MK2005 – Customer Relations

Introduction

A typical UK bank will have relationships with a number of groups including the obvious group of customers, these relationships determine the success of the bank as good relationships mean repeat custom.  This report looks into the UK banking situation analysis and the various relationships; we will also offer ideas as to how the bank can maintain its relationships.

Plan Aims & Objectives

Within this report we fulfil the following aims and objectives:

  • Look into the UK’s leading banking corporations (provide some background research)
  • Environmental Audit of UK banking and a branch
  • Produce a SWOT analysis for personal banking
  • Produce a SWOT analysis for corporate banking
  • Produce a SWOT analysis for Small to Medium Sized Enterprise (SME)
  • Outline the OSTAC framework in relation to a typical high street bank.

Situation Analysis

The bank will have relationships with the following people:

  • The Bank of England: - all banks must have a relationship with the Bank of England as they set interest rates

  • The government: - banks have relations with the government for obvious reasons

  • Current Customers from all sectors: - day to day transactions and correspondence such as sending statements as well as dealing with complaints

  • Potential customers: - advertising to attract new customers

  • Suppliers of services – e.g. Securicor – counting houses: - without these relationships the bank wouldn’t be able to survive

  • Competitors – other banks: - the bank has to keep an eye on the day to day goings on in the sector to be able to remain competitive

  • Other financial services – financial advisors accountants etc: - these people may send customers to the bank

  • Pension companies: - if they offer their services via the branch or website

  • Insurance companies: - if they offer their services via the branch or website

  • Credit reference agencies: - the bank will seek the services of these agencies when enquiring about current customers or potential customers

(Jennifer Murray)

Banking Sector

There are a large number of high street banks in the UK.  They range from big companies like Barclays, HSBC Bank plc and Lloyds TSB to smaller banks, which include the Woolwich.  Although each of the banks have similar products and services they have to compete with each other to remain profitable, for example they can do this by offering the most competitive, savings, investments, lending products and insurance.  

Most banks offer corporate banking, Small Business Banking and Personal Banking.   We researched into the services that a typical high street bank offers by looking at a number of banks.

For the purposes of this assignment as a group we will only be focusing on the Personal Banking products and services that HSBC provide.  

We have decided that we would prefer our typical high street to be similar to HSBC Bank plc as they are so popular and successful.  

The following products and services have been focused on HSBC Bank plc’s Personal Banking to give us an idea of a typical banks’ product portfolio:

  • Personal Internet Banking
  • Current Accounts
  • Savings Account
  • Credit Cards
  • Mortgages and Home Buying
  • Borrowing Money
  • Investments
  • Insurance Services
  • Youth, Student and Graduate
  • Offshore Banking

(Please refer to Appendix 1 for a more detailed product portfolio of HSBC)

(Tarninder Singh Sandhu)

The UK banking is a huge industry with nearly every adult in the UK holding an account information found in a Mintel report shows that

Mintel estimates that nearly 40 million adults have at least one personal current account and it is undoubtedly the widest held of all financial products. Anyone that is economically active will really need a current account, particularly given the increasing reliance on the electronic transmission of money via standing orders, direct debits and debit/credit cards.

The current account market is a very mature one and new business opportunities are really limited to churn business, increased second account ownership and virgin business as a result of demographic changes.

The fastest-growing age groups over the next two decades will be those aged 45-59 and 60-74.  Both groups will increase by 44% on the 2001-25 period as the ageing of the general population continues to become more apparent. This would suggest that the use of direct channels for personal banking, traditionally favoured by younger to middle-aged consumers, will have finite growth potential. However, it should be noted that many of the people moving into the older age group will be technologically aware and prepared to bank online or over the telephone, as they probably have done for many years.

Mintel also states that switching accounts is now easier and because of this a bank needs to maintain its relationships

Switching accounts is now easier

Consumers have always perceived that switching bank accounts is not worth the hassle and may affect their credit status. This goes some way to explaining why many people remain with the same provider although not entirely happy with service levels.

People have not previously seen the price advantage in switching provider, although with greater consumer awareness this may be changing. Consumers will often cite disruption to direct debits and other automated transactions as the major reasons for not switching provider.

New changes in the Banking Code, which came into effect on 1 March 2003, have made it easier for people to switch current accounts.

A key point we found in the report is that:

People are still concerned about the physical location of the branch

The last decade has been characterised by the development of a number of new ways in which to conduct personal banking and to access current accounts in the wake of changes in regulation and technological advances. Customers can now choose from a range of delivery mechanisms that include the telephone, via the Internet, using ATM networks, via interactive digital television and WAP-enabled (wireless access protocol) mobile phones. However, the branch network can clearly still be expected to play a vital role in recruiting new customers for the vast majority of current account providers. This is largely because many consumers still appear to be far more comfortable opening a bank account within the secure confines of a branch environment ably assisted by the help and guidance of a member of their chosen provider's staff.

Market Size

The market size of the current account sector is covered in this section of the report. Many current accounts now offer similar features to instant access savings accounts and the lines of demarcation are not as clear as they once were. Indeed, some current accounts offer better interest rates than savings accounts today as well as the added benefits such as overdraft facilities.

Figure 10: Value of UK personal bank accounts (MBBG only), 1997-2002

Source: Mintel estimates

There were an estimated 71 million current accounts in use in 2003


Figure 12: Estimated volume of current accounts, 1998-2003

(Source of Graphs/Charts: Mintel Report, 2003)

(Sundeep Singh Chahal)

There are a number of factors that influence a Banks day-to-day business this includes the:

Environmental audit of UK banking

Political factors

The ongoing events in the middle east such as the Arab Israeli conflict and the recent war in Iraq influence banking throughout the world these situations affect the general publics spending and borrowing and therefore have a direct impact on the bank.

Government policies on their spending and borrowing and on the general publics spending and borrowing will also influence how a bank carries out its day to day business if the government is trying to decrease or increase borrowing this will influence the banks customers which will obviously impact on the bank.

Economic factors

Interest rates on borrowing and saving will influence how the general public perceive the value of their money and ultimately what they choose to do with it:

  • If the rates on saving are high then people will save
  • If the rates on saving are low then people will spend
  • If the rates on borrowing are low then the public will borrow more
  • If they are high they will not borrow or borrow less.

This has an impact on the funds that a bank has available.

Exchange rates the current events with the dollar will impact on UK banking.

Percentage borrowing/saving the percentage of people borrowing or saving impacts on a business.

House prices not only affect the amount of mortgage that the banks customers take out but the amount they save spend etc.

Social factors

More acceptable to be in debt its now more acceptable to owe money to a bank on credit cards and overdrafts that in the past which means that the percentage rate of borrowing has increased.

Join now!

Shopping has become a past time, which means that people may borrow to shop.

People shop around for loans credit cards mortgages they don’t necessarily stick with their own bank which means that banks are competing for these people to use their service.

Certain banks offer to do all the work when you switch banks this was originally the main reason people tended to not switch banks.

Longer working hours mean that people have less time to go to the bank and that banks are usually shut when people do have the time.

Sunday ...

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