Around two-thirds of adults favour the separation of retail and investment banking


Much current debate is taking place about the structure of banking in the UK following the bank bailouts of 2008-9. Breaking up the banks into their retail and investment arms is one radical consideration being examined by the Independent Banking Commission, set up by the government to look at possible reforms to the banking system.


Recently Bank of England Governor Mervyn King suggested splitting banks into deposit taking and investment institutions to control the risk of future taxpayer bailouts.


Research for financial and business specialist JGFR commissioned from GfK NOP* found 69% of consumers believed retail banking should be kept separate from investment banking, with more support from middle-aged, middle/higher income customers likely to have more cash to lose.


Major high street banks dominate as main financial services providers


This finding was one of several that examined attitudes to high street banks in their role as main financial services providers. Currently over 82% of consumers regard the top ten bank brands including Nationwide as their main financial services provider, a proportion that has grown since the bank bail outs as size, together with government backing, appear to have been a key feature to consumers worried about the safety of their money.


Competition set to grow on the high street in main financial services provider market – Tesco Bank could emerge as a strong player


Both the coalition government and the Independent Banking Commission wish to see improved high street competition among banks – something that is set to grow in the coming two years as new players emerge. Already Metro Bank has launched as a branch (known as store)-based bank in London, and set to expand. Two other major brand names have announced they intend to enter the key current account market in the coming year with a branch-based offering – Tesco Bank and Virgin. A banking start-up, NBNK, led by Lord Levene, Chairman of Lloyds of London has listed on AIM with a view to bidding for the 600 Lloyds TSB branches forced to be sold off by the European Commission as a condition for the previous government’s bailout of the Lloyds Banking Group while the good bank of Northern Rock is set to be sold off .


Consumers were asked about the attraction of new high street banks emerging with over a quarter liking increased competition – to a greater extent among men (32% v 23%), among higher earners (35%) and among 30-49 year olds (31%).


Over the past two decades Tesco has become the UK’s leading supermarket and made no secret of its desire to become a significant presence in financial services. Although it has achieved a strong market position in a number of financial product markets it has made no headway in the key main financial services provider segment, where current accounts and mortgages are essential product offerings.


Consumers were asked about whether they would consider changing their main financial services provider when Tesco offer a current account – 11% responded – a figure that would shake up the main financial services provider market.


Already there is some evidence this quarter of the impact of the growing presence of Santander moving to challenge the big five high street brands as a main financial services provider. Its market share is at a record high – and set to grow when the takeover of RBS branches in England is complete.


But will inertia, loyalty, branch access and satisfaction with existing providers prevail?


For the great majority of customers of the main banks and Nationwide, a mixture of inertia, loyalty, branch access and general satisfaction with the service has resulted in less switching and a less competitive market than many banking regulators, strategists, personal finance commentators and market analysts would wish.


Four-fifths of consumers are very satisfied with their existing main financial services provider highlighting the relatively small minority of customers who may be open to new offers. Among the main financial services providers, HSBC (88%) has the most satisfied customers.


As to the current emphasis on ‘fairness’, just under four-fifths of customers believe their main financial services provider treats them fairly, with Nationwide’s customers believing they are the most fairly treated (89%).


The future of banking is mobile and online


Asked to look ahead, 55% of adults agree that the future of banking is about online and mobile access, with well over two-thirds of the under 40s in agreement. Technological change adds another dimension to the great high street banking debate, centred on how the payment function of banks evolves and who is best placed to meet the challenges.


Commented John Gilbert, Chief Executive of JGFR:


“The results of this survey highlight the relative conservatism of consumers towards their banks for whom salary/earnings transfers in and taking cash out will be the main features of the relationship. With customers wanting retail banks split off from investment banks the opportunity for non-banks to enter the market increases – particularly in the mobile, card-based and online payments area. Putting the payments system at risk is likely to be the biggest danger to any break up of the banks”


*1,000 adults representative of the UK population aged 16+.


To find out more about the JGFR Consumer Attitudes to Banks research ring John Gilbert on 0208 955 7510 or 07740 027968 or contact


Table:  Leading Main Financial Services Provider Brands (4 –quarter average, September 2010)*


                                                            Market share (%)


1.      Lloyds TSB                            17.7

2.      Barclays                                 15.5

3.      HSBC                                     11.7

4.      Halifax                                    11.5

5.      NatWest                                   9.9

6.      Santander                                6.1

7.      Nationwide                              5.6

8.      Bank of Scotland                    3.3

9.      Royal Bank of Scotland         2.7

10.  Alliance & Leicester              1.9


* base 8,000 adults, representative of the UK population, aged 16+


Source: GfK NOP / JGFR