With interest rates at an all-time low, the UK savings market is under pressure to find new ways to encourage saving behaviours. The challenge is greater for the bigger banks, as new players begin to disrupt the market. RFi Group’s Sarah Hollinshead sat down with young professional Haydn Williams, Commercial Lead for Personal Savings at Royal Bank of Scotland (which includes NatWest, RBS and Ulster Bank among its businesses) to understand his view on the changing climate and how institutions should be responding.
Generally, people in the UK save too little and too late vs. our European counterparts. For example, roughly 1/3 of households have less than £250 in savings, meaning even covering an unexpected bill can be a significant challenge.
The current savings statistics are not pretty and the population is facing a tougher future because of it. Haydn kicks off by providing an overview of the current state of the market.
“Generally, people in the UK save too little and too late vs. our European counterparts. For example, roughly 1/3 of households have less than £250 in savings, meaning even covering an unexpected bill can be a significant challenge.”
These challenges differ between age groups, Haydn explains, with both the young and the older generations at most risk.
“For those either in or approaching retirement, interest from cash savings have traditionally been used to support pension income in a manner that provides very limited risk to capital. While the Government’s introduction of the Personal Savings Allowance had made a portion of interest income tax free, due to the low interest rate environment, it is unclear how materially beneficial this has been for savers. This means people have to turn to riskier asset classes (equities, peer-to-peer lending, corporate bonds) to generate yield which could mean capital is at risk during a time of life where certainty could be best.”
With potential cuts in the state pension, higher costs of living and higher debt levels (university tuition fees for example), saving is critical for the youth segment to ensure a high standard of living throughout life.
“For younger savers, the challenge is different; some may think "why bother" with the rates on offer. Getting into the simple habit of saving regularly, regardless of return, is critical just to build up the capital which either makes you more financially resilient or able to achieve the things you want to in life e.g. buy your first house.”
To combat the decrease in savings and the increasing need for good financial health, Haydn believes providers that make it easy for customers to get into the habit of saving regularly are going to be the winners in this environment.
“Being able to turn what is seen by some as a burden (i.e. saving to cover the cost of something negative to happen like your car breaking down) into something positive and empowering is really important. Just look at the success of Help to Buy ISA, an initiative that helps people save towards their first home. For providers, attracting these customers is important commercially - lots of customers saving small amounts regularly gives a stable deposit base to act as a foundation of your business.”
Further differentiation comes in the form of ease of application, according to the RBS Commercial Lead.
“Customers don't want to waste time in complex account opening processes when returns from cash savings are at historic lows. Customers expect to be able to open a simple savings account with 3-4 clicks online or via a mobile app. The savings providers who do this will undoubtedly be successful.”
Customer centricity ties together both Haydn’s factors for success, and this is partnered with a move away from product-centric thinking. Haydn explains that the development of capabilities that help customers save, rather than actual products, provides the true scope for innovation.
Customers expect to be able to open a simple savings account with 3-4 clicks online or via a mobile app. The savings providers who do this will undoubtedly be successful.
“Our activities are aimed at driving greater engagement with the act of saving and core to that is remembering most of your customers are not financial experts - so when they need help, keep it simple and easy to understand.”
“Meanwhile, for certain customer segments it is the level of support that will change rather than the product. For example, the NatWest/RBS First Saver account aimed at under 16s is a straightforward savings account – however it comes with an interactive app to help children learn about money.”
To keep on top of customer satisfaction, Haydn describes the usual feedback loop from staff members and customers as critical. Furthermore, he signifies the importance of 3rd party input in addition to in-house creativity as being the key to victory.
“We as a country are recognised as an exciting market for fintech firms. For fintech firms, that means the opportunity to partner with financial institutions to “test and learn” around what concepts work in terms of getting customers to save more effectively – something we are very open to if it is right for our customers.”
Fintechs and smaller companies benefit from agility and speed to market. Yet, Haydn is a great believer that improvements in the way data is captured and processed means all providers have opportunities to continually individualise the customer experience at pace.
On the other hand, Haydn expresses his belief that a total overhaul of the traditional savings products is unlikely.
“In some respects, I can see aspects of the market remaining unchanged. This could be basic savings products or some of the traditional elements of savings. For example, in one form or another, NatWest has offered piggybanks for over 30 years which remain hugely popular with customers!”
Between putting pennies in your piggybank, or transferring funds on a mobile with a fingerprint, the important notion is that savings are vital, and Haydn believes it remains the responsibility of financial institutions to deliver that message to customers. He closes with some words of wisdom on how best to keep ahead.
“It's easy to be inward looking, however understanding competitors, market and product trends, plus wider economic/demographic factors, always gives a “top down” view upon which to develop a business strategy.”