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Insight Report Current Accounts – Emerging Trends, Product Insights and Case Studies

Published: Jul-2014 | Format: PDF | Timetric | Number of pages: 76 | Code: MRS - 1496

Due to changes in regulatory frameworks and competitive dynamics, retail banking and its current account business have changed gradually during the last decade. Despite initiatives taken by banks to retain customers, the current accounts market in developed economies recorded growing instances of account switching. Improved customer service, attractive reward programs and financial incentives offered by banks are the main factors encouraging customers to switch their primary banks.
In emerging economies, pricing has been the primary reason for the low volume of banking customers. As pricing is affected by cost pressures and changing customer expectations, banks are adopting a number of product and pricing strategies in the form of loyalty programs, incentives, packaged current accounts and customized product offerings to entice customers. Furthermore, with increasing technological advancements, banks are encouraging customers to use low-cost banking channels to conduct banking transactions, resulting in reduced operating costs and improved profitability.
With rising competition and regulatory pressure, banks in the US are increasing charges on current accounts in order to maintain profitability. Consequently, the percentage of free checking or current accounts dropped from 76% in 2009 to 38% in 2013. This has led customers to switch to banks offering no, or low, monthly fees on basic checking accounts. The UK current account market also recorded a high number of customers switching accounts. Robust customer service mechanisms, branch proximity, flexible banking hours and attractive reward programs are factors enticing customers to switch banks. The switching of accounts was further intensified with the introduction of the Current Account Switch Service by the Payments Council on September 16, 2013, which allows fast and seamless switching to new banks. For the six-month period between October 1, 2013 and March 31, 2014, 609,300 UK current accounts were switched, a 14.0% increase compared to the equivalent period in 2012 when there were 532,500 switches.
Due to firm’s capitalizing on this trend, the current account market has recorded a number of new entrants. T-Mobile, a provider of wireless voice, messaging, and data services launched a mobile-based checking account in the US in January 2014, with low banking charges. Similarly, UK-based retailer Tesco is also launching current account products in the UK through its banking arm, Tesco Bank.


    This report highlights the key trends arising in key current account markets following the global financial crisis.
    The report gives an insight into current accounts offered by banks in countries such as the US, Canada, Brazil, the UK, Germany, India, Australia, the UAE and South Africa.
    The report outlines the various factors affecting consumers' choices of current accounts in these markets.
    The report also discusses the key drivers, issues and challenges faced by retail banks when offering current accounts in these countries.

Key highlights

• Free checking accounts (accounts with no charges) are diminishing as banks impose fees to improve profitability. According to Bankrate, free checking accounts in the US dropped from 76% in 2009 to 38% in 2013. The average monthly fee of non-interest bearing checking accounts up 25% in 2012 with a monthly fee of US$5.48 with an average balance of US$723 to be maintained to waiver the surcharge fees.
• The use of overdraft protection by account holders is rising rapidly in the US, making overdraft protection a major revenue-generating component for banks. Overall, 13 million consumers used overdraft protection in 2010 in the US, generating revenues of US$35.0 billion for banks. Banks offer overdraft protection to avoid the bouncing of checks, or insufficient funds in cases of debit card transactions.
• According to the German Bundesbank and IMF forecasts, the German economy is expected to be relatively stable over the next five years, despite the financial uncertainties faced by most European countries. Consequently, consumer spending is expected to grow over 2014−2018. The promotion and development of payment cards will offer substantial growth for the industry. As a result of the Bundesbank’s decision to outsource more of its cash-recycling facilities to private companies, cash is likely to be less attractive for retailers, as cash-handling services were previously provided by the Bundesbank at little or no cost.
• Rural and agricultural industries form a noticeable proportion of the economies in many Asia-Pacific countries. Banks and financial institutions offer current accounts to farmers and the rural population, with minimal fees, as they look to build a presence in unbanked agricultural areas. Agri-current accounts are designed for those in agriculture-related businesses or trading in agricultural commodities.
• The expatriate population accounts for significant proportions of the total populations in many Middle East countries. The UAE’s expatriate population accounts for more than 80% of the total population, followed by Kuwait and Oman where the expatriate populations account for 63% and 62% respectively. Saudi Arabia, Qatar and Bahrain have 30%, 27% and 26% of their total population as expatriates.

Reasons to buy

    Gain insights into the current accounts markets of developed and emerging economies in the Americas, Europe, Asia-Pacific, and the Middle East and Africa.
    Gain an understanding of the amendments brought about in current account markets following the global financial crisis.
    Gain analysis of current account markets based on strategies adopted to improve products and product portfolios.
    Gain insights into key operational and regulatory trends in key current account markets.

Table of contents

1 Executive Summary
2 Global Snapshot – Current Account Market Dynamics
2.1 Assessment of Market Trends
2.2 Key Drivers
2.3 Challenges
3 The Americas
3.1 Emerging Trends
3.2 Product Comparison
3.2.1 Product comparison – the US
3.2.2 Production comparison – Canada
3.2.3 Product comparison – Brazil
3.3 Strategies
4 Europe
4.1 Emerging Trends
4.2 Product Comparison
4.2.1 Product comparison – the UK
4.2.2 Product comparison – Germany
4.3 Strategies
5 Asia-Pacific
5.1 Emerging Trends
5.2 Product Comparison
5.2.1 Product comparison – Australia
5.2.2 Product comparison – India
5.3 Strategies
6 The Middle East and Africa
6.1 Emerging Trends
6.2 Product Comparison
6.2.1 Product comparison – UAE
6.2.2 Product comparison – South Africa
6.3 Strategies
7 Case Study
7.1 First Direct – Upfront Incentives Encourage Customers to Switch to its Current Accounts
7.2 Bank of America – “Keep the Change” Initiative to Acquire Customers
7.3 T-Mobile – Mobile-Based Checking Accounts in the US
7.4 Union Bank – Empowering Customers to Create their own Current Accounts
7.5 HDFC Bank – Implementation of Effective Customer Segmentation and Distribution Strategies
7.6 Absa Bank – Introduction of Packaged Current Accounts
8 Appendix
8.1 Methodology
8.2 Contact Timetric
8.3 About Timetric
8.4 Timetric’s Services
8.5 Disclaimer

List of tables

Table 1: Global Current Market Snapshot – Emerging Trends and Strategies Adopted
Table 2: Economic Conditions in Key Markets, 2009 and 2013
Table 3: Debit Cards – Volumes in Key Countries (Million), 2009–2018
Table 4: New Businesses Registered in Key Countries, 2009–2012
Table 5: Unbanked Populations in Key Developing Economies, 2013
Table 6: Open-Loop Prepaid Cards Segment Value (US$ Billion), 2009–2018
Table 7: Canada – Current Accounts With Low Charges
Table 8: The US and Canada – Online and Mobile Penetration, 2013
Table 9: The US – Checking Account Types, March 2014
Table 10: The US – Basic Checking Accounts, March 2014
Table 11: The US – Premier Checking Accounts, March 2014
Table 12: The US – Student Checking Accounts, March 2014
Table 13: Canada – Checking Account Types, March 2014
Table 14: Canada – Everyday Banking and Checking Accounts, March 2014
Table 15: Canada – Unlimited Banking Current Accounts, March 2014
Table 16: Brazil – Current Account Types, March 2014
Table 17: Brazil – University Current Accounts, March 2014
Table 18: Brazil – Business Current Accounts, March 2014
Table 19: The UK – Current Account Types, 2014
Table 20: The UK – Basic Current Accounts, March 2014
Table 21: The UK – Graduate Current Accounts, March 2014
Table 22: Germany – Current Account Types, 2014
Table 23: Germany – Basic Current Accounts, March 2014
Table 24: Germany – Premium Current Accounts, March 2014
Table 25: The UK – “With Benefits” Current Accounts
Table 26: Asia-Pacific – Current Accounts With Low Banking Charges
Table 27: Australia –Transaction Account Types, March 2014
Table 28: Australia – Everyday Banking, March 2014
Table 29: Australia – Everyday Business Accounts, March 2014
Table 30: India – Current Account Types, March 2014
Table 31: India – Regular Current Accounts, March 2014
Table 32: India – Agri-Current Accounts, March 2014
Table 33: Asia-Pacific – Current Accounts for Specific Customer Segments
Table 34: The Middle East and Africa – Economic Indicators, 2013–2018
Table 35: The UAE – Current Account Types, March 2014
Table 36: The UAE – Current Accounts, March 2014
Table 37: The UAE – Business Current Accounts, March 2014
Table 38: South Africa – Current Account Types, March 2014
Table 39: South Africa – Basic Current Accounts, March 2014
Table 40: South Africa – Small Business Current Accounts, March 2014
Table 41: The Middle East and Africa – Specific Current Accounts for High-Income Customers
Table 42: The Middle East and Africa – Specific Current Accounts for Students and Young People
Table 43: HDFC Bank – Current Accounts for Specific Customer Segments

List of figures

Figure 1: Percentage of Respondents Forming New Primary Relationships With Banks, 2013
Figure 2: The US – Free Checking Accounts (%), 2009–2013
Figure 3: The Americas – Open-Loop Prepaid Card Growth Rates, 2009–2018
Figure 4: Europe – Users of Mobile Banking, July 2013

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