment's inability to save is driven by issues of affordability

An above-average number of rational consumers have stopped adding to their savings accounts

Instead of being constrained by affordability,rational consumers are paying off expensive debt rather than seeking the paltry market saving return

Rational consumers are more comfortable making active decisions concerning their finances

Rational consumers are more likely to exhibit switching behavior than consumers in other segments

Hedonists are also more likely to switch their accounts but amount to only 15% of switching consumers

Emotional and panicked consumers are much less likely to exhibit switching behavior

Action Points

Balanced positioning: savings institutions need to effectively target their services if they wish to maintain a stable deposit base

The financial services Megatrends framework can be used to target these customer segments

Messages that appeal to the Megatrend of Individualism will appeal to the rational consumer

ACTION POINT: Product innovation to incorporate debt repayment with savings opportunities may attract the rational consumer

ACTION POINT: Rational consumers like to be in close control of their finances and should be approached with solutions that increase how they effectively manage their money

Rational consumers may be more willing to lock away their money given fewer issues with affordability and a pragmatic outlook

A broader savings strategy that allows consumers to utilize a number of products with different time horizons may appeal strongly to the rational consumer

Messages that appeal to the Megatrend of Convenience will appeal to hedonistic consumers

ACTION POINT: Convenience and flexibility of withdrawals will greatly appeal to this pleasure-seeking consumer segment

ACTION POINT: Goal-based advertising focusing on the product of saving will help keep the hedonistic consumer focused on the value of saving

Messages that appeal to the Megatrends of Comfort and Connectivity will attract the emotional consumer

ACTION POINT: Comfort,Connectivity and Authenticity are vastly important for providing reassurance to this concerned but valuable consumer group

Banks need to anticipate consumers' concerns given their emotional situation,and facilitate a closer,more meaningful relationship with consumers

Messages that appeal to the Megatrend of Authenticity will reassure panicked consumers

ACTION POINT: Savings providers need to focus the information they deliver on being clear and straight to the point

Going forward into the recovery and beyond

APPENDIX

Methodology

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

Further reading

Ask the analyst

Datamonitor consulting

List of Tables

Table 1: Consumers are making the rational choice prioritizing expensive debt over low interest savings

List of Figures

Figure 1: The global economic crisis drove a step change in household saving behavior in the UK

Figure 2: 17% of UK consumers lack a savings account

Figure 3: A third of UK savings account holders can no longer afford to save

Figure 4: Issues with affordability peaked in the summer of 2009

Figure 5: 74% of those consumers without accounts have issues with affordability

Figure 6: The UK is tentatively emerging from the recession but unemployment remains at a 10-year peak

Figure 7: The global slowdown forced consumers to reassess their saving positions

Figure 8: UK consumers are more likely to display switching behavior driven by a more focused urge to find the best rate

Figure 9: 17% of savers are looking for alternatives to savings

Figure 10: Consumer interest groups are complaining about the lack of reward for saving

Figure 11: Slim pickings in bank savings accounts encourage savers to consider elsewhere

Figure 12: Attractive gains in the equity markets make alternatives to the traditional savings channel look worthy of consideration

Figure 13: Few consumers are certain as to what is the best step outside of the savings arena

Figure 14: Consumers are grossly uninformed when it comes to general financial knowledge

Figure 15: Neither savers nor non-savers are convinced by government-backed savings

Figure 16: The financial stability of the organization is the most important consideration before making a financial purchase

Figure 17: Significant proportions of savers and non-savers are focusing on repaying debt obligations

Figure 18: The behavioral segmentation model contains five clearly defined consumer segments

Figure 19: Rational consumers are the largest segment at 30% compared to the smallest segments at 13%

Figure 20: Consumer segmentation has remained robust throughout the recession and into the recovery

Figure 21: Confused and panicked consumers are the most likely to have ceased adding to accounts

Figure 22: Confused and panicked consumers,both those with and without accounts,have major issues with affordability

Figure 23: Rational consumers are much more likely to be focusing on debt rather than saving

Figure 24: Rational consumers and hedonistic consumers are more likely to switch their saving accounts

Figure 25: MortgageOne in Malaysia offers an example of how to combine debt and saving schemes for net benefits

Figure 26: Highlighting the goal of savings will help to entice the consumption-driven hedonistic consumer segment

Figure 27: Virgin Money is approaching the market with simplicity as a central part of its offering