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Online Banking - IrelandProduct Type: Market Research ReportPublished by: Mintel International Group Ltd. Published: May 2004 Product Code: R560-1131 Description In its early days, the Internet was heralded as the future of business, and so followed a multitude of dot.com companies, eager to tap into this new phenomenon. Consumers were promised that they could perform most, if not all, of their everyday functions online, as supermarkets, clothing retailers and electrical retailers all invested in setting up an online presence. It was soon to follow then, that given the mundane and tiresome nature of some banking transactions, such as queuing in a busy branch to apply for a credit card, the Internet seemed perfectly suited to take the hassle out of banking. Therefore it was in 1999 that Bank of Ireland became one of the first Irish banks to offer online banking through its F-Sharp subsidiary.Optimism and expectations surrounding the impact of online banking were quite high; a report from Cap Gemini Ernst & Young in 2001 claimed that banks expected as little as 60% of business to be conducted at branches by 2004. With the benefit of hindsight and the burst bubble of the dot.com era, the outlook for e-commerce has been revised considerably. The scale-down in expectation has been mostly attributable to the consumer, as a number of barriers, including security fears, technophobia and a general preference for traditional branch banking, have hindered the development of online banking. This report aims to explore the barriers preventing increased uptake of online banking in Ireland, both North and South, while also exploring the reasons why some consumers have moved to manage their personal finances online. A key part of the report focuses on exclusive consumer research commissioned by Mintel in order to investigate consumer attitudes towards online banking. Table of Contents Introduction and Abbreviations Definitions Geographical, national and regional definitions Population Figures Conversion factors BMRB Target Group Index (TGI) sample sizes Abbreviations Executive Summary Market dynamics suggest a positive future for online banking Target market for online banking shows signs of growth Phenomenal growth in number of online banking users masks a more limited reality Local banks dominate the online banking market but competition is emerging Advertising and promotion will be crucial to growth of online banking Online banking most popular among affluent and 25-49-year-old consumers Online banking users make frequent use of service - a trend more evident in RoI Consumer attitudes towards online banking differ in RoI and NI Attachment to traditional banking and negative perceptions proving to be a barrier to online banking Market Drivers Demographics Figure 1: Population trends, by age group, in thousands, RoI, 1998, 2003 and 2008 Figure 2: Population trends, by age group, in thousands, NI, 1998, 2003 and 2008 Consumer confidence Figure 3: Index of consumer expectation in RoI, 1996-2003 Disposable income Figure 4: Personal disposable income per capita at current prices and year-on-year (YoY) % growth, RoI, NI and UK, 1995-2002 Figure 5: Personal disposable income per capita at constant (1995) prices, RoI, NI and UK, 1995-2002 Unemployment Figure 6: Employment and unemployment trends, by gender, RoI, 1999-2004 Figure 7: Employment and unemployment trends, by gender, NI, 1999-2004 Technology Growing acceptance of the Internet among Irish consumers Figure 8: Internet penetration (any access - home and elsewhere), GB, RoI and NI, 2000 and 2003 Online business banking leading the way Banks are facilitating the uptake of online banking Figure 9: Number of ATMs provided by the five main clearing bank groups in RoI, 1998-2003 Figure 10: Number of ATMs provided by the four main home-based banks in NI, 1997-2001 New entrants Wide ownership of basic financial products provides opportunity for online banking Figure 11: Most competitive credit card providers by lowest standard rate, UK, February 2004 Legislation Benefits of online banking Barriers to online banking Market Size and Segmentation Market size Figure 12: Market size (by number of online banking users), all-Ireland, 2001-03 Figure 13: Market size (by number of online banking users), RoI and NI, 2001-03 Market segmentation Figure 14: Breakdown of online banking usage, RoI, February 2004 Figure 15: Breakdown of online banking usage, NI, February 2004 The Supply Structure and Profiles Pure-play banks Cahoot Egg First Direct IF - Intelligent Finance One Direct Smile Clicks and mortar Abbey National Alliance & Leicester Allied Irish Bank/First Trust Bank Bank of Ireland HBOS HSBC Northern Bank/National Irish Bank Permanent TSB Ulster Bank Group Competition emerging from new quarters Supermarkets and retailers moving into personal finance market Figure 16: Supermarkets and retailers should not get involved in personal finance, RoI and NI, 2003 Advertising and Promotion Advertising expenditure Figure 17: Total advertising expenditure on telephone/online banking by bank/brand, RoI, 2001 and 2003 Figure 18: Advertising expenditure on online banking, broken down by brand, NI, 1999-2003 Mass market or bust for some banks Online advertising expected to grow in importance Figure 19: Overall advertising expenditure by all companies, RoI, 1998-2003 Figure 20: Overall advertising expenditure by all companies, NI, 1998-2002 New technology offers potential Figure 21: Mobile phone penetration in RoI and NI, 1998 and 2003 Figure 22: Penetration of digital, satellite and cable television in RoI, 2001 and 2003 Figure 23: Penetration of digital, satellite and cable television in NI, 2001 and 2003 Branding Advertising intensity driven by a range of factors Figure 24: Promotional intensity matrix, for specific financial products The Consumer Consumers' familiarity with Internet will dictate their use of online banking Figure 25: The evolution of an e-consumer Consumer research into online banking Figure 26: RoI and NI sample sizes, 2004 Overall penetration of online banking Figure 27: Penetration of online banking, RoI and NI, February 2004 RoI consumers Online banking consumer profile Figure 28: Composition of online banking customer base (%), RoI, February 2004 Frequency of use of the total population Figure 29: Frequency of online banking usage, by %, RoI, February 2004 25-49-year-olds and the affluent most frequent users of online banking Figure 30: Frequency of online banking usage, by age and socio-economic group, RoI, February 2004 Full-time workers are heavy users Figure 31: Frequency of online banking usage, by employment status and region, RoI, February 2004 Attitudes towards online banking Many RoI consumers remain sceptical about online banking Figure 32: Agreement with statements relating to online banking, RoI, February 2004 Users in RoI are positive about online banking but are reluctant to do away with branch banking altogether Figure 33: Agreement with statements relating to online banking, by user group, RoI, February 2004 Non-users in RoI lack knowledge of online banking and still prefer to visit their bank branch Younger and more affluent consumers are the most receptive to online banking Figure 34: Agreement with statements relating to doubts about online banking, by age and socio-economic group, RoI, February 2004 Consumers in full-time employment still to be sold on the benefits of online banking - in contrast with full-time students Figure 35: Agreement with statements relating to doubts about online banking, by employment status and region, RoI, February 2004 Significant barriers to uptake exist among consumers in Connacht/Ulster, which banks will have to address Correlation between age and attitudes towards online banking Figure 36: Agreement with statements relating to benefits of online banking, by age and socio-economic group, RoI, February 2004 Appreciation of online banking benefits increases with affluence although consumers remain loyal to well-known banks Students' attitudes towards online banking bode well for the future Figure 37: Agreement with statements relating to benefits of online banking, by employment status and region, February 2004 Dubliners indifferent to advantages of online banking Online banking activity Figure 38: Breakdown of online banking usage by type of transaction, RoI, February 2004 25-49-year-olds and ABC1 consumers are the most confident users of online banking in RoI... ...while Dubliners and those in the rest of Leinster also show signs of confidence when using online banking NI consumers Online banking consumer profile Figure 39: Composition of online banking customer base (%), NI, February 2004 Frequency of use of the total population Figure 40: Frequency of online banking usage by %, NI, February 2004 Ownership of multiple financial products can determine frequency of online banking usage Figure 41: Frequency of online banking usage, by age and socio-economic group, NI, February 2004 Heaviest users are consumers in full-time employment residing in Belfast City Figure 42: Frequency of online banking usage, by employment status and region, NI, February 2 004 Attitudes towards online banking Figure 43: Agreement with statements relating to online banking, NI, February 2004 NI users still prefer to use well-known banks but are prepared to use other online banks in addition to their existing bank Figure 44: Agreement with statements relating to online banking, by user group, NI, February 2004 High preference for branch banking among non-users is main barrier to online banking Younger NI consumers most positive towards online banking while older consumers still prefer branch banking Figure 45: Agreement with statements relating to doubts about online banking, by age and socio-economic group, NI, February 2004 As in RoI, affluent consumers show least loyalty to branch banking Loyalty to branch banking is lowest among NI consumers in full-time education, suggesting they will be most receptive to online banking Figure 46: Agreement with statements relating to doubts about online banking, by employment status and region, NI, February 2004 Benefits of online banking rated most highly by 16-49-year-olds Figure 47: Agreement with statements relating to benefits of online banking, by age and socio-economic group, NI, February 2004 Full-time employed most likely to shop around for financial products, which presents opportunity for pure-plays and smaller players Figure 48: Agreement with statements relating to benefits of online banking, by employment status and region, NI, February 2004 Online banking activity Figure 49: Breakdown of online banking usage, by type of transaction, NI, February 2004 RoI and NI consumer comparisons and conclusions The online banking consumer profile differs in RoI and NI ABC1 consumers aged between 25-49 are most frequent users of online banking in both RoI and NI Majority of online banking users will use it at least once a week Figure 50: Frequency of online banking usage, (%), RoI and NI, February 2004 RoI online banking users display most positive sentiment for online banking Non-users in NI still show high attachment to traditional branch banking Security concerns more prevalent among NI consumers Loyalty to well-known banks is higher in NI Attitudes reveal that educating the consumer about online banking is a priority RoI consumers less likely to shop around but more aware of the convenience and accessibility of online banking Attitudes towards online banking based on perception rather than experience Potential exists in RoI for pure-play banks NI consumers still to realise potential of online banking Online banking does not play a major role in the choice of financial provider The Future Online banking yet to blossom Role of ATMs provides indication of future impact of online banking Changes in the competitive structure to have major bearing on market Promotion of online banking crucial, with growing potential for new communication channels and a possible role for the more personal touch Customised online banking products vs the 'one size fits all' approach Forecas Figure 51: Penetration of online banking, by age, RoI and NI, February 2004 Figure 52: Forecast of the number of online banking users, Scenario 1, RoI and NI, 2003-08 Figure 53: Forecast of the number of online banking users, Scenario2, RoI and NI, 2003-08 Appendix: Research Methodology |
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