The Changing Face of Retail Savings

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.

Report Highlights

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Overview 1
Catalyst 1
Summary 1
Methodology 1
Table of Contents 2
Table of figures 3
Table of tables 4
Introduction 5
Economic events have driven consumers into heightened states of concern over their savings 5
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 6
Globally unemployment is high and set to continue to rise into 2010, driving anxiety 6
Bank collapses and reduced trust in the banking sector as a whole have caused consumers to become concerned about the security of their savings 7
Household savings rates have risen since 2007 and are expected to remain at an elevated level throughout 2010 9
Some countries have more serious savings rate concerns than others 10
Nearly 70% of consumers are intending to increase saving in the next six months 11
The Future Decoded 13
Trend: Interest rates across the globe have fallen to a historic low 13
Lower interest rates depress incentives to save 14
Insight: Consumers lack financial awareness and therefore struggle to find suitable products, but they are attempting to rectify this 14
Poor general financial awareness is reflected through a very inaccurate estimation of national interest rates 14
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 15
Consumers are now paying significantly more attention to banking literature, and savings institutions should take note 16
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 17
Insight: Familiarity leads consumers to save with their primary bank 18
Geographically there are large differences in savings channel preferences 19
Banks remain the chief point of call for savers 20
Building societies have a strong presence in the UK and Australia, but elsewhere have little representation 20
Japan and Russia are embracing specialist online savers 20
Asian countries favor insurance companies 20
Government-run savings schemes remain underused with the noted exception of India 20
Stock market saving is hugely popular with Chinese consumers 20
Trend: Price is a less competitive driver than before the downturn 21
In today's conditions, competition between financial services companies is fierce 21
Financial service providers must look past price to compete successfully in today's market 21
Consumer empowerment means banks must get some 'basics' right to attract and retain customers 21
Insight: Consumers are more appreciative of the financial stability of their savings institutions 22
The global economic crisis has lead to the stability of the financial organization featuring heavily in decision-making 22
Consumers want savings products to supply a reasonable return but retain flexibility of access and security from risk 23
Trend: Consumers are apathetic concerning action for the financial future 24
Insight: Consumer now prioritize short-term savings over long-term security 26
Over a third of consumers are not intending to invest more for the long run 26
Insight: Primary banks can take advantage of their existing consumer relationship and more efficiently cross-sell 28
Consumers are unwilling to pay for financial advice up-front, and instead use the internet as a free resource 28
Consumers are showing a preference for going to their primary banks for financial advice, presenting important opportunities for banks 29
Insight: Consumer have a level of saving loyalty towards their primary bank 30
Consumers who are looking to switch banks are generally more worried about the economy 31
Insight: Affordability is given as the strongest reason for not saving 32
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 34
Financial services institutions must encourage these key consumer segments to ask themselves: ""can I afford not to save?"" 36
Consumer segment 1: Apathetic consumers 36
Consumer segment 2: Struggling consumers 36
Financial institutions need to view the other two segments as targets for acquisition and thus align their marketing strategies with the segmentations revealed 36
Consumer segment 3: Comfortable consumers 36
Consumer segment 4: Die-hard consumers 37
Country segmentation analysis: UK, Australia, Singapore, USA and Germany 37
Insight: Online savings are now used by 43.9% of consumers with internet access 39
INSIGHT: Online banking market reveals untapped potential 41
Consumers check balances online but fail to make the move to some of the other banking activities 41
Heavy online use by price-driven consumers and those who are more optimistic about their household finances 42
Action Points 44
ACTION POINT: Savings institutions must alleviate concerns if they are to hope to increase deposits 44
ACTION POINT: Savings institutions need to counter consumer apathy through effective marketing 44
Struggling consumers 45
Apathetic consumers 45
ACTION POINT: Savings institutions need to develop strategies to engage their acquisition targets 45
Comfortable consumers 45
Diehard consumers 46
ACTION POINT: Savings institutions need to adapt their products to suit the flexibility required to meet consumers' short-term anxieties 46
ACTION POINT: Savings institutions need to meet consumer demands for information or be prepared to face the consequences 46
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. 47
ACTION POINT: Savings institutions must not become complacent, or they will see an outpour of deposits once sentiment improves 47
ACTION POINT: Savings institutions must be prepared to compete on more than just price alone 48
ACTION POINT: Online banking interfaces must be improved to provide service and security to rival in-house arrangements 48
APPENDIX 50
The financial services Megatrends framework 50
Datamonitor has identified 10 Megatrends in consumer behavior 50
Megatrends are a tool for capturing the drivers of consumer behavior 50
A Megatrend framework is a vital tool for analyzing and structuring consumer attitudes and behaviors 50
A trend framework is used for generating and selecting ideas 51
A Megatrend framework is vital for financial services 51
Customer retention as well as customer acquisition must be considered 51
There are inherent obstacles in financial services that limit innovation in customer targeting 51
Greater customer understanding can help to overcome the obstacles found in targeting and communicating to customers 51
The Megatrend framework enhances an analysis of the deposit market 52
There are 10 Megatrends that impact on the actions and attitudes of financial services customers 53
The six behavior trends identify the benefits that consumers wish to gain from a product or service 53
The four complexities are areas within which traditional assumptions or measures of behavior no longer apply 55
Tables 57
Methodology 61
Ask the analyst 62
Datamonitor consulting 62
Disclaimer 62
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List of Tables
Table 1: Household savings rates by country, 2009 10
Table 2: Characteristics of consumers showing bank savings switching behavior: comparison of response averages and percentage breakdown of consumer segment representation 32
Table 3: Major central bank interest rates, August 2007 to August 2009 57
Table 4: Global household savings rate, 1991-2010 (% of income) 58
Table 5: Household savings rate by country (% of income) 59
Table 6: Percentage of respondents who hold different savings products in different countries 60
Table 7: Mean and standard deviation of interest rate estimates and actual values for US, UK and Japan 61
List of Figures
Figure 1: Consumers are very concerned about the value of their savings 5
Figure 2: Rising unemployment rates across the world drive consumer anxieties 7
Figure 3: Global average household saving rates (% of income) fell up to the onset of the economic crisis 9
Figure 4: Consumers are making attempts to save more money 11
Figure 5: Consumers want to pay more into savings but it is a mixed response, with nearly a third not intending to save more 12
Figure 6: Global interest rates are at record lows, suffocating saving incentives 13
Figure 7: Consumers are grossly uninformed when it comes to general financial knowledge 15
Figure 8: Consumers fail to look more interested in the financial world in general 16
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 17
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 18
Figure 11: Banks remain the dominant force in retail saving, followed by insurance companies and the stock market 19
Figure 12: The financial stability of the organization is the most important consideration before making a financial purchase 23
Figure 13: Easy access, competitive rates and low risk appear to be the most attractive qualities of savings products 24
Figure 14: Consumers appear apathetic, with a low likelihood of action across the board 25
Figure 15: Consumers fail to show any strong move towards their bank for savings advice 26
Figure 16: Consumers lack motivation to invest more for the long term in the next six months 27
Figure 17: Consumers hold more products where ease of access to funds outweighs return 28
Figure 18: Consumers remain resistant to paying for advice up-front and still use their primary bank as their source of financial advice 29
Figure 19: Consumers are unlikely to switch their savings accounts to another bank 31
Figure 20: Non-savers view saving as unaffordable 33
Figure 21: Four distinct consumer segments have emerged within the savings market 35
Figure 22: There exists variation in segment distribution across different countries 38
Figure 23: Nearly 44% of consumers are registered for some form of online savings 40
Figure 24: Consumers regularly check their online bank balance, with few consumers neglecting internet services 41
Figure 25: Consumers highlight branch and security issues as the two main reasons for not using online banking 42
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