Niche Finance - UK: Industry Report

Niche Finance - UK

Product Type: Market Research Report
Published by: Mintel International Group Ltd.
Published: July 2008
Product Code: R560-3394

Description

Today, consumers are more individualistic than ever and they expect financial products and services to address them as individuals. In this environment, the mass market is no longer the target, but rather a series of small sub-market sectors.

While financial services firms can survive without a niche, to flourish in today’s consumer market requires a greater concentration on specific market segments. The major institutions are finding that if they remain as generalists, their products and services become diluted, while smaller firms are better able to compete against the high street giants if they attempt to carve out a niche for themselves.

This report looks at four key niche target groups within the financial services industry:

newly arrived Eastern and Central European immigrants
students
seniors (over-65s)
investors who want to buy Shari’a-compliant financial products.

A core focus will be on the process of finding and serving these potentially profitable market segments and on the current efforts that have been made to design custom-made products or services for them. The report draws on a mixture of industry and consumer research, including exclusively commissioned research covering product ownership and attitudes among both Central and Eastern European immigrants, and the Muslim community - two market segments that have attracted considerable attention from even mainstream financial services firms.

Table of Contents

Issues in the Market: Abbreviations/Definitions
Insights and Opportunities: Building awareness by building communities; More lessons for students?; The art of financial management; Shifting focus to the young
Market in Brief: Eastern and Central European finance; The Polish pound begins to speak; The market characteristics: Young, gifted and Polish; Product development centres on the Polish market; The current provision: Simplicity drives the market; Marketing messages: Talk to them in their own language; Where more work needs to be done; But let’s give the banks some credit; Student finance; The future of financial services; Spending - and borrowing; The market characteristic: Young, gifted and potentially loaded; The current provision: Limited, the first signature is all important; Marketing opportunities: Banks need to get smarter; Senior finance; A market coming of age; The size of the target market: A large ‘niche’ sector; A niche looking to boost its income; The market characteristic: Highly diverse and individualistic; Significant financial diversity; Important age diversity; The current provision: Are financial services firms taking this market seriously?; Marketing messages: Don’t underestimate the senior consumer; This is a dynamic market; Shari’a finance; A slow burn, but has the fire started to take hold?; The size of the target market: 2 million Muslims and 1.3 million of working age; Mortgages lead the way; The market characteristic: Young, family-oriented but fragmented; The current provision: mortgages well established, the rest playing catch-up; Range of products is expanding; Marketing opportunities: Community-focused; Language is important
Fast Forward Trends: Trend 1: Agelessness; Old getting younger, young getting older; Students and seniors - what way now for financial responsibility?; Young at heart; Trend 2: Staying Connected; Online enablers; Uniting the niche
Niches Compared: How well has the industry marketed?; The characteristics of each niche; Current provision; Marketing techniques employed; Meeting requirements
Eastern and Central European Finance: Who are your Customers?: Key points; Why Eastern and Central European finance?; Who is the target market?; The Poles dominate; They are ‘legitimate workers’; The market is maturing; They are young and free - but not necessarily single; In low-skilled jobs….; …earning low wages but working long hours…; …despite being well educated; Do you know your trippers from your blenders?; The size of the target market?; Not an easy task; How niche is niche?; 1.5% of current account holders; Spending power of £8.4 billion; A fluid market; Is the target market shrinking?
Eastern and Central European Finance: Understanding the Market: Key points; Product development timeline; Product- or language-led?; Language developments; Product developments; Current accounts: A straightforward product meeting a need; HSBC targets all immigrants; NatWest launches the first Polish Account; Lloyds TSB follows closely behind; The prepaid card market: competition for the major banks; Prepaid vouchers: Competition for credit cards
Eastern and Central European Finance: Marketing Approaches: Key points; Language is important; Targeted branches yes, but only in certain localities; Advice services can lead to trading up; Get the marketing mix right; The specialist media grow; Specialist press listings; Remember, marketing begins at home; Remember K.I.S.S.; Points to remember
Eastern European Finance: Consumer Research: Key points; Basic needs determine product ownership; Bank accounts - not just a short-term product; Ownership patterns similar to those for UK nationals; Should the banks stop Pole dancing?; Banks are on the right track; The old, poor and Non-Polish speakers need more help; But has the marketing message been lost in translation?; Advertising efforts falling on deaf ears?; More work needed on non-Poles; Advertising focused on the more affluent and the mature; The young, poor and non-Poles are being bypassed
Shari’a Finance: Who are your Customers?: Key points; Why Shari’a finance?; Who are the target market?; Not the Muslim community, but the Muslim communities; Second and third generation; Potential for child bonds and insurance products; Scope for commercial business…; …but a community split along economic lines; The size of the target market; How niche is niche?; Nearly 400,000 UK Muslims hold Shari’a finance products; Trends in the target market
Shari’a Finance: Understanding the Market: Key points; What is available on the market?; Government support boosts the industry; Shari’a mortgages; Three mortgage models; Key market providers; Now the insurance support is available…; …but some difficulties remain; The product range is expanding; Income multiples can be high; Personal loans: Only one provider; Shari’a current accounts: Becoming well established; Crossing the niches: Islamic student accounts; Shari’a-compliant worldwide money transfers; Shari’a savings accounts: Only one provider; Shari’a insurance: Just getting started; Principle insurance launched; The big boys waiting in the wings, and HSBC moves in; Stockbroking: Established but no new entrants; Islamic pensions: Interest is stirring; Islamic investment funds: A few funds available; Shari’a-compliant Child Trust Fund: Big potential; Shari’a credit cards the next step?
Shari’a Finance: Marketing Approaches: Key points; Get the community on your side; Target leaflet drops and distribution are effective; Challenging perceptions; The branch is key; Use of the Muslim media; Watch what you put on your brochures…; …and remember it’s not just Muslims who want Shari’a products; Trust is a big issue
Shari’a Finance: Consumer Research: Key points; Ownership of financial products is high; Women and the over-35s lead the market; Muslim C1s buck the norm; Urdu/Hindi and Bangla speakers the most likely to own; 30% of Muslims own Shari’a-compliant products; A 940,000 gap; Women again lead the market; Income determines ownership but social grade is less important; Are second-generation Muslims more interested in Shari’a products?; Gap analysis; Figure 46: Gap analysis for Shari’a finance products, June 2008; Shari'a products are complementary; Rich and mature are hardcore users; Are Westernised Muslims less interested?; Could the banks do more?
Student Finance: Who are your Customers?: Key points; Why student finance?; Who are the target market?; Young, free, single - and affluent?; The size of target market; Over 2 million students - but the focus is on UK students; How niche is niche?; Less than 4% of the adult population; Less than 2% of consumer spending power; Trends in the Target Market; Student numbers rising, but the rate of growth is slowing…; Could the market have reached a peak?; The funding gap - key role for banks to play; Student debt keeps rising; Commercial lenders important…; …but limited revenue possibilities
Student Finance: Understanding the Market: Key points; What is available on the market?; Student accounts: The basic, well-established essential; Prepayment cards: For young people and students; Dedicated student credit cards: Not much activity; Student insurance: Small range of policies; High-risk targets?; The insurance market gap; A gap for gap-year cover?; Student personal loans: Loans sold to students
Student Finance: Marketing Approaches: Key points; Get’ em as young as possible…; …but why wait until they have an offer?; Give ‘em ‘something’ for ‘nothing’; A student is for life - not just university; Remember you’re targeting students, not the young; The laptop effect; Use the arts link; Offline advertising channels still valuable…; …as are the student media; The campus is also an advertising medium
Student Finance: Channels to Market: Key points; All’s Fair in love and war…; ..and remember other events as well; On-campus branches less important today; Use new tech for banking services and marketing; It’s the Facebook generation…; …but he who lives by viral marketing can die by viral marketing
Student Finance: Consumer Research: Key points; Students have to rely on debt for their lifestyle; Student loans dominate student debt; Managing their finances - a more responsible approach?; Dislike of debt is growing; Don’t forget that students save as well; Better at saving than their peers?
Senior Finance: Who are your Customers?: Key points; Why senior finance?; Who is the target market?; Women increase in importance with age; It’s a couple market; A market where lifestyles and living arrangements change; Seniors are financially comfortable; From watchful to struggling; Figure 86: Financial situation of seniors, by wealth type, 2008; Some are challenged and some are resilient; Financial power rests with the channelled and comfortable…; …but issues remain; Over £1 trillion in assets; Seven in ten own property outright; Seniors adopt new financial strategies; The ‘GOTYs’; The size of the target market; How niche is niche?; High savings ownership; Trends in the target market; Not falling behind in the income race; The flow of money across the generations; Income from employment of growing importance; Seniors grow as consumers…; …and drive the savings market; Increasingly wealthy market
Senior Finance: Understanding the Market: Key points; What is available on the market?; Premium packaged current account: One provider; Savings accounts; Credit cards: Only one provider; Travel insurance: Not all seniors covered…; …despite a risk-averse target market; Few offer cover to over-80s; Motor insurance; Funeral plans; Life insurance products; Expanding the market…; …but at a price; Long-term care insurance; Variety of benefits on offer; Equity release schemes; Rebuilding reputations; Income generation key; Three main product types
Senior Finance: Marketing Approaches: Key points; Time to readjust attitudes?; The silver saver gimmick; Seniors are not that gullible; Inform and entertain; Age pride: The ‘Dove effect’; Don’t overdo the senior celebs; Advertising quality is important…; …but debate rages in the marketing community; Retirement - not just a single lifestage; Simple and hassle-free, offering good value; Don’t count on brand loyalty; The channels to market; Mainstream media work well but watch the small print; Radio an increasing important channel; Don’t ignore new technology
Senior Finance: Consumer Research: Key points; One in four seniors are watchful of their finances; Asset-rich ABs; Seniors are good financial managers, consequently…; …debt levels are low; Seniors like cash not credit; Debt - cause or effect?; Asset ownership is high; Savings account ownership on the rise; ISA ownership rising: more seniors paying tax…; …but interest in riskier savings has remained stable

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