Emerging Media and Technology

Where u need 2 b

October 2008

Mintel International Group. All rights reserved. Confidential to Mintel.

Key Issues
To what extent are people bypassing traditional channels to arrange and manage their financial affairs? How many people are actually using social networking sites? Is there any real consumer appetite for mobile finance? Do certain consumer segments make greater use of new media and technology when it comes to financial services? When people are unhappy with their bank, do they still turn to customer services, or do they just complain online?

Mintel International Group. All rights reserved. Confidential to Mintel.

Internet Penetration in the UK

Figure: British internet penetration at home/work/place of study or elsewhere, 2003-08 Base: 3,965/4,060/4,334/4,090/2,058/2,131/1,964 adults aged 16+

5 5 5 5 5 5 % with internet access 5 5 5 5 5 5 5 5 5 5 5 Apr 5 5 Apr 5 5 Apr 5 5 Apr 5 5 May 5 5 Apr 5 5 July 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

After several years of static growth, broadband usage has helped boost internet penetration in recent years. As of July 2008 more than two thirds of UK adults report having access. Another interesting development is the emergence of mobile broadband, which enables users to surf the web anywhere via 3G network dongles. With improving technology and decreasing tariffs it is currently the fastest-growing broadband platform.

Source: Ipsos MORI/Mintel

Mintel International Group. All rights reserved. Confidential to Mintel.

Technology and online banking

Figure: Use of online banking and mobile internet services, September 2008
Base: 2,000 internet users aged 16+

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Online banking through a laptop/desktop PC Standard internet (WAP/GPRS) through your mobile 5 (broadbandG speed) internet through your mobile 5 5 5 5 5 5 5 5

5 5

The first online banking service was launched over a decade ago, and by mid-2008, more than 21 million were banking online in the UK. According to Mintel consumer research, two thirds of internet users regularly use online banking services.

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Text alerts that Online banking warn you if youre through a mobile about to go phone overdrawn/ over your credit limit

While an increasing number of people are using their mobile phones to access the internet, when it comes to online banking the majority of users rely on their PC.

Use regularly/occasionaly Never used

Have used, but not any longer Have never heard of this service

Source: GMI/Mintel Mintel International Group. All rights reserved. Confidential to Mintel.

Buying financial products online

Figure: Online purchasing behaviour of select financial services products, September 2008
Base: 2,000 internet users aged 16+

5 5 5 5 5 5 5 5 5 5
%5 5

With the development of online tools such as price comparison websites, the internet has revolutionised the sale of insurance and credit cards. Although, face-to-face distribution channels continue to hold a dominant position in the sale of most other personal financial services products a third of internet users would consider arranging a current account online.

5 5 5 5 5 5 5 5
Motor insurance Home insurance Savings account Credit card Current account Personal loan Investment product Mortgage Pension

Have bought online Would consider buying but not online

Would consider buying online Probably wouldnt consider buying at all

Source: GMI/Mintel

There is considerably less interest in arranging financial products that are more complex and require significant amounts of money, such as a mortgage or pension, online.

Mintel International Group. All rights reserved. Confidential to Mintel.

Consumers still unconvinced of mobile phone banking

With First Direct launching text alerts in 1999, mobile banking has been in existence for nearly a decade but has been a niche activity. Most recently, with improvements in handset technology and the growth of near-broadband mobile internet speeds interest in this channel has been rekindled. Consumers have, however, expressed considerable concerns over security, despite the argument that mobiles are, in some ways, more secure than desktops. A large amount of scepticism is also evident with two fifths of internet users stating they just dont see the need for mobile banking services.

Mintel International Group. All rights reserved. Confidential to Mintel.

The potential of mobiles - beyond account management

With the launch of increasingly sophisticated phones, financial services providers are looking to expand the use of services such as phone-based payments. Lloyds TSB for example, among others, already allows customers to switch money between accounts while Nokia has recently partnered with Visa to expand the development of Contactless payment services. Faster broadband speed connectivity on mobile phones has made the likes of mobile share-dealing and spreadbetting a reality. Industry contacts were less convinced about the use of mobiles in other areas of the financial services market, such as the arrangement of personal loans and the use of price comparison websites.

Mintel International Group. All rights reserved. Confidential to Mintel.

Contactless Payments a trial still in progress

Mintel research indicates that only around 1% of credit card holders have a contactless card - although APACS suggests that by the end of 2008, over five million will have been issued.

One of the primary issues in the further spread of the service is who will pay for the technology required - banks or vendors.

Mintel International Group. All rights reserved. Confidential to Mintel.

Social Networking in financial services

With more than half of all internet users having used a social networking site, the rapid rise in popularity of these websites has lead to considerable interest about their potential value in financial services. Although it is still too early to judge it can be argued that marketers may be finding the websites less useful than first imagined as marketing directly is likely to be viewed as an intrusion. Given the level of personal information many users make available, there are also serious concerns in regard to security and identity theft. As the Facebook-led revolt against HSBCs changes to its graduate account highlighted the true potential power or danger of these sites may have more to do with word of mouth advertising or closer communication with customers.

Mintel International Group. All rights reserved. Confidential to Mintel.

Social-networking appeals to a younger user base

Figure : Any user of select social-networking websites by age, September 2008
Base: 2,000 internet users aged 16+

5 5 5 5 5 5 5 5 5 5 % 5 5 5 5 5 5 5 5 5 Facebook My space 5- 5 5- 5 55 55 Bebo 5- 5 55 Second Life 5- 5 55 5+ 5 Linked-In

In contrast to personal finance webpages the typical user of a social-networking website tends to be much younger. This could mean that the finance industry may have to wait for the average user base to age before it can fully reap the potential benefits of social-networking. Although the user base is so young they are also reasonably affluent (Facebook and Linked-In users in particular), so there arguably could be an opportunity for the financial services industry to engage with consumers much earlier in their adult lives.

Source: GMI / Mintel

Mintel International Group. All rights reserved. Confidential to Mintel.

The excitement about virtual worlds has died down

Originally developed as a source of entertainment, online virtual worlds like Second Life caught mainstream attention in 2006. Excited by its potential as a business tool several financial services firms have made extensive use of Second Life, although this has now slowed considerably as hype started to catch up with reality. For the most part, most firms have accepted that virtual worlds will likely remain a niche route to market for the predictable future, although firms such as Aviva USA, are looking to incorporate them as a training tool

Mintel International Group. All rights reserved. Confidential to Mintel.

Consumer - Technology ownership and usage

Figure:Ownership of various types of technology, September 2008 Base: 2,000 internet users aged 16+
Broadband Internet at home Digital TV Other mobile phone (not smartphone) Portable digital music/media player Static home games console Personal video recorder Digital radio Portable gaming device Residential Wi-Fi Interactive services on Digital TV Smartphone Mobile Wi-Fi PDA or other handheld computer None of these 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 % 5 5

Broadband internet at home is far and away the most commonly used modern technology used by internet users in the UK. In addition to being a valuable platform for information gathering, the rapid growth of high speed internet connections in peoples homes has helped to establish online banking, and execution only online sharedealing as viable channels for doing business. Although not all new technologies are particularly useful for financial services, of the ones listed, mobile devices are likely to present an area of significant growth potential.

Source: GfK NOP/Mintel

Mintel International Group. All rights reserved. Confidential to Mintel.

Emerging media and sources of advice

The usage of the different types online information resources varies according to the type of financial product a consumer might be looking to arrange. Age also has been shown to have a significant impact on the type of on or offline information resource one may utilise. Younger consumers are more likely to seek advice from friends and family while just over two fifths of people in the 34 to 44 and plus 55 age groups are likely to seek professional advice. People from more affluent and wealthy backgrounds are the most likely to take advantage of multiple on and offline resources when arranging a personal finance product. People who have a high interest in modern technological devices also tend to show a higher level of financial sophistication.

Mintel International Group. All rights reserved. Confidential to Mintel.

Emerging media and customer complaints

Figure: What consumers would do if their bank let them down, September 2008
Base: 2,000 internet users aged 16+

% 5 5 5 5 5 5 5 5 5 5 5 5

As the chart clearly displays the more traditional ways of complaining to or about banks continue to reign. Hardly any consumers say they would resort to using web forums, posting bad reviews on the web or complaining on social-networking websites if they had a problem with their bank. In fact of all the most modern technologies, only email was close to challenging the more traditional ways of complaining when things go wrong.

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Source: GMI / Mintel

Mintel International Group. All rights reserved. Confidential to Mintel.

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