Report: Niche Finance - UK

Issues in the Market
Abbreviations/Definitions
Insights and Opportunities
Building awareness by building communities
More lessons for students?
The art of financial management
Shifting focus to the young
Market in Brief
Eastern and Central European finance
The Polish pound begins to speak
The market characteristics: Young, gifted and Polish
Product development centres on the Polish market
The current provision: Simplicity drives the market
Marketing messages: Talk to them in their own language
Where more work needs to be done
- Figure 1: Ownership of financial products, May 2008
- Figure 2: Awareness of the marketing and sales efforts of the major banks, May 2008
But let' s give the banks some credit
Student finance
The future of financial services
Spending -- and borrowing
The market characteristic: Young, gifted and potentially loaded
The current provision: Limited, the first signature is all important
Marketing opportunities: Banks need to get smarter
Senior finance
A market coming of age
The size of the target market: A large ' niche' sector
A niche looking to boost its income
The market characteristic: Highly diverse and individualistic
Significant financial diversity
Important age diversity
The current provision: Are financial services firms taking this market seriously?
Marketing messages: Don' t underestimate the senior consumer
This is a dynamic market
Shari' a finance
A slow burn, but has the fire started to take hold?
The size of the target market: 2 million Muslims and 1.3 million of working age
Mortgages lead the way
The market characteristic: Young, family-oriented but fragmented
The current provision: mortgages well established, the rest playing catch-up
Range of products is expanding
Marketing opportunities: Community-focused
Language is important
Fast Forward Trends
Trend 1: Agelessness
Old getting younger, young getting older
Students and seniors -- what way now for financial responsibility?
Young at heart
Trend 2: Staying Connected
Online enablers
Uniting the niche
Niches Compared
How well has the industry marketed?
The characteristics of each niche
- Figure 3: A comparison of the main characteristics of each niche, 2008
Current provision
- Figure 4: The level of product development, by niche, 2008
Marketing techniques employed
- Figure 5: The marketing techniques used to target each niche, 2008
Meeting requirements
- Figure 6: How well have financial companies targeted the four niches?, 2008
Eastern and Central European Finance: Who are your Customers?
Key points
Why Eastern and Central European finance?
Who is the target market?
The Poles dominate
- Figure 7: The number of approved applications for worker registration card and accession worker cards, by country, 2004-08
They are ' legitimate workers'
The market is maturing
- Figure 8: The age breakdown of new approved applications for worker registration cards and accession worker cards, by age, 2004-08
They are young and free -- but not necessarily single
- Figure 9: Registered workers* with dependents, by year of application, 2004-08
In low-skilled jobs....
- Figure 10: The socio-economic profile of Eastern and Central European in the UK, May 2008
...earning low wages but working long hours...
- Figure 11: Weekly income of the chief income earner (% by income band), May 2008
...despite being well educated
Do you know your trippers from your blenders?
The size of the target market?
Not an easy task
How niche is niche?
1.5% of current account holders
- Figure 12: The number of adults owning basic finance products, 2007 and 2008
Spending power of £8.4 billion
- Figure 13: The aggregate spending power of Eastern Europeans, 2006-08
A fluid market
Is the target market shrinking?
Eastern and Central European Finance: Understanding the Market
Key points
Product development timeline
- Figure 14: Chronology of Eastern and Central European bank account developments in the UK, 2006-08
Product- or language-led?
Language developments
Product developments
Current accounts: A straightforward product meeting a need
HSBC targets all immigrants
NatWest launches the first Polish Account
Lloyds TSB follows closely behind
The prepaid card market: competition for the major banks
Prepaid vouchers: Competition for credit cards
Eastern and Central European Finance: Marketing Approaches
Key points
Language is important
Targeted branches yes, but only in certain localities
Advice services can lead to trading up
Get the marketing mix right
The specialist media grow
Specialist press listings
Remember, marketing begins at home
Remember K.I.S.S.
Points to remember
Eastern European Finance: Consumer Research
Key points
Basic needs determine product ownership
- Figure 15: Ownership of financial products, May 2008
Bank accounts -- not just a short-term product
- Figure 16: The attitudes towards opening a bank account in the UK, May 2008
Ownership patterns similar to those for UK nationals
- Figure 17: Ownership of financial products, by gender, age, socio-economic group and income, May 2008
Should the banks stop Pole dancing?
- Figure 18: Ownership of financial products, by language, May 2008
Banks are on the right track
- Figure 19: Eastern European attitudes towards key aspects of banks' operations, May 2008
The old, poor and Non-Polish speakers need more help
- Figure 20: Eastern European attitudes towards key aspects of banks' operations, by gender, age, socio-economic group, language and income, May 2008
But has the marketing message been lost in translation?
- Figure 21: Awareness of the marketing and sales efforts of the major banks, May 2008
Advertising efforts falling on deaf ears?
More work needed on non-Poles
- Figure 22: Awareness of new financial products and services of the major banks, by gender, age, socio-economic group, language and income, May 2008
Advertising focused on the more affluent and the mature
- Figure 23: Awareness of financial advertising specifically targeted at Eastern Europeans, by gender, age, socio-economic group, language and income, May 2008
The young, poor and non-Poles are being bypassed
- Figure 24: Awareness of any financial product, service or advertising targeted at Eastern Europeans, by gender, age, socio-economic group, language and income, May 2008
Shari' a Finance: Who are your Customers?
Key points
Why Shari' a finance?
Who are the target market?
Not the Muslim community, but the Muslim communities
- Figure 25: How religious are Muslims?
Second and third generation
Potential for child bonds and insurance products
- Figure 26: The age structure of the Muslim population compared with the UK population, 2001
Scope for commercial business...
...but a community split along economic lines
- Figure 27: The socio-economic breakdown of the Muslim community, June 2008
The size of the target market
- Figure 28: The number of Muslims in Great Britain (million), 1996-2007
How niche is niche?
- Figure 29: The proportion of the GB population which is Muslim, 1996-2007
Nearly 400,000 UK Muslims hold Shari' a finance products
- Figure 30: The number of holders of Shari' a-compliant financial products, June 2008
Trends in the target market
- Figure 31: The size of Shari' a mortgage market (gross lending), 2003-09
Shari' a Finance: Understanding the Market
Key points
What is available on the market?
Government support boosts the industry
Shari' a mortgages
Three mortgage models
Key market providers
- Figure 32: The leading Shari' a mortgage providers in the UK, 2008
Now the insurance support is available...
...but some difficulties remain
The product range is expanding
- Figure 33: The Shari' a mortgage products available, June 2008
Income multiples can be high
Personal loans: Only one provider
Shari' a current accounts: Becoming well established
Crossing the niches: Islamic student accounts
Shari' a-compliant worldwide money transfers
Shari' a savings accounts: Only one provider
Shari' a insurance: Just getting started
Principle insurance launched
The big boys waiting in the wings, and HSBC moves in
Stockbroking: Established but no new entrants
Islamic pensions: Interest is stirring
Islamic investment funds: A few funds available
Shari' a-compliant Child Trust Fund: Big potential
Shari' a credit cards the next step?
Shari' a Finance: Marketing Approaches
Key points
Get the community on your side
- Figure 34: The regional distribution of Muslims in GB (% of population), 2001
Target leaflet drops and distribution are effective
Challenging perceptions
The branch is key
- Figure 35: The breakdown of the customer base of the Islamic Bank of Britain, by system used, end of 2007
Use of the Muslim media
Watch what you put on your brochures...
...and remember it' s not just Muslims who want Shari' a products
Trust is a big issue
Shari' a Finance: Consumer Research
Key points
Ownership of financial products is high
- Figure 36: Ownership of financial products by UK Muslims, June 2008
Women and the over-35s lead the market
- Figure 37: Ownership of financial products by UK Muslims, by gender and age, June 2008
Muslim C1s buck the norm
- Figure 38: Ownership of financial products by UK Muslims, by socio-economic group and income, June 2008
Urdu/Hindi and Bangla speakers the most likely to own
- Figure 39: Ownership of financial products by UK Muslims, by language, June 2008
30% of Muslims own Shari' a-compliant products
- Figure 40: Ownership of financial products by UK Muslims, June 2008
A 940,000 gap
- Figure 41: A picture of Shari' a product market penetration, June 2008
Women again lead the market
- Figure 42: Ownership of Shari' a-compliant financial products by UK Muslims, by gender and age, June 2008
Income determines ownership but social grade is less important
- Figure 43: Ownership of Shari' a-compliant financial products by UK Muslims, by socio-economic group and income, June 2008
Are second-generation Muslims more interested in Shari' a products?
- Figure 44: Ownership of Shari' a-compliant financial products by UK Muslims, by language, June 2008
Gap analysis
- Figure 45: Shari' a product penetration and gap analysis, by gender, age, socio-economic group, income and language, June 2008
- Figure 46: Gap analysis for Shari' a finance products, June 2008
Shari' a products are complementary
- Figure 47: Attitudes towards and usage of Shari' a products by Muslims, June 2008
Rich and mature are hardcore users
- Figure 48: Muslims with positive attitudes towards SCFPs*, by gender, age, socio-economic group, income and language, June 2008
Are Westernised Muslims less interested?
- Figure 49: Muslims with ambivilent attitudes towards SCFPs*, by gender, age, socio-economic group, income and language, June 2008
Could the banks do more?
- Figure 50: Those believing that most banks don' t really care about catering to Muslims, by gender, age, socio-economic group, income and language, June 2008
Student Finance: Who are your Customers?
Key points
Why student finance?
Who are the target market?
Young, free, single -- and affluent?
- Figure 51: Total number of UK-based university applicants aged 18 and under, 2007 and 2008
The size of target market
Over 2 million students -- but the focus is on UK students
- Figure 52: All student enrolments on Higher Education, by domicile, 2006/07
How niche is niche?
Less than 4% of the adult population
- Figure 53: Student numbers relative to the UK population, 2007
Less than 2% of consumer spending power
- Figure 54: Estimated expenditure and incomes for UK full-time students in the UK, 2007
Trends in the Target Market
Student numbers rising, but the rate of growth is slowing...
- Figure 55: All student enrolments on HE courses, 2002/03-2006/07
Could the market have reached a peak?
The funding gap -- key role for banks to play
- Figure 56: The student funding gap*, 2004-07
Student debt keeps rising
- Figure 57: Full-time UK student amounts owed and savings (£m), 2004-07
Commercial lenders important...
- Figure 58: Estimated structure of student debt (%), 2007
...but limited revenue possibilities
Student Finance: Understanding the Market
Key points
What is available on the market?
Student accounts: The basic, well-established essential
- Figure 59: Eligibility criteria on student accounts, June 2008
- Figure 60: Overdraft limits on student current accounts, June 2008
Prepayment cards: For young people and students
- Figure 61: Examples of prepayment cards aimed at students, June 2008
Dedicated student credit cards: Not much activity
- Figure 62: Examples of student credit cards, June 2008Student insurance: Small range of policies
- Figure 63: Buildings and contents insurance, 2006 and 2007
High-risk targets?
- Figure 64: Examples of providers offering student insurance products, June 2008
The insurance market gap
- Figure 65: Car ownership, students and non-students, 2003-07
A gap for gap-year cover?
- Figure 66: Holiday and travel insurance, 2000-07
Student personal loans: Loans sold to students
- Figure 67: Facilities Used In last 12 months, 2003-07
Student Finance: Marketing Approaches
Key points
Get' em as young as possible...
...but why wait until they have an offer?
Give ' em ' something' for ' nothing'
- Figure 68: Examples of the freebies offered on student bank accounts, June 2008
- Figure 69: Examples of the freebies offered on student credit cards, June 2008
A student is for life -- not just university
Remember you' re targeting students, not the young
The laptop effect
Use the arts link
Offline advertising channels still valuable...
- Figure 70: The proportion of adults aged 18+ who are students, by newspaper readership and supermaret usage, April 2008
...as are the student media
The campus is also an advertising medium
Student Finance: Channels to Market
Key points
All' s Fair in love and war...
..and remember other events as well
On-campus branches less important today
Use new tech for banking services and marketing
- Figure 71: The proportion of adults aged 18+ who are students, by technology usage, internet usage and commercial TV viewing, April 2008
It' s the Facebook generation...
...but he who lives by viral marketing can die by viral marketing
Student Finance: Consumer Research
Key points
Students have to rely on debt for their lifestyle
- Figure 72: The current financial position of students, April 2008
Student loans dominate student debt
- Figure 73: Student indebtedness, 2007
- Figure 74: Ownership of credit cards and store cards, students and non-students, by gender, 2007
- Figure 75: Credit card ownership, by gender, 2003-07
Managing their finances -- a more responsible approach?
- Figure 76: Agreement/disagreement that ' I am very good at managing money' , students and non-students, by gender, 2007
Dislike of debt is growing
- Figure 77: Those definitely agreeing that ' I don' t like the idea of being in debt' -- students, by gender, 2003-07
Don' t forget that students save as well
- Figure 78: Ownership of savings account and ISAs, students and non-students, by gender, 2007
- Figure 79: Type of account held, 2003-07
Better at saving than their peers?
- Figure 80: Agreement/disagreement that ' I am no good at saving money' , students and non-students, by gender, 2007
Senior Finance: Who are your Customers?
Key points
Why senior finance?
Who is the target market?
Women increase in importance with age
- Figure 81: Breakdown of senior adults, by gender and age, 2008
It' s a couple market
- Figure 82: The household composition of pensioners+ in GB, by gender, 2006/07
A market where lifestyles and living arrangements change
- Figure 83: The marital status of over-65s, April 2008
Seniors are financially comfortable
- Figure 84: The socio-economic and ACORN profile of seniors compared with all adults, April 2008
From watchful to struggling
- Figure 85: Classification of seniors (000), by their financial situation, April 2008
- Figure 86: Financial situation of seniors, by wealth type, 2008
Some are challenged and some are resilient
- Figure 87: Segmentation of seniors in the UK, by broad type, 2008
Financial power rests with the channelled and comfortable...
- Figure 88: Segmentation of seniors, by financial factors, by age, 2007
...but issues remain
Over £1 trillion in assets
- Figure 89: The financial balance sheet of seniors, 2007
Seven in ten own property outright
- Figure 90: Home ownership pattern (%) of seniors compared with all adults, April 2008
Seniors adopt new financial strategies
The ' GOTYs'
- Figure 91: Seniors with a young outlook on life, May 2008
The size of the target market
How niche is niche?
- Figure 92: Senior market relative to consumers as a whole, 2007
High savings ownership
- Figure 93: The number of pensioners and adults holding various assets, 2006/07
Trends in the target market
Not falling behind in the income race
- Figure 94: Estimates disposable income of seniors and all consumers, 2003-07
The flow of money across the generations
Income from employment of growing importance
- Figure 95: The proportion of pensionable age* adults, by economic activity in GB, 2006/07
Seniors grow as consumers...
Figure 96: Estimated expenditure of seniors and all consumers, 2003-07
...and drive the savings market
- Figure 97: Estimated savings of seniors and all consumers, 2003-07
Increasingly wealthy market
- Figure 98: Estimated balance sheet of seniors, 2005-07
Senior Finance: Understanding the Market
Key points
What is available on the market?
Premium packaged current account: One provider
Savings accounts
Credit cards: Only one provider
Travel insurance: Not all seniors covered...
...despite a risk-averse target market
- Figure 99: Holiday and travel insurance, 2003-07
Few offer cover to over-80s
Figure 100: The age limits on single-trip travel policies covering the seniors market, by age, June 2008
- Figure 101: The age limits on annual multi-trip travel policies covering the seniors market, by age, June 2008
Motor insurance
- Figure 102: Ownership of motor insurance, 2003-07
Funeral plans
- Figure 103: The leading providers of funeral plans+, June 2008
Life insurance products
- Figure 104: Ownership of life insurance, 2003-07
Expanding the market...
...but at a price
- Figure 105: Over-50s life cover plans, June 2008
Long-term care insurance
- Figure 106: The number of long-term care policies+ in force at year end, by age of policyholder, 2004-07
Variety of benefits on offer
- Figure 107: Examples of long-term care policies, June 2008
Equity release schemes
Rebuilding reputations
- Figure 108: Equity release+ new sales, 1991-2007
Income generation key
Three main product types
Senior Finance: Marketing Approaches
Key points
Time to readjust attitudes?
The silver saver gimmick
Seniors are not that gullible
Inform and entertain
Age pride: The ' Dove effect'
Don' t overdo the senior celebs
Advertising quality is important...
...but debate rages in the marketing community
Retirement -- not just a single lifestage
- Figure 109: Seniors acquiring new interests and pastimes, by age, June 2008
Simple and hassle-free, offering good value
Don' t count on brand loyalty
- Figure 110: Length of time with current motor insurance provider, by age, February 2008
The channels to market
Mainstream media work well but watch the small print
- Figure 111: Time spent on main activity, by age group with rates of participation, 2005
Radio an increasing important channel
Don' t ignore new technology
- Figure 112: New technology penetration among seniors (65+), April 2008
Senior Finance: Consumer Research
Key points
One in four seniors are watchful of their finances
- Figure 113: Financial clusters among seniors and all adults, April 2008
Asset-rich ABs
- Figure 114: The main financial clusters among seniors, by gender, socio-economic group, tenure and ACORN category, April 2008
Seniors are good financial managers, consequently...
- Figure 115: Indicators of seniors' abilities with their savings, spending and money management, April 2008
...debt levels are low
- Figure 116: Debt products in which seniors owe money, April 2008
Seniors like cash not credit
- Figure 117: The proportion of adults paying off their credit card at the end of each month, April 2008
Debt -- cause or effect?
- Figure 118: Proportion of senior cluster group who owe money on any debt product, April 2008
Asset ownership is high
- Figure 119: Percentage of persons with selected assets, 2006/07
Savings account ownership on the rise
- Figure 120: Type of account held, 2003-07
ISA ownership rising: more seniors paying tax...
Figure 121: ISA ownership, 2003-07
...but interest in riskier savings has remained stable
- Figure 122: Equity investment holdings (individual shares and collective investments), 2003-07

Niche Finance - UK - July 2008

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