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Online Banking in the UK: Sizing the Market Opportunity



The online channel has already proven its worth in the UK retail banking market, but changing pressures and ever-demanding consumers mean that providers need to ensure that their online propositions continue to meet customer needs.



This report explores the balance between maintaining a satisfactory online banking proposition that allows consumers to carry out their day-to-day banking, and the merit of additional online features such as personal financial management (PFM). Ensuring that the relationship with online customers is maintained is vital due to the remote nature of the online channel.


  • Refine the design of your online banking platform by learning the key consumer demands from this channel.
  • Benchmark your online offering with comparisons of ease of use of online features from the UK's top providers.
  • Boost customer retention by identifying the core target customers for the online channel.
  • Maximize the potential of the online channel by ensuring that innovation aligns with customer needs.


  • As a number of top UK providers face upheavals in their customer bases with the sale and purchase of branches, this creates a challenge to retain customers sold off with the branches, or attract new ones. The quality and functionality of the service that consumers receive on their existing online banking platform will play a part in this decision.
  • The remote nature of online banking weakens the relationship between a provider and customers. This may contribute to the feeling among consumers who predominantly use the online channel that their provider does not understand their financial situation. Providers must address this in order to offer services that align with their customers' needs.
  • Consumers who only use the online channel for their regular banking activities are more likely to be self-sufficient when seeking out advice. Providers will want to find ways in which to deliver advice and information effectively through the online channel in order to continue to advise these customers.


  • What are the key challenges of the online channel for the top UK providers?
  • Is online banking primarily a customer retention or acquisition tool?
  • Is there a gap between consumer demand and bank offerings for specific online activities?
  • Who is the typical online banking customer?
  • What is the potential of the online channel for marketing to customers?

Table of Contents


  • Catalyst
  • Summary
  • Methodology


  • (Untitled section)
    • Online banking is a core part of banking propositions in the UK
    • Consumers demand online banking facilities alongside their current accounts
  • There is little differentiation between the online offerings of the top UK providers
    • Barclays shows the greatest differentiation
    • An ideal online platform would bring together as much functionality as possible onto one page
    • There is little perceived differentiation between the online offerings of providers
    • Providers should encourage more frequent use of the online channel
  • The typical online customer needs to be better understood by providers
    • Mainstream demographics are represented by online devotees
    • Online devotees are more self-sufficient when seeking out advice
    • Providers need to ensure that online customers feel that their personal situations are understood
  • The occurrence of online current account opening remains low in the UK
    • Young, less affluent consumers are the most likely to open an account online
    • Opening a current account online should become the norm
    • Savings accounts have been opened predominantly through the branch channel
    • Online devotees are more likely to take out a mortgage online
    • The online channel facilitates the personal loan application process


  • The top UK providers face challenges to their provision of financial services
    • Lloyds TSB will need to work hard to ensure that it retains customers when its branches are sold
    • Santander will have to move from acquisitions to organic growth
    • RBS is in an uncertain position with regard to its branches
    • Nationwide is looking to a new means of expansion through branch purchases
    • Halifax has been presented as a "challenger" brand but its online platform does not reflect this
  • Providers need to eliminate problems with online platforms due to customer reliance
    • Outdated computer systems are hindering online progress
    • RBS and NatWest customers have twice been left without access to their money
    • Nationwide double-charged customers on payments
    • Barclays, Santander, HSBC, and Lloyds TSB customers have been left unable to access their online banking
  • Consumers who predominantly use the branch channel are less likely to switch their current account
    • The lack of loyalty shown by online customers needs to be addressed by providers
    • Banks need to ensure that they are getting the basics right
  • Functionality would need to change significantly for the online channel to become an acquisition tool
    • PFM tools are not a strong enough pull for consumers in the UK
    • Providers do not need to introduce a full PFM service in order to meet consumer demands
    • Lloyds TSB's PFM venture has been missed by a number of its customers
    • Nationwide customers show the greatest affinity with sharing goals through social media
    • Customers of Halifax and HSBC show a high demand for specific PFM features
    • Personalization of online banking platforms would benefit consumers
  • Security and a lack of human contact currently limit the use of online banking
    • Security is a big issue for non-users of the online channel
    • Consumers who prefer human contact when banking may never be persuaded to use online
    • Providers should make sure that customers have all the necessary details to access their banking
  • The majority of consumers find marketing on their online platform irritating or intrusive
    • Providers must ensure that online devotees are marketed to appropriately with relevant products
    • Consumers prefer to hold multiple products with one provider, which aids cross-selling
    • Even among the most devoted online users, in-branch is a key channel for opening savings accounts
  • The online channel has potential as a source of advice
    • Providers have to compete with third-party tools and forums
    • There is a lack of consistency in providers' online guidance to customers
    • Tools and calculators need to be promoted to consumers
    • If consumers need to speak to an advisor, this should be an easy next step
    • The online channel will not completely replace face-to-face advice


  • Methodology
  • Secondary sources
  • Ask the analyst
  • Disclaimer


  • Figure: The online channel dominates for everyday banking in the UK; however, consumers continue to use the branch on a less regular basis
  • Figure: The top seven banks in the UK differ in the online banking functionality that they offer customers
  • Figure: The ability to see their transaction history in different formats helps Nationwide customers to understand their spending better
  • Figure: Lloyds TSB's Money Manager service is the only comprehensive personal financial management tool offered by a top provider in the UK
  • Figure: There are a number of features of online banking that would come together to build an "ideal" banking platform
  • Figure: There is minimal differentiation between the ease of use of online banking offerings
  • Figure: Use of the online channel for conducting banking activities varies by provider in terms of frequency
  • Figure: The branch channel has dominated the opening of retail banking products in the UK
  • Figure: Lloyds TSB has the greatest proportion of customers stating that they would be very likely to switch provider if their main branch were to close
  • Figure: Customers of Santander are the most likely to consider banking without any physical branches
  • Figure: Online and technical issues experienced by the top UK providers have hit the headlines repeatedly
  • Figure: Switching levels over the past five years are significantly lower among consumers who predominantly bank through the branch channel
  • Figure: Consumers are most likely to want to gather all their accounts together in one place
  • Figure: Halifax and HSBC may want to consider specific aspects of PFM functionality for their customers
  • Figure: BBVA's Tu Cuentas account is customizable and allows consumers to aggregate accounts from other providers
  • Figure: A preference to conduct their finances face-to-face is the most prevalent reason for consumers not using online banking
  • Figure: Providers need to improve the consistency or accessibility of their online advice and guidance
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