Mirroring the UK retail banking sector, high street banks and building societies have dominated the UK savings market. Over the last decade, the rise of fintech has created a wave of firms delivering innovation across all aspects of personal finance, including the savings market. That has led to a substantial increase in services targeting consumers who need help saving money. 

But have we seen an increasing willingness amongst consumers to consider newer providers for their personal finance needs?  

That was one of the questions we set out to answer when we commissioned YouGov to survey more than 6,000 UK consumers. The results present a picture of an industry undergoing transformation. 

The YouGov research revealed that many consumers are content with managing their savings (78%) and, to a lesser extent, investments (52%). Investors also like to use services that provide suggestions on saving their money (17%) or financial advisors (11%).  

When we examine the reasons for this, several factors come into play: 

• Not having a significant amount of savings to justify the cost of an advisor.
• Confidence in navigating and understanding the savings product landscape.
• Lethargy, as most feel, if the rate is reasonable, there is little else to worry about.
• Digital functionalities and overviews of accounts fulfil their need for instant oversight of their savings.
• Digital information resources (such as forums and Money Saving Expert) provide sufficient information and education on optimal choices. 

 As one participant in the qualitative interviews explained: 

Given that many are self-sufficient in managing their savings, we examined what consumers looked for when selecting a provider. This uncovered several non-negotiables when choosing a service to meet their saving and investment needs: 

• Security and trust: For 37%, trust in the brand was one of their three most important factors when choosing a provider. This fundamental need drives demand for FSCS-eligible deposit accounts, transparent information provision, and fair treatment, which is now reflected in rules such as Consumer Duty.
• Interest rates and returns: As savers seek to protect their capital and make the most of their money, 60% rated this as one of their three most important factors when choosing a provider. Conversely, poor interest rates were the primary reason for dissatisfaction with a current provider at 77%, with customer service a distant second at just 10%.
• Accessibility: 40% of consumers rated accessibility and ease of use as one of their three most important factors when choosing a provider. This is essential for most consumers (64%) who set money aside for unexpected expenses and prioritise having easy access to their funds. It could also explain the popularity of easy access savings accounts despite them typically offering lower interest rates. 

Consumers have plenty of choices when it comes to saving, whether it’s an easy access account or a Cash ISA. The market has seen new digital savings propositions launched, which attempt to get to the heart of why people want to save while also addressing the hurdles that may be getting in the way of their saving being as effective as possible.  

So why do so many continue to use traditional providers? In our previous blog post, we examined the role of lethargy in why people don’t move. Given the comfort levels of managing savings and the above factors, it’s perhaps no surprise that the research shows that banks and building societies are the most used or preferred providers. 

The large personal current account providers have tended to hold an advantage when attracting savings deposits, as many consumers – driven mainly by a desire for convenience – use the same provider for their current and savings accounts. Depositing funds into secure pots, integrated with an existing bank account, is simpler than opening a separate savings account. 

Despite the lower returns associated with easy-access accounts, they represent the most popular type of UK consumer savings product, even for those with significant savings. This is partly because easy-access accounts can be opened with a minimal deposit, but it also reinforces that a significant number of people value the flexibility of any-time withdrawals above potentially receiving a higher interest rate. 

However, there is more variation among investment providers that are used or preferred; in particular, specialists are significantly more popular among those with savings and investments. Those with savings and investments are more likely to consider a range of providers besides banks – with specialist savings providers a close second (37% and 34%, respectively). 

If many consumers appear to be broadly happy with their providers (82% are satisfied with their primary savings provider and 87% with their primary investment provider), and a significant portion have a savings account with a high street bank or building society, is there an opportunity for other firms? 

The answer may lie beyond some of the headline numbers. 

Savers are more likely to have multiple providers (57%), while investors are less likely to (41%) and prefer a single provider. The most popular reason for having numerous savings providers is that different providers offer different types of savings accounts (29%) or types of investments (35%). 

The maturing fintech market is contributing to these shifts, with 30% of those surveyed now considering fintech banks for their primary accounts. This reflects a wider move towards more tech-enabled savings and investment platforms, with nearly half (48%) of all people surveyed viewing online savings and investment platforms as the future. More broadly, 72% of consumers surveyed view technology as essential/ necessary to help them manage their money. 

Then there are the demographic differences. The likelihood of holding a savings account for five years or more increases with age, with 70% of savers age 55+ having a savings account with their primary provider for five or more years. Alternative saving providers are preferred more by younger age groups (peaking at 19% among those aged 25-34), while traditional wealth management providers are preferred more by those aged 55+ (13%). 

The research reinforces that when consumers are looking to open an account or switch to a new provider, a great customer experience alone won’t be enough. There’s a reason many use their bank for savings, too – an inherent trust factor that comes from knowing where their funds are and that they are eligible for FSCS protection.  

While many firms can, for now, compete on rates, consumers also want to know their funds are safe. The complexity of some firms’ arrangements is only really revealed in the length of a firm’s T&Cs and disclaimers. Even if customers read them, they may still need to understand the details of how their deposits receive FSCS protection, which bank, or banks, their funds will be held at and how long it may take for a customer to get their funds back in the event that a firm fails. 

The competitor landscape will continue to evolve and diversify, and the choice of available savings products will grow.  

However, challengers’ ability to grow their customer base successfully will depend on savers’ willingness to trust new brands to meet their financial needs. This trust factor will likely increase as newer entrants become more established and prove the value of their offerings versus incumbent providers.