Fresh from securing massive mortgage market share gains
and boasting strong growth in retail deposits, Santander’s main UK
retail subsidiary, Abbey, has turned its guns on the current
account market, with the launch of two new packaged accounts.
In Abbey’s sights are long-standing packaged account
market leaders Lloyds TSB and Barclays. A Lloyds TSB spokesperson
told RBI it had 4 million packaged account holders while a
Barclays spokeswoman said it has approximately 1.6 million such
accounts.
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Abbey has released the Travel Reward and Family Reward accounts,
each costing £15 ($24.30) per month, aimed at frequent travellers
and families with children respectively. According to the bank, the
products have been designed to counter the common criticism that
packaged accounts frequently provide benefits that customers rarely
use.There is now estimated to be more than 10 million UK packaged
banking customers, each paying an average of around £120 per year
in fees for packaged accounts, meaning Santander is looking to grab
a slice of a market worth an annual £1.2 billion.
In 2006, a report from research group Mintel concluded the UK
packaged account market was worth around £900 million from more
than 7 million account holders.
Steve Shore, director of Abbey Banking, told RBI:
“Added value accounts can be great value – but only when customers
actually use the benefits. It’s no use having a high headline
amount if a customer only uses a fraction of that. Our accounts
have been designed so that the benefits are relevant to the needs
and lifestyles of our customers and they can maximise the value
they get from their account.”
Criticism has been levelled at the packaged account market in
the past, with banks being accused of simply creating another
method of charging customers without providing any real added
benefit to a current account.
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By GlobalDataShore thinks this is not the case: “People are paying £180 a
year for these accounts yet there are over £850 worth of relevant
benefits on offer – so it’s a great deal if people use them. That’s
why we have designed the accounts and the supplier contracts in the
way we have – to ensure our customers get the most from their
accounts.”
Abbey are promoting the product launches via the internet,
avoiding the possibility of customers being pressured into signing
up to the accounts from branch-based sales staff.
A spokesperson from Abbey told RBI: “We have already
organised the deals and benefits that come with the packages, so
naturally we want our customers to take up the benefits.”
In total, there are now more than 60 separate packaged current
accounts on the UK market from 18 providers. Santander’s move into
the market follows the October launch of the Privilege account,
costing £8.50 per month from the country’s leading ethical bank
Co-operative Bank (see RBI 600).
In the third quarter, Abbey continued to punch above its weight
in the mortgage sector, with a market share of net new mortgage
lending of around 28 percent, while for the year to date it has
attracted retail inflows of £4.3 billion, up 70 percent from last
year.
In a separate product launch, Abbey has unveiled the First Home
saver account, initially limited to 5,000 customers, for people
aged between 16 and 35 looking to save for their first home, paying
a very competitive 8 percent. Account holders have to be aged
between 16 and 35 and agree to pay in £100 to £300 a month by
standing order.
