Report: Financial Services: Technology and the Internet - UK

Issues in the Market
Key issues
Abbreviations
Future Opportunities
Tackling security concerns
Beyond the basics
The high street vs online
Opportunities to expand mobile banking
Shift in market for financial advice
Market in Brief
Technology ownership
- Figure 1: British internet penetration at home/work/place of study or elsewhere, April 2002-April 2009
Almost 90% use the internet for some banking activities
- Figure 2: Overview of preferred channels for banking activities (combined), June 2009
Online banking increases but concerns persist among consumers
Online channels are surpassing traditional sources of financial advice
- Figure 3: Most popular sources of advice for financial products, June 2009
Moneysupermarket.com and MoneySavingExpert.com lead the way
Mobile banking is a niche activity but there is scope to expand
Security concerns are likely to limit the uptake of contactless payments
Technology Ownership and Usage
Key points
70% of adults have internet access
- Figure 4: British internet penetration at home/work/place of study or elsewhere, April 2002-April 2009
Financial activities are common reason for using the internet
- Figure 5: Types of activity undertaken on the internet in the last three months, October 2008 and April 2009
Technology device ownership
- Figure 6: Technology device ownership summary, July 2009
Factors that determine technology ownership
- Figure 7: Technology device ownership summary, July 2009
New finance related technology is endorsed by government
Consumer Context
Key points
The economic context
Changing attitudes and behaviour
Recession leads to increased financial engagement
- Figure 8: Savings, investment, borrowing and debt repayment -- consumers' expected activity, quarterly indices, 2002-09 (Q2)
Online Banking
Key points
Shift towards online transactions
- Figure 9: The number of personal customers registered for telephone and internet banking, and the number of transactions, 2003-07
Around 34 million use internet for banking activities
- Figure 10: Overview of preferred channels for banking activities (combined), June 2009
Convenience is the main attraction for consumers
Online banking has advantages and challenges for providers
Online banking vs. branch network
Banking crisis could undermine appeal of online-only providers
Tackling security concerns, as online banking fraud rises
- Figure 11: Online banking fraud losses, 2004-08
Recent online banking developments dominated by security improvements
Mobile Banking
Key points
Mobile phones are ubiquitous
- Figure 12: Mobile phone subscribers, 2003-08
Mobile banking -- a niche but evolving activity
A range of mobile banking services is available
Different approaches to charging structures
Recent mobile banking developments
Interest among consumers but there are barriers to overcome
- Figure 13: Attitudes towards mobile banking, June 2009
Security fears may be overstated
Expansion of smartphones will boost mobile banking
Contactless and Mobile Payments
Key points
An evolution in UK payments
- Figure 14: Volume of cheque*, plastic card** and automated payments^ transactions, millions, 2002-18
Moving towards a cashless society
More than three million contactless payment cards in circulation
Banks take different approaches to rollout
The role of retailers
The consumer perspective
- Figure 15: Attitudes towards contactless payment technology, June 2009
Recent market developments
Mobile payments -- the next big thing?
Development of mobile wallet concept
Helping to tackle financial inclusion
Pre-paid cards as a launch pad into mobile banking
Online Advice and Money Management
Key points
Online sources of advice are changing the advice landscape
- Figure 16: Most popular sources of advice for a range of financial products, (includes banking, general insurance and long-term products) June 2009
But online advice doesn' t always translate to online sales
Usage of personal finance websites
- Figure 17: Usage of selected personal finance websites, June 2009
Independent money websites strike a chord among consumers
Taking an independent approach to financial matters
A new breed of money management providers
An opportunity for financial service providers?
Making finance fun
Mobile money management
Financial Services and Social Media
Key points
Social networking has become a mass-market activity
- Figure 18: Usage of selected social networking sites, June 2009
Advantages of using social media
Examples of online communities
Communities for finance professionals
Challenges of using social media
Consumer activism
Gaining and maintaining interest
An evolving marketplace
The Consumer -- Purchasing Financial Products Online
Key points
General insurance products are more likely to be purchased online
- Figure 19: Online purchasing of financial products, June 2009
Online purchasing behaviour -- a three-way split
- Figure 20: Repertoire of number of financial services products bought online, June 2009
Online purchasing is more likely among high earners
- Figure 21: Demographic overview of repertoire of number of financial services products bought online, June 2009
General insurance -- the ' starter purchase'
- Figure 22: Buying financial services products over the internet, by repertoire of number of financial services products bought online, June 2009
Age is not the barrier often cited...
- Figure 23: Financial products bought online, by gender, age, socio-economic group and gross annual household income, June 2009
... but younger adults will be easier to convert to online channels
- Figure 24: Financial products that people would consider buying online, by gender, age, socio-economic
Under-24s need more support to use online channels
- Figure 25: Financial products that people would consider buying but not online, by gender, age, socio-economic group and gross annual household income, June 2009
The Consumer -- Channel Preferences for Banking Activities
Key points
Online is becoming increasingly popular for regular banking activities...
- Figure 26: Preferred channels for banking services, June 2009
... but face-to-face channels still have the edge for advice and queries
Men are more likely to complete more detailed transactions online
- Figure 27: Online banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
What people want from their bank branch
- Figure 28: Face-to-face banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
Telephone banking -- a support service?
- Figure 29: Telephone banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
A multi-channelled model?
- Figure 30: Overview of preferred channels for banking activities (combined), June 2009
Mobile remains a niche banking channel
The Consumer -- Attitudes Towards Online Banking
Key points
Online banking provokes mixed opinions
- Figure 31: Attitudes towards online banking and security, June 2009
Shifting attitudes as convenience becomes more important
- Figure 32: Positive and negative attitudes towards online banking and security, by gender and age group, June 2009
Tackling security concerns and providing a sense of control
- Figure 33: Positive and negative attitudes towards online banking and security, by attitudes towards online banking and security, June 2009
Online banking users have security concerns
- Figure 34: Attitudes towards online banking and security, by preferred channels for banking services, June 2009
Security concerns influence online purchasing behaviour
- Figure 35: Attitudes towards online banking, by the likelihood to have arranged current account online, June 2009
Higher earners are more likely to opt for online providers
- Figure 36: Attitudes towards the security of high vs online providers, by age group, socio-economic group and gross annual household income, June 2009
Banking crisis -- positive for high street providers?
The Consumer -- Channel Preferences for Financial Advice
Key points
Bank staff and price comparison sites are most popular sources of advice
- Figure 37: Most popular sources of advice for a range of financial products, June 2009
Different sources of advice for different financial products
- Figure 38: Preferred sources of advice when arranging financial products, by type of product, June 2009
Online sources of advice appeal to under-35s and more affluent groups
- Figure 39: Key demographics for preferred sources of financial advice, June 2009
Most people use multiple sources of financial advice
- Figure 40: Cross-analysis of sources of advice when arranging financial products, June 2009
Online advice is likely to be crucial in the expansion of new technology
- Figure 41: Preferred sources of financial advice, by selected attitudes towards online banking, mobile banking and contactless payment cards, June 2009
The Consumer -- Attitudes Towards Online Sources of Advice
Key points
20 million internet users use price comparison sites
- Figure 42: Attitudes towards online sources of financial advice, June 2009
Are financial forums reducing the demand for professional advice?
- Figure 43: Attitudes towards online sources of financial advice, by sources of advice most likely to be used to arrange financial products, June 2009
Price comparison sites as a research tool rather than a distribution channel
16-24-year-olds most likely to lack trust in online advice
- Figure 44: Attitudes towards online sources of financial advice, by gender and age group, June 2009
Internet usage has impact on attitudes towards online advice
- Figure 45: Attitudes towards online sources of financial advice, by gross annual household income and daily personal internet usage, June 2009
The Consumer -- The Key Online Brands
Key points
Moneysupermarket.com top personal finance websites
- Figure 46: Frequency of usage of internet sites, June 2009
Most people use a variety of finance and social networking websites
- Figure 47: Repertoire of number of internet sites used, June 2009
- Figure 48: Usage of internet sites by repertoire of number of internet sites used, June 2009
Users of price comparison sites use several different brands
- Figure 49: Cross-analysis of usage of selected internet sites, June 2009
More affluent are more likely to turn to online sources of information
- Figure 50: Demographic overview of users of different types of internet sites, June 2009
Discussion boards are replacing traditional channels of advice
- Figure 51: Advice or guidance most likely to use to arrange financial products, by types of internet sites used, June 2009
Websites influence purchasing behaviour
- Figure 52: Attitudes towards online sources of financial advice, by types of internet sites used, June 2009
The Consumer -- Attitudes Towards Mobile Banking
Key points
Two fifths are interested in mobile banking...
- Figure 53: Attitudes towards mobile banking, June 2009
... but security concerns and a perceived lack of need could hamper the uptake
Almost four million 16-24-year-olds are interested in mobile banking
- Figure 54: People interested in mobile banking, by gender, age, and gross annual household income, June 2009
A bonus for busy professionals
Allaying fears and promoting mobile banking
- Figure 55: Barriers to mobile banking, by age group, June 2009
Telephone banking could provide a lead into mobile banking
- Figure 56: Attitudes towards mobile banking, by preferred channels for banking services, June 2009
Balancing online and mobile banking channels
- Figure 57: Attitudes towards mobile banking, by postive and negative attitudes to online banking, June 2009
The Consumer -- Attitudes Towards Contactless Payment Cards
Key points
Security worries may hamper the uptake of contactless payment cards
- Figure 58: Attitudes towards contactless payment technology, June 2009
Under-35s are the most likely to appreciate contactless payment facilities
- Figure 59: Positive attitude to contactless payment cards, by gender, age, and socio-economic group, June 2009
Lost cards are a bigger issue among likely users
- Figure 60: Attitudes of those postive about contactless payment cards, June 2009
Chip and PIN has support across the demographic spectrum
- Figure 61: Negative attitudes towards contactless payments, by gender, age and gross annual household income
Experience of contactless technology has positive and negative impact
- Figure 62: Cross-analysis of attitudes towards contactless payment cards, June 2009
Positive indications for mobile payments
- Figure 63: Attitudes towards contactless payments, by interest in mobile banking, June 2009
Online channels will be important
- Figure 64: Attitudes towards contactless payment technology, by likelihood to purchase a credit card over the internet, June 2009
Appendix -- The Consumer -- Channel Preferences for Banking Activities
- Figure 65: Overview of preferred channels for banking activities, by demographics, June 2009
Appendix -- The Consumer -- Attitudes Towards Online Banking
- Figure 66: Full demographic breakdown of positive/negative attitudes towards online banking and views on high street and online providers, June 2009
Appendix -- The Consumer -- Channel Preferences for Financial Advice
- Figure 67: Preferred sources of advice when arranging financial products, full demographic breakdown, June 2009
Appendix -- The Consumer -- Attitudes Towards Online Sources of Advice
- Figure 68: Demographic breakdown of attitudes towards online sources of financial advice, June 2009
Appendix -- The Consumer -- The Key Online Brands
- Figure 69: Frequency of usage of internet sites, by demographics, June 2009
Appendix -- The Consumer -- Attitudes Towards Mobile Banking
- Figure 70: Most popular attitudes towards mobile banking, by demographics, June 2009
- Figure 71: Next most popular attitudes towards mobile banking, by demographics, June 2009
Appendix -- The Consumer -- Attitudes Towards Contactless Payment Cards
- Figure 72: Attitudes towards contactless payment technology, by demographics, June 2009

Financial Services: Technology and the Internet - UK - August 2009