|
The rise of alternatives to
established banks in the UK has been predicted by
many industry commentators for a number of years,
with many encouraging it to break the domination of
the incumbents and provide much needed innovation to
a sector held hostage to legacy technology.
Cross-border payments has been one area seen as ripe
for such change, especially small businesses poorly
served by big banks. The opportunity this presents
has attracted many new entrants, such as FinTech
players, along with established payment providers
who see new growth channels to pursue.
In cracking such a market, mind share (brand
recognition and recall) is key. This has proved to
be a major challenge for these new entrants and has
become somewhat of a black hole for their
hard-fought investment funds in marketing spend. So,
despite lots of PR noise about their arrival, the
big bank incumbents have continued to reign, even
with small business. But change maybe finally
happening.
While domestic banks have been consistent mind share
leaders with the likes of HSBC and Barclays enjoying
double digit mindshare and market share, others such
as NatWest and Lloyds are in single digits and
declining in both measures. In the last 12 months,
this decline in mind share for many domestic banks
has been impacted further as non-bank BFX providers’
mind share reinitiates growth after 18 months of
no-growth, potentially indicating that non-banks are
finally breaking through a ‘glass-ceiling’.
Looking more closely into the non-bank space, the
recent increases in mind share have largely been
with Micro and SME businesses. This would seem to
indicate that non-bank providers are now more
effectively focusing their marketing efforts on
these size of businesses.
However, while non-banks’ mindshare is significantly
less with lower corporates there is a growing
awareness for them within this segment. To date
banks have been far more dominant with lower
corporates, especially with hedging FX products. The
upturn in mindshare for non-banks in this segment
however presents a very lucrative opportunity for
them in the future if they can capitalise on it.
The real question these
mind-share successes pose is whether the marketing
efforts of these non-banks have been useful in
providing any ROI in the form of greater market
share?
In the UK spot FX market E&P’s BFX insights show the
answer is “yes”. The latest insights show there has
been an upward rise of non-bank providers in this
competitive product line. Over the past three years
non-banks have seen their market share rise by a
resounding 5.9 percent and with a distinct upward
turn in the first half of 2019, whilst domestic and
international banks have fallen by 4.9 percent and
1.5 percent respectively. Non-banks are now
definitely, albeit slowly, stealing market share
from the incumbent market leaders.
This transition in market share corresponds with
businesses openness in using a non-bank provider for
their cross-border payments. E&P’s UK BFX research
in H1 2019 found that there is a strong propensity
and willingness for Micro and SME businesses to use
a non-bank provider – particularly for cross-border
payment transactions. Reported with an inverse
rating scale, businesses rated their openness in
using a non-bank provider for their cross-border
payment transactions on a scale of 1 – 5, with 1
being ‘very open’ and 5 being ‘not open’. The
average rating score for Micro and SME businesses
were 1.69 and 1.94 respectively. Any rating lower
than 2.25 can be viewed as businesses being open to
using a non-bank provider.
There are winners and losers
with this dual-dynamic of mind share and market
share. In the UK, non-bank winners include Monex,
SAXO and Worldfirst, all benefiting from increases
in both mind share and market share. However, losers
don’t just include some of the UK’s domestic banks.
A long-established non-bank, Western Union Business
Solutions, is suffering from the reverse with this
dual dynamic, with declines in both mind share and
market share in the UK.
About East & Partners
Business FX program
East’s ‘voice of the customer’ metrics provide
access to trackable unprompted brand recall, market
share, wallet share and other fundamental metrics on
Micro, SME and Lower Corporates use of BFX. With
competition at its peak and the number of providers
(including FinTechs) growing in all product lines,
it’s never been more important to keep track of a
provider’s performance relative to their
competitors. East captures this insight as part of
its Business Foreign Exchange (BFX) programmes’,
reporting that enables providers to track their
performance relative to their competitors every six
months.
|
