2020 Banking Consumer Study: Making Digital More Human – UK Findings

2. Contents Overview 3 (Re)introducing the personas 4 UK findings 8 Switching Accounts 9 Priorities & Personalisation 12 Data Trust 15 Bundled Services 18 Digital Engagement 21 Response to COVID-19 24 Unfamiliarity with Neobanks 27 Connect with our subject matter experts 31

3. Overview Consumers have swiftly pivoted to digital channels due to COVID-19 Digital migration accelerates commoditisation and jeopardises trust Banks must create a customer experience that blends the convenience of digital with human personality and expertise In this time of disruption, consumers have pivoted to digital channels faster than predicted. In this study, we sought to understand which shifts in consumers’ behaviour are likely to endure beyond COVID-19. As it calls out the need for making digital banking more human. Digital preference - our survey shows that many consumers unable or unwilling to visit branches, rapidly shifted to digital channels across a range of banking activities. Legacy systems - banks have made some progress, but the rollout of new digital offerings continues to be hampered by longstanding legacy systems. Rebuilding and maintaining trust - banks should strive to maintain the entrepreneurial spirit that flourished in 2020, continuing to offer customers the support given during COVID-19, instead of narrowing this. Rise in digital engagement - could be both a blessing and a curse for banks. Many have not yet succeeded in adding to their digital interactions and marketing touchpoints the humanity, personality and personalisation that are typically provided by knowledgeable staff. Emotional connection - without this banks risk weakening their already fragile personal and emotional connection with consumers. Meaning that services are likely to become commoditised, with consumers focused on price alone. Optimal customer experience - creating this requires banks to strike the right balance between initiatives that mimic humanity and putting human advisors in front of customers. Integrating video conference and digital channels - just focusing on supporting consumers’ increased use of digital channels may create an effective digital offering, but it will lack the humanity and personality needed to engage customers emotionally.

4. (RE)introducing the personas The evolution of changing banking behaviours

5. Pragmatists 27% of the 3,000 respondent in UK Trusting and channel-agnostic, Pragmatists see technology as a means to an end rather than a lifelong passion. They are satisfied with the service levels they receive and expect good value from banking and Insurance providers. Traditionalists 27% of the 3,000 respondents in UK These customers value the human touch and avoid technology wherever possible. They show low levels of engagement and satisfaction with their financial services providers, and trust is also low. Pioneers 17% of the 3,000 respondents in UK This group comprises risk-takers who are tech-savvy and hungry for innovation. They are keen to engage with financial services providers through digital channels and mobile devices. (RE)introducing the personas The consumers in our survey can be segmented into four broad personas based on how they perceive and engage with banks. The Personas Sceptics 29% of the 3,000 respondents in UK Tech-wary and generally dissatisfied with their financial services providers, these customers are also the least trusting. They are the largest persona group in this year’s study. Everywhere Most evenly distributed persona group across age groups and geographies. Channel agnostic 74% don’t mind which channel they use to communicate with bank/insurer. Open to advice 94% trust their human advisor in their bank branch on loan or mortgage advice. Trusting 93% and 88% trust bank and insurer respectively to look after their data. Data Conscious 81% are alert and cautious about their data privacy Mature 80% are above 55 years old. Tech- avoiders 72% never use a mobile app or website to contact their bank Responsive to human touch Value personal contact with knowledgeable stuff. Feeling disconnect Only 58% say their bank is effectively communicating about its measure through COVID-19. Low trust Only 71% and 59% trust their Banks and insurers to look after their financial wellbeing respectively. Young 51% are between 18 and 34. Tech-savvy 82% say smartphone is principal device for transacting online. Open to risk 71% are willing to take risks to improve their lives. Hungry for innovation 71% want to explore new channels such as wearable devices. Reciprocal 73% and 62% would be willing to share data in return for advanced services for bank and insurer respectively. Risk-averse Only 36% say they take risks to improve life. Tech-wary Only 52% described themselves as confident users of technology. Low trust Only 49% and 45% trust their Banks and insurers to look after their financial wellbeing respectively. Difficult to convince Low interest in integrated proposition around core needs. Dissatisfied Only 58% say they able to get support from their bank when they need it.

6. The sample showed an even split of gender profiles across age groups The 2020 Global Financial Services Consumer study surveyed 48,710 banking & insurance customers globally including 3,000 UK respondents Demographics 6% 9% 8% 9% 7% 10% 5% 8% 8% 9% 8% 13% 0% 10% 20% 30% 18-24 25-34 35-44 45-54 55-64 65+ Males Females Non-workers make up the majority of responses due to older respondents and COVID-19 impacts 42% 29% 11% 5% 2% Not Working Full time Part Time Self Employed Student

7. Over half of respondents are of medium income respondents 28% 53% 20% Sceptics have grown in both Global and UK markets whilst Traditionalists have fallen sharply The 2020 Global Financial Services Consumer study surveyed 48,710 banking & insurance customers globally including 3,000 UK respondents Demographics Overall Gender Split 10% reduction in the number of responses from Traditionalists and an increase in all others Largely the increase in the number of Sceptics can be explained by certain trends: • COVID-19 means less face-to-face services • Loss of ‘traditional’ ways of banking • Shift to digital 49% 51% 38% 24% 16% 21% 33% 23% 21% 23% Sceptics Pioneers Traditionalists Pragmatists 2018 2020 29% 17% 27% 27% 24% 16% 37% 24% 2018 2020 Global UK Low Medium High

8. 1 - Switching Accounts Of the 1 in 5 UK customers who opened a new account in 2020, only 4% switched main account provider, a fall from 2018 with Pioneers slowing their switches. 2 - Priorities & Personalisation Whilst the majority of UK consumers prioritise value for money, there is a 45% increase in interest for personalised advice relative to 2018. 3 - Data Trust In 2020, UK consumers are 15% more willing to share data with their banks and insurers relative to 2018, but a key concern is data intrusiveness. 4 - Bundled Services The majority of UK respondents are interested in bundled products with over 50% willing to pay for them – predominantly Pioneers among varied age ranges. Of the 3000 UK respondents to the survey, we identified several patterns among consumers, which we distilled into seven key findings: 5 - Digital Engagement Digitalisation is increasingly demanded among UK consumers, with Mobile taking the lead as the main channel to interact with Banks; a 50% increase from 2018. 6 - Response to COVID-19 Assistance programs such as chatbots by banks and insurers were well received by UK consumers, with 45% wanting to continue this type of service post-pandemic. 7 - Unfamiliarity with Neobanks Neobanks face challenges to onboard new customers because 42% are unfamiliar with Neobank offerings and the fact customers are generally satisfied with their current bank.

9. Switching Accounts Key finding 01

10. Primary account switching has reduced in 2020 to only 4%, with customers looking for stability during covid-19 Switching Accounts Bank account opening in the UK has remained fairly constant despite COVID 19 18% 21% 2018 2020 of customers opening bank accounts in the UK within the last 12 months But only 4% switched main provider in the UK, a sharp reduction from 9% in 2018 4% 6% Yes 2018 2020 4% 9% 2018 2020 Global UK

11. Main bank switches dropped across all Personas but especially for Pioneers UK switching is highest among 18-24 year olds Switching Accounts Primary account switching has reduced in 2020 to only 4%, with customers looking for stability during covid-19 25% 2018 8% 2020 11% of 18-24 year olds have switched to a new provider Medium and high incomes are more likely to switch their main account 8% 5% 2% High income Medium income Low income

12. Personalised Services Key finding 02

13. Personalised Services Value for money and convenience are top priorities in 2020 With banks offering digital services and not focusing on an emotional connection, these are likely to become commoditised, with consumers focused on price alone. UK bank & insurance consumers now prioritise value for money, in keeping with Global trends Of UK banking consumers prioritise personal advice on how to save money as the highest appeal for growing in digital services 1 in 3 62% Increase in consumer interest in personalised digital experiences from 2018 10% – 30% Interest in personalised advice has grown the most 45%

14. Personalised Services Value for money and convenience are top priorities in 2020 How appealing would you find the following digital experiences if offered by your banks or insurers? 35% 36% 45% 51% 55% 56% 60% 62% 65% 72% 80% 21% 21% 43% 40% 47% 43% 52% 54% Gamification through the mobile app Gamification through the website Chatbot that offers financial advice in plain language Advice on how to travel, shop, etc more sustainably Updates on my account balance by SMS or mobile app Budget info based on spending this month Alerts about upcoming direct debits by SMS or mobile app Savings tips based on my spending patterns Alert when I'm close to overdraft by SMS or mobile app Offers/perks based on shopping history Assistance dealing with cyber security threats 2018 2020

15. Data Trust Key finding 03

16. Willingness to share data with banks has risen slightly in the UK, in contrast to the global trend 53% 55% 2018 2020 51% 44% 2018 2020 Whilst UK willingness to share data rose by 7% from 2018, bucking the global trend, data intrusiveness concerns are rising Data Trust Pioneers are the most willing personas to share data in exchange for personalisation or other benefits Global UK 46% 73% 29% 64% Sceptics Pioneers Traditionalists Pragmatists Bank 37% 62% 22% 53% Insurer

17. selected ‘advice that is relevant to your personal circumstances’ as highest data share priority Whilst UK willingness to share data rose by 7% from 2018, bucking the global trend, data intrusiveness concerns are rising Data Trust Increase from 2018 to 2020 in willingness to share data Was selected as a very close second (88%) highest willingness to share data 10% – 20% More competitive Lower prices 89% Intrusiveness is deemed as the highest rationale for respondents not willing to share data 3% 6% 6% 13% 9% 20% 27% 31% 53% Other I worry that it would make my financial advice more expensive My bank is not clear and transparent about how my data will be stored / protected I worry it would make my banking more expensive My bank is not clear and transparent about how my data will be used I worry that my bank would sell information to third parties I worry that my data might get stolen from my bank I am concerned that I would be bombarded with lots of irrelevant information It’s too intrusive 2020

18. Bundled Services Key finding 04

19. Almost half of UK consumers are interested in bundled products and services. 55% would pay for them Interest and willingness to pay for bundled services are driven mostly by tech savvy pioneers Bundled Services Banks could focus their bundled service offerings with the right balance of digital and human interaction to meet the demands of the 55-64 age range who are most likely to buy bundled services. of UK banking consumers prioritise personal advice on how to save money as the highest appeal for growing in digital services 62%

20. Interest to pay for bundled products are predominantly shared by Pioneers in the 55-64 age range 79% 72% 71% 73% 83% 56% 62% 75% 70% 65% 75% 33% 18-24 25-34 35-44 45-54 55-64 65+ Interested Prepared to buy Interest and willingness to pay for bundled services are driven mostly by tech savvy pioneers Bundled Services 40% 48% 13% 73% 40% 55% 57% 28% 68% 48% Total Pragmatists Traditionalists Pioneers Sceptics Interest in Bundled Services from Bank or Insurer Prepared to Pay for Bundled Services 83% of 55-64 year old within Pioneers are interested in bundles; of which 75% are willing to pay. 40% 41% 23% 16% 11% 11% 50% 60% 57% 17% 20% 26% 18-24 25-34 35-44 45-54 55-64 65+ Interested Prepared to buy 40% of 18-24 year old Traditionalists are interested in bundles; of which 50% are willing to pay. Those over 35 are less enthusiastic overall.

21. Digital Engagement Key finding 05

22. Digital engagement surges, and is here to stay with online and digital channels being preferred over others Digital Engagement To succeed, banks must create customer experiences that blend the convenience of digital services with human personality and expertise. Digital channels are now the most popular channel to join a new bank whilst digital methods of engagement are also growing in popularity Question: How often, if at all, do you currently use the following when contacting your bank? Answer: Daily, Once a week, and 2-4 times a week (Top 5 responses) 10% 10% 25% 37% 44% 9% 7% 35% 38% 30% 0% 10% 20% 30% 40% 50% Email (or secure messaging) Chat/Instant messaging Bank ATM Online website on desktop/laptop Online via a mobile app or website 2018 2020 Mobile use has increased from 2018 30% – 44%

23. Percentage of respondents per persona using online via mobile or the website at least 2-4 times a week 20% 33% 7% 11% Sceptics Pioneers Traditionalists Pragmatists Digital engagement surges, and is here to stay with online and digital channels being preferred over others Digital Engagement of respondents would like digital experiences to replace in-person financial services activities 66% A third of customers have no major gripes with Video Calls used by financial services for remote interaction 26% 27% 36% It’s less personal than a face-to-face conversation It’s too intrusive I don't mind the idea - I'm just more comfortable with other channels Face-to-Faceis still the 2nd most popular channel when joining a new bank 35% 41% 48% Online via a mobile app or website (or smartphone or tablet) Face-to-face Online website using a desktop/laptop computer

24. COVID-19 Response Key finding 06

25. Banks are perceived to have responded well to COVID-19 and have communicated effectively COVID-19 Response Rebuilding trust needs to happen precisely when many banks will seek to taper COVID-19 support and make difficult credit decisions. Seeking success, banks should strive to maintain the entrepreneurial spirit that flourished in 2020. The majority of consumers believe that their bank responded well during COVID-19 Extended interest-free overdrafts were the most utilised COVID-19 service 56% 68% 73% 65% 25% 22% 18% 27% 19% 11% 9% 8% Bank is passing interest rate reductions speedily and sufficiently My bank is effectively communicating with me about its response My bank is providing me with the support I need My bank is providing the country with the support it needs Agree Neutral Disagree 5% 5% 6% 7% 8% Interest-free mortgage repayment holidays/deferrals Interest-free credit card repayment holidays/deferrals Advice on how to manage my finances during the outbreak Guidance on how to use online banking digital tools Extended interest-free overdrafts

26. Just under half of respondents indicated a desire for at least one form of COVID-19 support to be available in the longer term Question: Which of these types covid-19 assistance are you most likely to need in the longer term? 55% 12% 13% 14% None of the above Advice on how to manage my finances Interest-free credit card repayment holidays/deferrals Extended and/or interest free overdrafts Banks are perceived to have responded well to COVID-19 and have communicated effectively COVID-19 Response Pioneers were the main users of COVID-19 assistance with the lowest uptake in traditionalists 6% 1% 17% 5% Advice on how to manage my finances during the outbreak Pragmatists Traditionalists Pioneers Sceptics

27. Neobank unfamiliarity Key finding 07

28. Neobank unfamiliarity of UK respondents have a Neobank account in 2020 increase from 9.5% in 2018 of respondents are not tempted by any Neobank features to open an account, mostly in the 65+ age range 15% 41% High income user groups are most likely to have a Neobank account but usage is fairly split across income groups 10% 14% 23% 45% 48% 45% Low income Medium income High income % who own Neobank account % Use Neobank for majority of transactions (of % who own Neobank Acct) Neobank account users have increased by 50% since 2018 with uptake increasing across all personas

29. Neobank unfamiliarity Neobank account users have increased by 50% since 2018 with uptake increasing across all personas Satisfaction with existing providers and lack of knowledge about Neobanks’ offering slows uptake in the UK 3% 3% 4% 7% 9% 9% 10% 11% 13% 16% 42% 50% 4% 20% 8% 6% 11% 30% 5% 19% 16% 11% 17% 43% Lack of payment services (e.g. contactless cards, Apple Pay) Desire to keep my finances separated (e.g. for spending and saving) Desire for expert, experienced advice Other Concerns about data security and fraud protection Complexity of switching Desire for human support and interaction Simpler to keep all my financial products with one provider Concerns about neobanks' financial stability Desire for physical bank branches Unfamiliar with what neobanks offer Happy with my current provider Reason for not using Neobank account for the majority of transaction Reason for not having a Neobank account Simple and convenient digital experiences and good value for money are the top factors that attract customers to Neobanks

30. We believe that you should keep these five principles in mind: Understand which shifts in consumer behavior and preference are temporary and which are here to stay, something that our data shows is likely to vary greatly by market. Unearth the needs and expectations of specific segments of your customer base. Determine how your strategy and operating model need to change to respond to these, reshaped preferences. 1 2 3 Prioritize technological flexibility and agility so that new digital offerings can be released at speed. 4 Inject humanity and personalization into digital channels where they will have the most positive impact. 5 Please contact us to learn more about this research, and how Accenture can help your organization to remain human, trusted, and relevant as the world continues to change at an unprecedented pace.

31. Connect with our subject matter experts Dr Peter Kirk UKI Customer Sales and Service Lead peter.kirk@accenture.com Graeme Smith Senior Manager, UKI Customer Sales and Service graeme.b.smith@accenture.com Hayley Taylor Manager, UKI Customer Sales and Service hayley.taylor@accenture.com Transforming the customer conversation in financial services UKI FS Customer Survey 2020 Financial services customers reveal their new demands. Please email Graeme Smith to receive a copy of the findings. Fjord Trends: Discover the trends that will inspire how brands serve their people for decades ahead. 2020 & 2021 Accenture’s Tech Vision digs into the IT trends that are rapidly reshaping life & society as a whole, and allowing businesses in every industry to reimagine what’s possible. 2019 & 2020 This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied. Copyright © 2021 Accenture. All rights reserved.