Cross-selling of Financial Services - Ireland

Cross-selling financial products in RoI and NI is probably more difficult now than it has been since the economic slowdown of the late 1980s. The media blame the greed and short-term thinking of the banking multinationals for the current worldwide economic crisis.

Currently the financial services industry is facing some tough market conditions. Unprecedented turmoil prompted by the credit crunch has impacted the market directly. A slowdown in the property markets and downturn in the economy in both NI and RoI have decreased consumer confidence.

Cross-selling financial products, particularly loans and mortgages, is difficult when the money supply is low and banks have had to tighten their lending criteria. Consumers too are beginning to worry about their future finances and are less likely to seek financial products they may not be able to afford to repay.

In an environment where trust in the banking sector as a whole is at a low ebb, building on existing customer relationships is critical. Cross-selling therefore represents a key opportunity for growth.

Key themes of the report:

• Difficult economic situation in IoI having a negative impact in all financial product market segments.
• Strengthening customer relationships is essential in cross-selling strategies. The branch channel is still the most important.
• Developing a product portfolio that speaks to niche groups is key to successful cross-selling of financial products.
• Providing staff with training and customer information allows them to make most of cross-selling opportunities.

Issues in the Market

Key themes of the report

Definitions

Abbreviations

Market in Brief

Cross-selling for revenue growth

Cross-selling methods

Barriers to successful cross-selling

Lack of competition in NI banking

Online banking - costs and benefits

Future outlook

Opportunities in lifestyle products

Internal Market Environment

Key points

Building customer relationships

Breaking customer relationships?

Recent controversy over bank charges

So what effect is the controversy having?

Lack of competition in NI banking

Fee-free banking - will it last?

The end of fee-free banking in NI?

More RoI customers are switching accounts

Personalised bank communications

The impact of the Internet

Figure 1: Internet usage, NI and RoI, 2002-07

Figure 2: Number of people who used the Internet for banking purposes, RoI, 2005 and 2006

Broader Market Environment

Key points

RoI - Celtic Tiger an endangered species

Figure 3: The economic outlook for RoI, 2006-08

Northern Ireland

Figure 4: The economic outlook for NI, 2006-08

The credit crunch - confidence in the financial market

Northern Rock crisis

Falling interest rates

Figure 5: UK and eurozone interest rates, 2002-08

Downturn in the property market

Demographic trends

Figure 6: Population change, by age group, NI, 2000-20

Ageing population - what effects will this have on the market?

Figure 7: Population change, by age group, RoI, 2000-20

Immigration

RoI - 13% of the population non-nationals

Figure 8: Non-national residents in RoI, by country, 2006

Significant Eastern European population in NI

Figure 9: Number of people coming to live in NI, 2005/06

Strategy Overview

Key points

Cross-selling a key driver for revenue growth

Cross-selling techniques

Short-term preferential rates

Segment Overview

Key points

Figure 12: Financial services products

Current accounts

Figure 13: Number of current accounts in issue (millions), all Ireland, RoI and NI, 2003-12

Debit cards

Credit cards

Figure 14: Estimated number of credit cards in issue (millions), all Ireland, RoI and NI, 2001-12

Personal loans

Figure 15: Unsecured loans market value, all Ireland, RoI and NI, 2003-12

Mortgages

Figure 16: Number and value of mortgage loans approved, RoI, 2003-12

Insurance

Holiday/travel insurance

Figure 17: Value of insurance market, all Ireland, NI and RoI, 2003-12

Buildings/contents insurance

Savings

Figure 18: Value of savings market, all Ireland, NI and RoI, 2003-12

Pensions

Figure 19: Size of new pension business, at current prices, all Ireland, NI and RoI, 2002-12

Companies and Products

Competitive landscape

Figure 20: Banks with which respondents have accounts, NI and RoI, November 2007

NI

RoI

Credit Unions dominate the RoI market

Banks

Abbey National

Alliance & Leicester

AIB Group

First Trust

Bank of Ireland

Halifax (RoI)

National Irish Bank (NIB) and Northern Bank

Permanent TSB

Ulster Bank

Supermarket finance

Figure 21: Agreement with statement ‘Supermarkets and retailers should not get involved in personal finance’, NI and RoI, 2002-07

Tesco Personal Finance

Sainsbury’s Bank plc

Other financial institutions

Credit Unions

An Post

Post Office

Channels to Market

Key points

Diversifying access

Branches

Figure 22: Comparison of branch numbers for major financial services providers, RoI, April 2008

Figure 23: Comparison of branch numbers for major financial services providers, NI, April 2008

On board with online

Distinct characteristics of online activities

Figure 24: Types of financial services used online, July 2007

Online banking less personal for cross-selling

Direct mail marketing

Figure 25: Percentage in agreement with the statement ‘I get fed up receiving junk mail about financial services’, NI and RoI, November 2007

Telephone banking

Figure 26: Common tasks for which consumers use telephone banking, NI and RoI, 2007

The Consumer - Choice of Bank

Key points

Figure 27: Banks with which respondents have accounts, NI and RoI, November 2007

Are banks hitting their key targets?

Figure 28: Topline demographic summary of account holders, according to above-average response, NI and RoI, 2007

Northern Bank and First Trust a miss with younger consumers

Post Offices have least affluent customer base

Credit Unions not attracting lowest income groups in NI

Males show a preference for certain banks

ABC1s more likely to bank with larger banks

Appendix

Figure 34: Number of branches of major financial services providers, NI and RoI, April 2008

Figure 35: Percentage of people who own a mortgage in their own name or jointly with spouse, RoI, 2002-07

Competitive Context

Figure 36: Personal finance statements, NI and RoI, November 2007

Figure 37: Personal finance statements, by gender, age, marital status, working status, socio-economic group, region, presence of children and Internet access, NI, November 2007

Figure 38: Personal finance statements, by gender, age, socio-economic group, presence of children, shopper status, region, working status, presence of children under 16, Internet access and digital TV access, RoI, November 2007

Consumer section

Top five reasons for choosing a current account product

Figure 39: Top five reasons for choosing a current account, NI and RoI, 2006

Bank accounts

Figure 40: Banks with which respondents have accounts, by gender, age, marital status, working status, socio-economic group, region, presence of children under 16, Internet access and digital TV access, NI, November 2007

Figure 41: Banks with which respondents have accounts, by gender, age, socio-economic group, presence of children, shopper status, region, working status, presence of children under 16, Internet access and digital TV access, RoI, November 2007

Figure 42: Opinions of bank/building society accounts, by gender, age, marital status, working status, socio-economic group, region, presence of children under 16, Internet access and digital TV access, NI, November 2007

Figure 43: Opinions of bank/building society accounts, by gender, age, socio-economic group, presence of children, region, working status, presence of children under 16, Internet access and digital TV access, RoI, November 2007

Figure 44: Opinions of bank/building society accounts, by gender, age, socio-economic group, presence of children, shopper status, region, working status, presence of children under 16, Internet access and digital TV access, RoI, November 2007

Figure 45: Agreement with the statement ‘I prefer to use the same bank/organisation for all products’, NI and RoI, November 2007

Cross-tabs

NI

Figure 46: Cross-analysis of banks with which respondents have accounts and attitudes towards banking, NI, November 2007

Figure 47: Cross-analysis of banks with which respondents have accounts and attitudes towards banking, NI, November 2007

Figure 48: Cross-analysis of banks with which respondents have accounts and attitudes towards banking, RoI, November 2007