The Internet: Driving Volume at the Expense of Profit? - UK

This report provides a summary of the current state of play within the online financial services market, as well as considering future prospects for market growth. In addition, it examines the impact that the Internet is likely to have on the price of financial products and whether or not a reduction in margins is an inevitable consequence of further growth in the online financial services market.

Issues in the Market

Scope of the report

Insights and Opportunities

There are clear opportunities for general insurers to exploit

Allaying security fears would help stimulate online activity

Search engine optimisation is the key to successful online marketing

Keen pricing is likely to remain a feature of Internet shopping…

…although heavy online discounting may not be inevitable

Report in Brief

Rising Internet penetration is boosting online financial services

The Internet is an effective way to target affluent consumers

Mintel’s research findings: Online product ownership

Mintel’s research findings: Purchasing behaviour

Mintel’s research findings: The importance of price

Mintel’s research findings: Attitudes towards online products

Background

Key points

Major structural changes have altered the pattern of distribution

The direct-sell revolution was the catalyst for change…

…but development of the Internet has accelerated this change

Online financial services have a number of inherent advantages

The Internet is one part of a multichannel strategy

Market Factors

Key points

Rising Internet penetration is boosting online financial services

Figure 1: British Internet penetration at home/work/place of study or elsewhere, by gender, socio-economic group, age, region and working status, 2001-06

An increase in the range of access routes will also boost usage

The sharp rise in broadband connections will also be significant

Figure 2: Broadband Internet connections in the UK, 2001-06

Changing lifestyles are impacting on access requirements

The Internet is performing an increasing role in people’s lives

A number of potential market barriers are also being tackled…

…although security fears continue to act as a drag on the market

Steps are being taken, but more needs to be done to allay consumer fears

Online User Profile

Key points

The Internet is an effective way to target affluent consumers

Figure 3: British Internet usage profile, by gender, socio-economic group, age and working status, October 2006

Consumers now conduct a broad range of activities online

Figure 4: Types of activity undertaken on the Internet in the last three months, 2003-06

Finance news sites offer little appeal for online browsers

Figure 5: Websites browsed for information purposes in the last three months, 2002-06

Insurance and banking sites attract a rising flow of potential buyers

Figure 6: Websites browsed for information purposes with a view to possibly buying in the last three months, 2002-06

Financial sector still lags behind in terms of online purchases

Figure 7: Websites actually purchased from in the last three months, 2002-06

Trade Perspective

Internet sales have increased strongly in the last few years

The Internet provides businesses with a range of benefits

Convenience and cost are the key benefits to the consumer

It allows customers to shop around; but not all are price-sensitive

Future growth in Internet sales seems assured

The Consumer - Online Product Ownership

Key points

Survey background

Almost a third of all adults can access their current account online

Figure 21: Proportion of adults who have finance accounts registered online, November 2006

Two thirds of heavy Internet users hold online financial accounts

Figure 22: Proportion of adults who have finance accounts registered online, by Internet usage, November 2006

More than half of ABs and 25-34s can access their finances online

Figure 23: Proportion of adults who have finance accounts registered online, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

High earners are most likely to hold online financial accounts

Figure 24: Proportion of adults who have finance accounts registered online, by working status, income, TV region and ACORN category, November 2006

Over half of all broadsheet readers manage their finances online

Figure 25: Proportion of adults who have finance accounts registered online, by technology usage, newspaper readership, commercial TV viewing and supermarket usage, November 2006

A fifth of ABs can access investment products online

Figure 26: Proportion of adults who have selected finance accounts registered online, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

More than half of all high earners hold an online savings account

Figure 27: Proportion of adults who have selected finance accounts registered online, by working status, income, TV region and newspaper readership, November 2006

One in 12 consumers have online access to four or more products

Figure 28: Number of financial product types registered for online access, November 2006

Almost half of ABs are multiple online financial account holders

Figure 29: Number of financial product types registered for online access, by gender, age and socio-economic group, November 2006

Online current accounts dominate the single-product group

Figure 30: Repertoire analysis on financial products registered online, November 2006

Lloyds TSB and HBOS have the most online account holders

Figure 31: Companies online finance accounts are held with, November 2006

Young adults are more likely to hold accounts with the ‘big five’

Figure 32: Main types of providers online finance accounts are held with, by gender, age, socio-economic group, working status and income, November 2006

Internet banks have the potential to generate cross-sales

Figure 33: Type of online financial accounts held by customers of the main types of provider, November 2006

Lloyds TSB and Barclays have the highest concentration of ABC1s

Figure 34: Online customer profiles of the ‘big five’ clearing banks, by gender, age and socio-economic group, November 2006

Four in ten Internet users would manage all their accounts online

Figure 35: ‘Can imagine a time when I manage all my financial accounts over the Internet’, November 2006

Over half of ABC1 18-34 Internet users would run all their finances online

Figure 36: ‘Can imagine a time when I manage all my financial accounts over the Internet’, by gender, age, socio-economic group and age/socio-economic group, November 2006

Most heavy Internet users can imagine running their accounts online

Figure 37: ‘Can imagine a time when I manage all my financial accounts over the Internet’, by lifestage, TV region, Internet usage and newspaper readership, November 2006

The Consumer - Purchasing Behaviour

Key points

Motor insurance is the most common financial online purchase

Figure 38: Proportion of adults who have arranged financial products online in the last 12 months, November 2006

Four in ten Internet users bought financial products online

Figure 39: Proportion of adults who have arranged financial products online in the last 12 months, by Internet usage, November 2006

The 45-54s form a key target audience for online travel policies

Figure 40: Proportion of adults who have arranged financial products online in the last 12 months, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

Almost six in ten high earners bought financial products online

Figure 41: Proportion of adults who have arranged financial products online in the last 12 months, by working status, income, TV region and newspaper readership, November 2006

One in seven adults bought two or more products online last year

Figure 42: Number of financial products arranged online in the last 12 months, November 2006

Over a quarter of ABs and 25-34s made multiple online purchases

Figure 43: Number of financial products arranged online in the last 12 months, by gender, age and socio-economic group, November 2006

The Internet offers online insurers a chance to boost cross-sales

Figure 44: Repertoire analysis on financial products arranged online, November 2006

Search engines provide a key source of Internet business

Figure 45: Types of websites used when arranging online financial purchases, by gender, November 2006

Younger consumers are most likely to use search engines

Figure 46: Types of websites used when arranging online financial purchases, by age group, November 2006

ABs tend to use the broadest range of websites

Figure 47: Types of websites used when arranging online financial purchases, by socio-economic group, November 2006

Almost 19 million consumers can see themselves buying online

Figure 48: Proportion of adults who might arrange financial products via the Internet in the future, November 2006

Six in ten 18-34s might buy a financial product online

Figure 49: Proportion of adults who might arrange financial products via the Internet in the future, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

Three in ten in the ABC1 family group might buy home cover

Figure 50: Proportion of adults who might arrange insurance policies via the Internet in the future, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

One in seven 25-34-year-olds would apply for a credit card online

Figure 51: Proportion of adults who might arrange other financial products via the Internet in the future, by gender, age, socio-economic group, lifestage and Mintel’s Special Groups, November 2006

The Consumer - The Importance of Price

Key points

The Internet is encouraging shoppers to be price-conscious

Figure 52: ‘More likely to compare prices when buying or browsing online’, November 2006

The 25-34s are most likely to compare prices when buying online

Figure 53: ‘More likely to compare prices when buying or browsing online’, by gender, age, socio-economic group and age/socio-economic group, November 2006

Heavy Internet users tend to be more inclined to compare prices

Figure 54: ‘More likely to compare prices when buying or browsing online’, by lifestage, TV region, Internet usage and newspaper readership, November 2006

Online financial purchasers are particularly price-conscious

Figure 55: ‘More likely to compare prices when buying or browsing online’, by online financial purchasing behaviour, November 2006

Half of Internet users would only buy discounted products online

Figure 56: ‘Would only buy online if the products are discounted’, November 2006

Young adults are most expectant of online discounts

Figure 57: ‘Would only buy online if the products are discounted’, by gender, age, socio-economic group and age/socio-economic group, November 2006

Most popular tabloid readers demand better rates online

Figure 58: ‘Would only buy online if the products are discounted’, by lifestage, TV region, Internet usage and newspaper readership, November 2006

Only a third of online savers demand preferential rates

Figure 59: ‘Would only buy online if the products are discounted’, by online financial purchasing behaviour, November 2006

Convenience rather than price is widely seen as the key benefit

Figure 60: Advantages of arranging finances online, by gender, November 2006

Heavy Internet users focus more on convenience than price

Figure 61: Advantages of arranging finances online, by Internet usage, November 2006

Internet-exclusive offers are more likely to attract young adults

Figure 62: Advantages of arranging finances online, by age group, November 2006

Three in ten ABs are attracted by cheaper products

Figure 63: Advantages of arranging finances online, by socio-economic group, November 2006

The Consumer - Attitudes towards Online Products

Key points

Allaying security fears could help stimulate online activity

Figure 64: Factors which might persuade consumers to arrange their finances online, by gender, November 2006

Price incentives hold more sway with medium Internet users

Figure 65: Factors which might persuade consumers to arrange their finances online, by Internet usage, November 2006

Improved security could have a big impact on 18-24s and 35-44s

Figure 66: Factors which might persuade consumers to arrange their finances online, by age group, November 2006

Three in ten ABC1 non-subscribers expressed security fears

Figure 67: Factors which might persuade consumers to arrange their finances online, by socio-economic group, November 2006

Only half of Internet shoppers have bought financial products online

Figure 68: Attitudes towards the Internet and other service-delivery channels, November 2006

The Future

What does Mintel’s research tell us?

Keen pricing is set to remain a feature of the online market…

…although the need for heavy discounts may not be inevitable