CURRENT ACCOUNT SWITCH SERVICE ANNUAL REPORT 2017

Transcription

1 CURRENT ACCOUNT SWITCH SERVICE ANNUAL REPORT 2017

2 2017 A fantastic year for CASS This year CASS has further consolidated its position as a market leader in switching services and consistently delivered the highest levels of consumer awareness ever 2

3 CONTENTS CONTENTS FOREWORD FROM JO KENRICK 5 INTRODUCTION FROM ANNE PIECKIELON 6 ENGAGING CUSTOMERS 8 Honing messages and understanding our audiences 9 How can the market work for vulnerable consumers? 10 Putting the consumer at the centre of decision-making 13 MARKETING ACTIVITY 14 MEETING THE CMA REMEDIES 16 GOVERNANCE, FUNDING AND INDUSTRY DEVELOPMENTS 17 New Payments Systems Operator (NPSO) 17 Open Banking 17 Engaging with the financial inclusion agenda 19 PERFORMANCE METRICS 20 CONCLUSION AND LOOKING FORWARD 22 3

4 A world leader A strong launch, followed by over three million successfully completed switches (at an operational success rate of over 99%), had established a world-leading switching service

5 FOREWORD FROM JO KENRICK FOREWORD FROM JO KENRICK It is over a year since I joined Bacs and took up an exciting new role as an independent non-executive director on the Bacs Board with specific responsibility for the Current Account Switch Service (CASS). Our work over the past 12 months has put the consumer at the heart of our decision-making Overall consumer trust remains low in the sector 55% of consumers trust banks 36% trust banks to work in their customers best interests Before I took up the role as Chair of the CASS Executive Committee I had seen the huge impact that CASS had achieved. A strong launch, followed by over three million successfully completed switches (at an operational success rate of over 99%), had established a world-leading switching service. But I also saw opportunities to build on CASS success by delivering further improvements in response to rapidly changing consumer expectations, which are in turn driving significant change in the banking market itself. My goal was, and has continued to be, ensuring that CASS is maintained as a market leader, providing a seamless and safe environment to foster competition. Ten years on from the financial crisis, the financial sector (e.g. banks and building societies) must now work much harder to respond to the demands of their consumers. Overall consumer trust remains low in the sector 55% of consumers trust banks and only 36% trust banks to work in their customers best interests (YouGov, 2018). Having a well-functioning switching service is more vital than ever, so that consumers and small businesses have the power to switch effortlessly from one provider to another. Our work over the past 12 months has put the consumer at the heart of our decisionmaking. We ve embedded a simpler and more representative governance framework for CASS, and we ve also built on our marketing activity so that we can communicate the benefits of the service to all, especially targeting hard-to-reach audiences. Meanwhile, the industry is undergoing significant change. This year sees the introduction of Open Banking. The first set of connections between third party providers and banks launched in January, allowing customer information to be shared with their consent. There is opportunity to give consumers even greater choice and control with this new technology and CASS will be working hard to ensure that it plays its part in ensuring all consumers benefit has been a fantastic year for CASS, but I firmly believe that the CASS community working together with regulators can continue to improve CASS and deliver an even more flexible service to meet a broadening set of customer needs. Jo Kenrick CASS Executive Committee Chair and Independent Non-Executive Director at Bacs My goal was, and has continued to be, ensuring that CASS is maintained as a market leader, providing a seamless and safe environment to foster competition. 5

6 INTRODUCTION FROM ANNE PIECKIELON INTRODUCTION FROM ANNE PIECKIELON 2017 has been a great year for CASS. This year CASS has further consolidated its position as a market leader in switching services and consistently delivered the highest levels of consumer awareness ever. I am immensely proud of the work that Bacs has done as custodians of CASS throughout 2017, promoting its benefits to a broader audience than ever before and undertaking research to future-proof the service whilst maintaining operational excellence. In 2017 the number of brands accessible through CASS reached 46 We believe this is testament to the continued success of the creative approach which has helped refresh the CASS marketing and advertising, and has allowed us to utilise new channels to communicate with consumers. All this is built on the strong foundation provided by a service that simply works. In 2017 the number of brands accessible through CASS reached 46, with challenger banks taking full advantage of a comprehensive take-on process where the team in Bacs provides a simple, flexible approach. But we are not resting on our laurels. Whilst the Competition and Markets Authority (CMA) was very supportive of CASS in its report on the retail banking industry, the regulator was clear that we needed to build on the operational success of the service and do more to raise awareness of the service amongst hard to reach groups. In 2017 we designed tailored messaging for these hard to reach audiences, including 18-24s and SMEs. Based on this work, we have already undertaken targeted activity, achieving a 10% uplift in awareness amongst 18-24s and creating one of the best performing Snapchat lenses of The success of CASS marketing activity has always been underpinned by a robust evidence base has been no different, as Bacs has continued a rigorous research programme, exploring topics as diverse as consumer representation, financial inclusion and market dynamics. Finally, Bacs is about to start a programme of market analysis work to test new features that could be incorporated as we implement our Account Switching Strategy to see if consumers feel they add value to the proposition by delivering what they need. This project will help define the next stage of CASS in operational terms, and make sure the service evolves and continues to meet end-user needs. I am immensely proud of the work that Bacs has done as custodians of CASS throughout 2017, promoting its benefits to a broader audience than ever before and undertaking research to future-proof the service whilst maintaining operational excellence. My team and I hope that this report provides a valuable update on CASS and we are looking forward to celebrating our 5th Anniversary in Anne Pieckielon Director of Product and Strategy My team and I hope that this report provides a valuable update on CASS and we are looking forward to celebrating our 5th Anniversary in

7 INTRODUCTION A focused approach This year we have designed tailored messaging for hard to reach audiences, including 18-24s and SMEs 7

8 Engaging Customers Tailoring CASS to key audiences Bacs has undertaken a programme of work to explore how best to engage the small business community including focus groups with a range of different types of small businesses 8

9 Engaging Customers In 2018 Research showed the key for engaging the audience was highlighting the range of benefits available if they were to switch bank accounts. engaging customers The success of CASS is reliant on insight; insight about HOW the market works, which messages resonate with which audiences and how best to involve consumer VOICES in the strategic decision-making process. In 2017, Bacs expanded its evidence base to ensure that CASS direction of travel was continuing to deliver for consumers. Honing messages and understanding our audiences Following an investigation of the awareness of CASS amongst different audiences, it was identified that those aged had significantly lower awareness than the rest of the UK population. Bacs therefore wanted to conduct research to understand when this audience were most likely to think about their finances, and how best to engage them with CASS. This research showed that the key for this audience was highlighting the range of benefits available if they were to switch bank accounts. This insight informed the delivery of dedicated creative executions for younger audiences and a targeted digital media campaign. Similarly, Bacs has undertaken a programme of work to explore how best to engage the small business community, including focus groups with a range of different types of small businesses from sole traders to those with complex financial arrangements to test different messaging approaches. A dedicated stream of activity is happening in Q to launch this messaging and coincide with the new business account opening Standard Information Set that is being introduced by the banking industry. 9

10 Engaging Customers CASS will draw upon the findings and opportunities identified within the SMF report to help shape the requirements that will refresh the service How can the market work for vulnerable consumers? As well as its own research, Bacs partnered again with the Social Market Foundation (SMF) to build on the 2016 report which examined the impact of CASS on the current account market. Last year s work assessed how the current account market is working for vulnerable consumers. Too often regulators and policymakers focus on the headline switching rate, masking the diverse range of experiences for consumers in the market. The SMF report looked at different causes of vulnerability, including those who are digitally excluded, repeat overdraft users and the unbanked. The research also looked to the future in order to understand how these groups may develop over time, identifying three key changes over time that are likely to impact vulnerability: demographics, technology and the economy. The report identified eight key metrics (highlighted in Fig.1) that would allow us to better understand market outcomes: The report also identified additional policy tools that could be implemented to aid the financially vulnerable. These include an increased focus on flexible budgeting; monitoring how providers support vulnerable consumers; improving financial and digital capability; and increasing effective data sharing to notify multiple providers about changes in customer circumstance. In 2018 CASS will draw upon the findings and opportunities identified within the SMF report to help shape the requirements that will refresh the service ensuring it continues to deliver for all consumers and SMEs in an evolving banking market. 1 Continuity in market participation of those who are unbanked 2 Utilisation of bank accounts 3 Passive and active consideration of switching 4 Take up of different products 5 Awareness of relevant charges 6 Proportion of consumers regularly using arranged or unarranged overdrafts 7 Digital engagement 8 Customer satisfaction Fig.1 Key metrics that would allow us to better understand market outcomes 10

11 Engaging Customers understanding market outcomes As well as its own research, Bacs partnered again with the SMF to build on their 2016 report 11

12 Engaging Customers Exploring Consumer representation Consumer outcomes are central to the decision-making process for bringing new products and services to market 12

13 Engaging Customers The research by y Queen Margaret University was designed to identify ways in which the availability and quality of consumer representation could be improved Putting the consumer at the centre of decision-making In order to strengthen the efficacy of the CASS governance framework (as required by the CMA), Bacs commissioned the Consumer Dispute Resolution Centre at Queen Margaret University to explore the broader question of consumer representation in financial services. The research was designed to identify ways in which the availability and quality of consumer representation could be improved in financial services, and ensure that consumer outcomes are central to the decision-making process for bringing new products and services to market. The report found that a combination of culture, people and process are the defining principles that underpin effective consumer representation and drew a number of conclusions (highlighted in Fig.2) as to how good systems of consumer representation might be developed for the payments sector. 1 Consumers should be put at the heart of all decision-making 2 Consumer representation should ideally be structured to include both Board level and collective forum representatives Consumer 3 representation 4 structures should be adequately resourced to rebalance power between the industry and the consumer 5 The role and way of working of consumer representatives should be transparent and influential, with key representative objectives, performance information, minutes of meetings and annual reports made publicly available It is important to appoint and develop effective consumer representatives. Training and capacity building should be provided 6 The effectiveness of consumer representation should be evaluated. Clear, measurable objectives should be set for the organisation s approach to consumer engagement and consumer representation Fig.2 How good systems of consumer representation might be developed for the payments sector 13

14 Marketing activity Continued success Whilst the character remained the same, this year s marketing activity was targeted across a variety of audience sub-groups and utilised a broader range of channels than previous campaigns. 14

15 Marketing activity The campaign continues to use the Switch Guarantee Guy character, and research has shown he remains popular with consumers across the UK 78% find him likable 71% charismatic 67% trustworthy. Marketing ACTIVITIY CASS creative campaign has continued to prove extremely successful, with awareness of the service in October hitting 84%, the highest ever level. The campaign continues to use the Switch Guarantee Guy character, and research has shown he remains popular with consumers across the UK: 78% find him likable, 71% charismatic and 67% trustworthy. Whilst the character remained the same, this year s marketing activity was targeted across a variety of audience sub-groups and utilised a broader range of channels than previous campaigns. Broadcast channels remain the most effective way of driving large reach and impact, but across both mass audience and year olds, a multi-channel approach proved to be most effective in driving reach and awareness. As well as the uptick in awareness across audiences, the success of the creative approach was further cemented by winning gold for the Marketing Campaign of the Year at the Emerging Payments Association awards, and silver at the DMA marketing awards for Public Sector. During the Q3-Q4 marketing campaign, particular attention was focused on financially vulnerable consumers, with dedicated digital activity including overdraft specific messages. This will be continued into 2018, when Bacs will be developing tailored messaging and marketing activity for this group. In August Bacs launched the first ever dedicated campaign towards this younger audience, with messaging distributed across Facebook, Snapchat, online video and Spotify. This activity saw a 10% increase in awareness amongst this audience, with Snapchat activity in particular smashing benchmarks and being described by the Snapchat team themselves as amazing. 15

16 MEETING THE CMA S REMEDIES Over the past 18 months, Bacs has continued to make improvements to CASS governance and reporting MEEting the CMA REMEDIES Following the CMA s retail banking investigation, Bacs has been working to embed the proposed remedies into the operation and promotion of CASS. The measures within the CMA s final report included implementing an increased redirection period for regular payments made to an old account; making improvements to governance and reporting and increasing levels of AWARENESS and confidence in the service. In September 2016, Bacs introduced a 36-month redirection period along with continued redirection for those customers who still needed it. The move was designed to give customers even greater confidence in the service and one year on, the operational success has been significant. Furthermore, Bacs work with Queen Margaret University has uncovered further insight into the most effective forms of consumer representation, based on culture, people and process. Bacs has continued to evolve the CASS Governance framework based on these findings. Over the past 18 months, Bacs has continued to make improvements to CASS governance and reporting, increasing transparency and ensuring that strategic decisions ultimately have the impact on the consumer at their heart. Having partnered with PwC to update the CASS governance, Bacs has developed a corporate governance structure that meets the CMA requirements and heeds the views of a broad range of stakeholders, whilst also maintaining a practical decision-making process. Bacs has embedded those governance changes this year, sharing CASS Executive Committee agenda and papers with key stakeholders. 16

17 GOVERNANCE, FUNDING AND INDUSTRY DEVELOPMENTS Open Banking has the potential to transform the retail banking industry and could ultimately pave the way for many of the changes to the market that consumers, regulators, politicians and other influential bodies have been calling for years. Governance funding and industry developments NEW PAYMENTS SYSTEMS OPERAtor (NPSO) In May 2017, the Payment System Operator Delivery Group recommended the consolidation of three of the UK s retail payment system operators Bacs, Faster Payments and the Cheque and Credit Clearing Company. Under the leadership of Chair Melanie Johnson and Chief Executive Paul Horlock, the NPSO took over the blueprint for the future development of the UK s shared payments infrastructure in December. In 2018, the NPSO will take over the responsibility for the operation of these three payment systems. Bacs has worked with the NPSO to ensure the transition is as seamless as possible and has been supporting its work to establish the new payments architecture. From a CASS perspective, Bacs is working to ensure that the product and related services continue to benefit customers and remain aligned to the broader developments within the new payments architecture and the wider industry. their personal requirements. Initially rolling out with nine institutions, Open Data, the sharing of product, branch and ATM data was launched back in The first set of Open Banking APIs launched in 2018, allowing customer information to be shared with their consent. Open Banking has the potential to transform the retail banking industry and could ultimately pave the way for many of the changes to the market that consumers, regulators, politicians and other influential bodies have been calling for. While it could be transformative to consumers in the longterm, Bacs is aware of the understandable hesitancy associated with sharing consumer financial data. Although it is likely that Open Banking will initially benefit tech-savvy early adopters, Bacs wants to help ensure that the ultimate benefits are felt by all. Bacs will work closely with Open Banking in 2018 to make sure the operation is aligned with CASS, and make sure consumers can benefit in a way that is safe and secure. OPEN BANKING While some elements of the CMA s remedies are now firmly embedded in the market, others are still in their infancy. A central pillar of the CMA s remedies for the retail banking market is the introduction of Open Banking which will enable people and small businesses to share their banking data securely with other providers and thus compare products and services based on 17

18 GOVERNANCE, FUNDING AND INDUSTRY DEVELOPMENTS Delivering a better outcome Throughout 2017, financial inclusion continued to rise up the political agenda 18

19 GOVERNANCE, FUNDING AND INDUSTRY DEVELOPMENTS As the debate around financial inclusion grows in volume, Bacs has made a significant contribution to the growing body of research aimed at delivering a better market for everyone Engaging with the financial inclusion agenda Throughout 2017, financial inclusion continued to rise up the political agenda, with politicians and regulators increasing scrutiny on how the financial services industry supports and protects vulnerable people. This was recognised by the Government in June, with the appointment of a Minister for Pensions and Financial Inclusion, Guy Opperman MP. In October, members of the Bacs team met with Mr Opperman to discuss the challenge of measuring initiatives to improve financial inclusion and Bacs will continue to share its research and insights on this subject with his ministerial team. As the debate around financial inclusion grows in volume, Bacs has made a significant contribution to the growing body of research aimed at delivering a better market for everyone. As well as the research outlined in the previous section, Bacs has facilitated debate around inclusion and the direction of travel for policy. Once again, Bacs worked with Prospect magazine to stage roundtables at both the Labour and Conservative Party Conferences, bringing together MPs, industry stakeholders and representatives from consumer groups to discuss the role of increased competition in improving outcomes for consumers. Building on the research undertaken by the SMF, the launch event for their report gathered the leading voices on the subject to discuss how financial inclusion can be nurtured and prioritised over the coming years. Panellists discussed the way in which the market had developed in recent years, with consumers facing greater choice, and raised a number of questions for consideration in As Bacs continues to take a leading role in this debate, we will be examining the role of CASS in fostering greater financial inclusion. Many measures were discussed, including technological innovation, competition between incumbents, regulatory involvement and increasing the use of the Post Office branch network in banking. 19

20 PERFORMANCE METRICS PERFORMANCE METRICS During 2017 Bacs reviewed the appropriateness of the KPIs set before launch of the service to ensure their continued relevance. Analysis of customer behaviour and forecast switching volumes produced using the Market Dynamics Model developed in conjunction with the University of Bristol led to us agreeing a new set of KPIs with HMT. Because actual experience is more relevant to customers and can be influenced by the service we now report on customer satisfaction with their switch rather than confidence in the service. 81% of consumers agree CASS is easy 78% agree it is quick 46 78% feel confident about switching Switches completed in 7 days: Bank and Building Society Brands accessible through CASS 99.2% In February 2018 awareness stood at 80% Awareness peaked at in October 2017 at 84% 95% of CASS switchers are satisfied with the process, including 66% who are very satisfied 20

21 CASS ANNUAL REPORT 2017 PERFORMANCE METRICS Consumer relevance We will look closely at how access to data is shaping the market and how this impacts outcomes for customers 21

22 CONCLUSION AND LOOKING FORWARD We have continued to deliver against regulatory requirements and CASS has facilitated 932,000 switches CONCLUSION AND LOOKING FORWARD 2017 has been an excellent year for CASS. We have continued to deliver against regulatory requirements and CASS has facilitated 932,000 switches. The new advertising creative has bedded in well and awareness levels have been at their highest levels ever. The CASS research programme continues to develop, and we are now working hard to raise awareness of the service amongst several harder-to-reach groups marks the 5th anniversary of the service and we will be marking this milestone with a celebration of CASS operational success and the impact it has had on retail banking. However, as the sector develops, more needs to be done to lead the debate and shape the market. Consumer needs continue to change at pace, and it is vital to ensure that the current account market and the switching service that facilitates consumer choice keeps pace with this. Regulators are now increasingly concerned with financial access, particularly as technology reshapes the market. In 2018 we will undertake further research and continue our sector-leading event programme to foster debate within the industry about how the needs of all consumers are properly met. In particular, we will look closely at how access to data is shaping the market and how this impacts outcomes for customers. Following the successes of our 2017 marketing activity, we will be rolling out a series of targeted marketing campaigns in 2018, building on the learnings from In addition, we will also be enhancing the operational side of the CASS service to allow participants and consumers more flexibility and an even smoother and more efficient service. As the wider payments industry evolves over the coming year, CASS will continue to serve as a driver of choice and competition and Bacs will be working to ensure the benefits of the new architecture are felt by all. 22

23 CONCLUSION AND LOOKING FORWARD Looking Forwards As the wider payments industry evolves over the coming year, CASS will continue to serve as a driver of choice and competition 23

24 Bacs Payment Schemes Limited 2 Thomas More Square London E1W 1YN Company Registration No.: (A Company limited by Guarantee) Bacs service desk: public.affairs@bacs.co.uk bacs.co.uk directdebit.co.uk currentaccountswitch.co.uk 24 CASSAR2017/MH/0318/REAL