Adding Value for Savers in a Challenging Market
Consumer confidence in the UK is low. In fact, the OECD has been producing its Consumer Confidence Index (CCI) in the UK since the early 1970’s and it has never been as low as it is now. To put that into perspective, in 1975 the index dipped as low as 94.5 and has spent all of the intervening years within a range of 95 and 105. Since July 2022, the UK CCI has not gone above 93 points.
When you look at the fundamentals, it’s no surprise. Interest rates are rising rapidly and hurting borrowers, while inflation tipped over 9% in late 2022. All of this makes it challenging for savers in the UK, with 85% concerned about inflation, 78% concerned about the UK economy and nearly 40% concerned about unemployment.
Not only is it challenging though. It’s also a time when it is particularly important to have a savings buffer and savers ability to save is in jeopardy. RFI’s data shows exactly this. In our 22H2 survey of banked consumers (conducted in November and December 2022), the proportion of people likely to increase their savings actually decreased, from 26% in 2021 to 20%.
If you can't save hard, save smart!
If it’s challenging to save and you are worried about the outlook, then it becomes incredibly important that you put what money you have to good use. To save smart.
And here there is another problem, particularly for younger consumers. When we asked savers, given the current environment, where they’d most prefer to put their money, while older savers we’re much more likely to prefer a savings account to a current account, younger consumers were almost as likely to prefer a current account.
With fixed rate savings accounts offering interest of well over 4% and easy access savings accounts available at 3% or more, this is just not smart.
How can banks and building societies help?
With customers in need of support and finding it challenging to save, there is value to add for savings institutions looking to improve customer experience and engagement.
The fact is that many of the youngest savers – those under the age of 30 – have probably never seen a rising rate environment as an adult. They don’t necessarily know what is smart and as RFI research has shown many times over, they value guidance and tools that help them when it comes to banking.
Helping these customers who most need it, could start with guiding them towards ways to maximise their savings. Are they saving enough, or should they be saving more? How can they cut back on spending and better manage their cashflow? Is their cash working hard for them or could it be doing more? All of these are areas that could be explored.
The fact is that most savers in the UK market (74%) do not feel like they’re getting the best rates available, yet they stay with their providers. At some point this is going to lead to dissatisfaction, so it’s in a provider’s best interest to make sure its customers feel smart (and valued).
And the benefits?
Let’s be cynical for a moment and assume that a bank or building society needs an additional incentive other than helping out customers.
RFI research shows that when a savers believes they have a rate that is better than the market average, they are significantly more satisfied and likely to recommend their provider. Adding value reaps rewards (and also helps out those that need it).