Online Financial Services - Convenience vs Personal Service - Ireland

In response to increasing demand for data concerning the dynamic economy and growth markets of Northern Ireland and The Republic of Ireland, Mintel has developed a series of reports covering a wide variety of sectors within both of these dynamic regions. Each one provides detailed coverage of key drivers as well as providing the very latest volume and value data. Also included are assessments of emerging trends, the activities of existing market players, brand ownership details, supply structures, future scenarios and statistical forecasts.

The Irish Series is segmented in the same manner as Mintel's UK reports, namely Finance, Leisure, Market, Retail and 'Specials'. This provides unparalleled coverage and will be a must for all companies who are either already active in this region, or will be looking to enter these distinct marketplaces in the future.

This report has been produced as part of Mintel's Irish Series and is sold in Ireland exclusively through our sales agency, OCO Consulting, based in Belfast.

Issues in the Market

Key themes in the report

Penetration deemed to be growing significantly

Can’t go, won’t go online

Spooked by the phishers

The lure of the best deals

Online users still testing the waters

A branch-less future?

Online option is extremely appealing for some

Contrast between RoI and NI consumers

Definitions

Abbreviations

Market in Brief

Steady - but unremarkable - growth

Banks doing their best - but obstacles remain

Many consumers still to be convinced

Increase in e-shopping to drive growth

Young consumers less active on all counts

Range of transactions conducted online remains limited

Internal Market Environment

Key Points

Strenuous promotion of online channel

Pricing strategies

Cutting back on fees

Green incentives

Providers offering better terms and rates to online users

Greater freedom for RoI consumers

Enthusiastic uptake by business clients leads the way

Small business appeal

Other factors

The downside: difficulty, confusion and frustration

Security Concerns - Still There (and Getting Worse?)

Key Points

The big issue: Phishing

The extent of the problem worldwide

The extent of the problem

Counting the cost in financial terms

The real costs - in terms of public confidence

What has been done?

Individual initiatives

Sector initiatives

National initiatives

International initiatives

What hasn’t been done?

Effective precautions could include:

Broader Market Environment

Key Points

Demographic factors

Population growth & changes

Projected growth in 35-44 group a boon for online financial services sector

Growth in 55+ demographic - coming round to online arrangements

Figure 1: People using online banking by age group, UK, 2001-06

Influx of immigrants of working age

NI projections

RoI projections

Figure 2: Non-nationals resident in RoI, 2006

Increasing Internet usage

Figure 3: Adult population who have used the Internet in the last 12 months, NI and RoI, 2001-06

Growth in trust placed in Internet as source of information

Figure 4: Agreement with statement “I often refer to the Internet before making a purchase”, NI and RoI, 2006

Growing embrace of e-commerce by consumers

Increasing numbers of consumers engaging in online shopping

But increasing numbers unhappy with the experience

Modern lifestyles and online banking - a perfect match

Economic strength bouys financial services sector

Figure 5: Health of the economy, NI and RoI, 2003-08

Sustained GDP growth: NI and RoI

The overall economic picture

Broadband penetration

Is poor broadband penetration obstructing online growth?

Availability in NI

...in contrast to availability in RoI

Take-up of broadband in RoI

Figure 6: Broadband subscribers per 100 inhabitants as of December 2006

Take-up of broadband in NI

Figure 7: Household in NI with Internet access by type, NI 2006 and 2007

Reasons for poor take-up of broadband: NI and RoI

Measuring Market Potential

Key Points

Overall penetration not spread equally across services

Growth in online banking site traffic

Trade views on current and future growth

Recent rates of growth exceed previous years

It’s all going according to plan

Growth compares reasonably well with other online activities

Obstacles remain to greater penetration

Strength and value: from the particular to the general

AIB

Bank of Ireland

Permanent TSB

The NI situation

Tipped for growth: arrangement of mortgages online

Future outlook - The real impact of the online channel

Not just online but mobile

Branches as financial services boutiques

The phenomenon of the rate chasers

Segment Performance

Key Points

Figure 9: Financial services used online, NI & RoI, 2006

Online channel used to monitor and manage

Initiation of financial arrangements generally done offline

Can this be explained by evolution?

The concept itself

Figure 10: The evolution of the e-consumer

How this applies to online financial services

Challenges ahead

How the concept fits with Mintel’s findings

Companies and Products

Key Points

Clicks-and-mortar institutions

Abbey National

Alliance & Leicester

Allied Irish Bank (trading as First Trust Bank in NI)

First Trust Bank (trading as Allied Irish Bank in RoI)

Bank of Ireland

First Active

Halifax

HSBC

National Irish Bank (operates as Northern Bank in NI)

Northern Bank (operates as National Irish Bank in RoI)

Northern Rock

Northern Rock-ed by US sub-prime fallout

Permanent TSB

Ulster Bank

Pure-play operators

Cahoot

Egg

First Direct

Intelligent Finance

RaboDirect

Supermarkets/Retailers

Tesco

Sainsbury’s

Marks & Spencer

Advertising and Promotion

Key Points

Incumbents v newcomers: fighting it out through the billboard

Choice of medium

Reaction of big two in RoI to newcomers

Outdoor doubles in 2006

RaboDirect and Halifax: the approach of the newcomers

Online advertising not yet mainstream in RoI

Figure 11: Top 10 online advertisers, RoI, January 2007 to July 2007

Financial sector a perennial big-spender in NI

Figure 12: Total spend by media type, UK, January 2005 to September 2006

The proven success of online advertising of financial services

The Consumer- Identifying the Target Market

Key Points

Measuring online activity

Targeting young consumers

Greatest interest among 25-44-year-olds

Figure 13: Accessing banking services, NI & RoI, 2006

Higher social grades more keen on online financial services...

Appendix

Broader market environment

Figure 18: Population trends by age group in thousands, RoI, 1998, 2003 and 2008

Figure 19: Population trends by age group in thousands, NI 1998, 2003 and 2008

Figure 20: Population change by age group, RoI, 2000-20

Figure 21: Population change by age group, NI, 2000-20

Economic growth

Consumer expenditure

RoI consumers getting the jitters...

NI consumers feeling a little more secure...

Inflation - rising in the south, stable in the north

Continued low unemployment and sustained employment growth

Interest rates

Figure 22: Short-term interest rates, UK and Eurozone, 2006-08

The future of broadband in RoI

The requirements include:

Figure 23: Number of Internet users who have made an online purchase in the past 3 months, RoI, 1993-2003

Figure 24: Agreement with statement “When I need information, the first place I look is the Internet”, NI and RoI, 2006

Accessing banking services

Figure 25: Accessing banking services, RoI and NI, 2006

Figure 26: Accessing banking services, RoI and NI, 2006

Figure 27: Type of financial service used online by age, NI, 2006

Figure 28: Type of financial service used online by social grade, NI, 2006

Financial products held

Figure 29: Financial products held, NI & RoI, 2006

Internet use

Do you have access to the Internet at home, at work or at school/college?

Figure 30: Access to the Internet, NI, July 2007

MORI data

Attitudes towards online financial services

Figure 31: Attitudes towards using online financial services, NI, July 2007

Figure 32: Financial services used online by demographic breakdown, NI, July 2007

Figure 33: Further attitudes towards financial services used online, by demographic breakdown, NI, July 2007

Figure 34: Financial services used online by demographic breakdown, RoI, July 2007

Figure 35: Attitudes towards financial services used online, by demographic breakdown, RoI, July 2007

Typologies

Figure 36: Consumer typologies relating to online financial services, NI, July 2007

Figure 37: Consumer typologies relating to online financial services by demographic breakdown, NI, July 2007

Figure 38: Cross-analysis of consumer types of online financial services used, NI, July 2007

Figure 39: Consumer typologies based on attitudes towards online financial services, RoI, July 2007

Figure 40: Consumer typologies relating to online financial services by demographic breakdown, RoI, July 2007

Figure 41: Cross-analysis of consumer types of online financial services used, NI, July 2007