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Financial Services: Consumers and New Technology - UK - August 2011

This report specifically focuses on the consumer aspect of finance and technology. It details consumer usage of a wide range of financial services-related technologies as well as their attitudes and behaviour towards them. In addition to exploring the potential of emerging technologies like mobile banking and mobile ‘tap and go’ payments, the report also takes a look at the development of new media channels, such as Facebook and Twitter, in relation to financial services.

“Although most consumers surveyed say they plan to take a wait-and-see approach to adoption, the fact that more internet users now say they use a smartphone than a standard mobile signals the significant market potential for both mobile banking and mobile contactless payments in the UK.”

– George Zaborowski, Senior Financial Services Analyst

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Table of contents

  1. Introduction

    • Consumers, finance and technology
      • Abbreviations
      • Executive Summary

          • The market
            • More than four fifths of internet users now banking online
              • Figure 1: Online banking usage frequency, April 2011
            • Use of mobile banking on the rise
              • Figure 2: Use of any type of mobile banking service, 2010 and 2011
            • Over two thirds have bought a financial product online
              • Figure 3: Buying select financial products online, May 2011
            • Contactless cards ownership not yet widespread
              • Figure 4: Level of ownership and usage of contactless debit and credit cards, May 2011
            • Market factors
              • Seven out of ten UK adults now have a broadband connection.
                • Two fifths of internet users have a smartphone
                  • Figure 5: Ownership of selected types of technology, May 2011
                • Strong growth in NFC-enabled handsets projected
                  • The consumer
                    • Attitudes and behaviour towards online banking
                      • Attitudes towards mobile banking
                        • Attitudes towards contactless cards
                          • Consumer interest in mobile payment technology
                            • New media and financial services
                              • Figure 6: Commenting about financial services provider customer services, by new media channels, May 2011
                            • What we think
                            • Issues in the Market

                                • Why hasn’t contactless payment technology taken off in the UK?
                                  • Will mobile ‘tap and pay’ technology be a hit with Britons?
                                    • How much interest is there in buying complex financial products online?
                                      • Can mobile banking become as common as PC-based online banking?
                                      • Future Opportunities

                                        • Defeating security fears
                                          • Adjusting to a more hectic pace of life
                                          • Technology Ownership

                                            • Key points
                                              • Seven in ten UK consumers now have broadband access
                                                • Figure 7: UK internet and broadband penetration – GB, 2004-10
                                              • Two in five internet users have a smartphone
                                                • Figure 8: Ownership of selected types of technology, May 2011
                                              • NFC-enabled handset sales expected to rise exponentially
                                                • Tablet PC usage also expected to rise significantly
                                                  • Early adopters – the usual suspects
                                                    • Figure 9: Ownership of selected types of technology, by demographics, May 2011
                                                • Online Banking

                                                  • Key points
                                                    • The number of online banking transactions has grown exponentially
                                                      • Figure 10: Number of registered telephone and online banking customers and number of transactions (MBBGs only), 2002 and 2009
                                                    • Online banking hasn’t made the branch network obsolete…
                                                      • …but it has revolutionised the way people manage their accounts
                                                        • Figure 11: Use of banking channels, April 2011
                                                      • Mobile online banking channel still in its infancy but emergent
                                                        • Younger generation reflects mobile banking’s significant potential
                                                          • Figure 12: Use of any bank channel, by demographics, April 2011
                                                        • Tech- and finance-savvy of the more affluent also evident
                                                        • Attitudes and Behaviour towards Online Banking

                                                          • Key points
                                                            • Over three fifths say they now do all their banking online
                                                              • Figure 13: Level of agreement with statements about online banking and security, May 2011
                                                            • Consumers have largely got over security concerns…
                                                              • …but security will always be an issue regardless
                                                                • The password problem
                                                                  • 25-44s form the core group of consumers moving finances online
                                                                    • Figure 14: Agreement with statements about online banking and security, by demographics, May 2011
                                                                  • The convergence of tech- and finance-savvy
                                                                  • Buying Financial Products Online

                                                                    • Key points
                                                                      • Over two thirds have bought a financial product online
                                                                        • Figure 15: Buying select financial products online, May 2011
                                                                      • Still more room for growth
                                                                        • One online purchase is likely to lead to several others…
                                                                          • Figure 16: Number of financial products bought online, May 2011
                                                                        • …but this has been mostly limited to straightforward products
                                                                          • Who’s already buying online?
                                                                            • Who’s considering buying financial products online?
                                                                              • Who is most open to buying more complex products online?
                                                                                • Pensions
                                                                                  • Mortgages
                                                                                    • Investment products
                                                                                      • As adviser numbers shrink, more distribution will move online
                                                                                      • Contactless Card Ownership and Usage

                                                                                        • Key points
                                                                                          • A significant amount of people still do not have a contactless card…
                                                                                            • Figure 17: Level of ownership and usage of contactless debit and credit cards, May 2011
                                                                                          • …but most people who have one, are using it
                                                                                            • Figure 18: Level of usage of a contactless debit or credit card among people who have been issued one, May 2011
                                                                                          • A young, male London-centric user-base
                                                                                            • Figure 19: Ownership and usage of any contactless payment card (debit or credit), by select demographics, May 2011
                                                                                        • Attitudes towards Contactless Cards

                                                                                          • Key points
                                                                                            • Chip and PIN just fine thank you
                                                                                              • Figure 20: Level of agreement with statements about contactless cards, May 2011
                                                                                            • Easing security concerns
                                                                                              • Many cardholders are looking for more opportunities to use contactless
                                                                                                • Figure 21: Agreement with attitudes towards contactless payment technology, by ownership of contactless credit or debit cards, May 2011
                                                                                              • Limited contactless payment acceptance by retailers
                                                                                                • Interest in the technology is mainly linked to age and gender
                                                                                                  • Figure 22: Agreement with attitudes towards contactless payment technology, by demographics, May 2011
                                                                                              • Mobile Banking Usage

                                                                                                • Key points
                                                                                                  • Monitise is the key provider of UK mobile banking services
                                                                                                    • Proportion of people using mobile banking nearly doubles in 2011
                                                                                                      • Figure 23: Use of mobile banking services, 2010 and 2011
                                                                                                    • Text-based mobile banking still number one
                                                                                                      • Figure 24: Number of financial services used on mobile phones, May 2011
                                                                                                      • Figure 25: Use of mobile banking services, by ownership of selected types of technology, May 2011
                                                                                                    • The rise of mobile applications
                                                                                                      • 16-34s form the core group of users
                                                                                                        • Figure 26: Use of mobile banking services, by gender and age, May 2011
                                                                                                      • Affluence and income are less significant factors
                                                                                                        • Figure 27: Use of mobile banking services, by socio-economic group, May 2011
                                                                                                        • Figure 28: Use of mobile banking services, by gross annual household income, May 2011
                                                                                                    • Attitudes towards Mobile Banking

                                                                                                      • Key points
                                                                                                        • Most consumers lukewarm about mobile banking…
                                                                                                          • Figure 29: Level of agreement with attitudinal statements towards mobile banking, May 2011
                                                                                                        • …but uptake of online banking proves this could change
                                                                                                          • Putting the focus on practical uses
                                                                                                            • Smartphone growth = mobile banking growth
                                                                                                              • Figure 30: Agreement with attitudinal statements towards mobile banking, by ownership of selected types of technology, May 2011
                                                                                                            • Level of interest directly linked with age
                                                                                                              • Figure 31: Agreement with attitudinal statements towards mobile banking, by demographics, May 2011
                                                                                                          • Consumer Interest in Mobile Payments

                                                                                                            • Key points
                                                                                                              • ‘Touch and go’ mobile payments now an option for Britons
                                                                                                                • NFC technology set to become a smartphone standard
                                                                                                                  • Most consumers not taking an ‘active’ interest
                                                                                                                    • Figure 32: Level of interest in mobile payment technology, 2010 and 2011
                                                                                                                  • Challenges resemble those faced by contactless plastic cards
                                                                                                                    • Industry co-ordination the essential missing element
                                                                                                                      • Rising smartphone usage points to real market potential
                                                                                                                        • Figure 33: Level of interest in mobile payment technology, by ownership of selected types of technology, May 2011
                                                                                                                      • Contactless card users provide a base to build on...
                                                                                                                        • Figure 34: Level of interest in mobile payment technology, by ownership and usage of any type of contactless payment type (debit or credit), May 2011
                                                                                                                      • …but upgrading to NFC-enabled handsets will take time
                                                                                                                        • 16-34s and Londoners the most keen
                                                                                                                          • Figure 35: Level of interest in mobile payment technology, by demographics, May 2011
                                                                                                                      • New Media and Financial Services

                                                                                                                        • Key points
                                                                                                                          • Most still praising or complaining via traditional channels…
                                                                                                                            • Figure 36: Commenting about financial services provider customer services, by channel, May 2011
                                                                                                                          • …but new media have given consumers a much louder voice
                                                                                                                            • Figure 37: Commenting about financial services provider customer services, by new media channels, May 2011
                                                                                                                          • Who’s most actively expressing their views via new media channels?
                                                                                                                            • Paying attention to the conversation and getting more involved
                                                                                                                              • First Direct leading the way in the UK
                                                                                                                                • Financial advisers also experimenting with new media
                                                                                                                                  • Amex allowing US cardholders to link accounts on Facebook
                                                                                                                                    • Discover incentivising Facebook friends
                                                                                                                                    • Identifying the Early Adopters

                                                                                                                                      • Key points
                                                                                                                                        • Key target groups
                                                                                                                                          • Figure 38: Buying select personal financial products online, by target groups, May 2011
                                                                                                                                        • Early Adopters (33% of sample)
                                                                                                                                          • Late Adopters (23% of sample)
                                                                                                                                            • Contactless Sceptics (22% of sample)
                                                                                                                                              • Security Concern (22% of sample)
                                                                                                                                                • Those using online banking also willing to buy online
                                                                                                                                                  • Figure 39: Buying select personal financial products online, by target groups, May 2011
                                                                                                                                                  • Figure 40: Repertoire of financial services bought online, by target groups, May 2011
                                                                                                                                                • Continued growth in online banking will lead to more online sales
                                                                                                                                                  • Early and Late Adopters lead the way in mobile banking…
                                                                                                                                                    • Figure 41: Usage of mobile banking services, by target groups, May 2011
                                                                                                                                                    • Figure 42: Repertoire of financial transactions on mobile services, May 2011
                                                                                                                                                  • …but text-based mobile banking still the dominant form
                                                                                                                                                    • Interest in mobile payments highly concentrated among Early Adopters
                                                                                                                                                      • Figure 43: Consumer interest in mobile payment technology, by target groups, May 2011
                                                                                                                                                  • Appendix – Technology Ownership

                                                                                                                                                      • Figure 44: Ownership of selected types of technology, by demographics, May 2011
                                                                                                                                                  • Appendix – Online Banking

                                                                                                                                                      • Figure 45: Use of the bank branch, by demographics, April 2011
                                                                                                                                                      • Figure 46: Use of online banking via a desktop PC or laptop, by demographics, April 2011
                                                                                                                                                      • Figure 47: Use of online banking via a smartphone, by demographics, April 2011
                                                                                                                                                      • Figure 48: Use of text-based banking on a mobile, by demographics, April 2011
                                                                                                                                                      • Figure 49: Use of telephone banking, by demographics, April 2011
                                                                                                                                                  • Appendix – Attitudes and Behaviour towards Online Banking

                                                                                                                                                      • Figure 50: Agreement with attitudes towards online banking, by ownership of selected types of technology, May 2011
                                                                                                                                                      • Figure 51: Disagreement with attitudes towards online banking, by ownership of selected types of technology, May 2011
                                                                                                                                                      • Figure 52: Agreement with the statements ‘Online banking makes managing my personal finances easier and less time-consuming’ and ‘I do almost all my banking online nowadays’, by demographics, May 2011
                                                                                                                                                      • Figure 53: Agreement with the statements ‘Online banking is totally secure’ and ‘I am happy to use a provider who can only be accessed online/over the phone’, by demographics, May 2011
                                                                                                                                                  • Appendix – Buying Financial Products Online

                                                                                                                                                      • Figure 54: Most popular selected personal financial products bought online, by demographics, May 2011
                                                                                                                                                      • Figure 55: Next most popular selected personal financial products bought online, by demographics, May 2011
                                                                                                                                                      • Figure 56: Most popular selected personal financial products consider buying online, by demographics, May 2011
                                                                                                                                                      • Figure 57: Next most popular selected personal financial products consider buying online, by demographics, May 2011
                                                                                                                                                      • Figure 58: Most popular selected personal financial products consider buying but not online, by demographics, May 2011
                                                                                                                                                      • Figure 59: Next most popular selected personal financial products consider buying but not online, by demographics, May 2011
                                                                                                                                                      • Figure 60: Most popular selected personal financial products wouldn’t buy at all, by demographics, May 2011
                                                                                                                                                      • Figure 61: Next most popular selected personal financial products wouldn’t buy at all, by demographics, May 2011
                                                                                                                                                  • Appendix – Contactless Card Ownership and Usage

                                                                                                                                                      • Figure 62: Ownership and usage of contactless payment card technology, May 2011
                                                                                                                                                      • Figure 63: Ownership and usage of any contactless payment card (debit or credit) technology, by demographics, May 2011
                                                                                                                                                  • Appendix – Attitudes towards Contactless Cards

                                                                                                                                                      • Figure 64: Agreement with attitudes towards contactless payment technology, by ownership of selected types of technology, May 2011
                                                                                                                                                      • Figure 65: Agreement with attitudes towards contactless payment technology, by ownership of contactless debit cards, May 2011
                                                                                                                                                      • Figure 66: Agreement with attitudes towards contactless payment technology, by ownership of contactless credit cards, May 2011
                                                                                                                                                      • Figure 67: Ownership and usage of contactless payment card technology, by agreement with attitudes towards contactless payment technology, May 2011
                                                                                                                                                      • Figure 68: Agreement with the statements ‘I am concerned about the consequences of losing my card’ and ‘Banks should only issue these cards when customers specifically request them’, by demographics, May 2011
                                                                                                                                                      • Figure 69: Agreement with the statements ‘Chip and PIN technology is more secure’ and ‘Paying for items using contactless technology is convenient’, by demographics, May 2011
                                                                                                                                                      • Figure 70: Agreement with the statement ‘I wish more retailers offered me the option to use contactless payments’, by demographics, May 2011
                                                                                                                                                  • Appendix – Mobile Banking Usage

                                                                                                                                                      • Figure 71: Most popular usage of mobile banking services, by demographics, May 2011
                                                                                                                                                      • Figure 72: Next most popular usage of mobile banking services, by demographics, May 2011
                                                                                                                                                  • Appendix – Attitudes towards Mobile Banking

                                                                                                                                                      • Figure 73: Disagreement with attitudinal statements towards mobile banking, by ownership of selected types of technology, May 2011
                                                                                                                                                      • Figure 74: Usage of mobile banking services, by agreement with attitudinal statements towards mobile banking, May 2011
                                                                                                                                                      • Figure 75: Agreement with the statements ‘Mobile banking is too much of a security risk’ and ‘Being able to manage my finances on the go would make my life easier’, by demographics, May 2011
                                                                                                                                                      • Figure 76: Agreement with the statement ‘I don’t really see the need for these services’, by demographics, May 2011
                                                                                                                                                  • Appendix – Consumer Interest in Mobile Payments

                                                                                                                                                      • Figure 77: Level of interest in mobile payment technology, by agreement with attitudes towards contactless payment technology, May 2011
                                                                                                                                                      • Figure 78: Level of interest in mobile payment technology, by demographics, May 2011
                                                                                                                                                  • Appendix – New Media and Financial Services

                                                                                                                                                      • Figure 79: Praising financial firms, by channel, by demographics, May 2011
                                                                                                                                                      • Figure 80: Praising financial firms by channel, by demographics (continued), May 2011
                                                                                                                                                      • Figure 81: Complaining about financial firms, by channel, by demographics, May 2011
                                                                                                                                                      • Figure 82: Complaining about financial firms, by channel, by demographics (continued), May 2011
                                                                                                                                                      • Figure 83: Neither praising nor complaining about financial firms, by channel, by demographics, May 2011
                                                                                                                                                      • Figure 84: Neither praising nor complaining about financial firms, by channel, by demographics (continued), May 2011
                                                                                                                                                  • Appendix – Identifying the Early Adopters

                                                                                                                                                      • Figure 85: Attitudes towards online banking, by target groups, May 2011
                                                                                                                                                      • Figure 86: Attitudes towards mobile banking, by target groups, May 2011
                                                                                                                                                      • Figure 87: Attitudes towards contactless payment technology, by target groups, May 2011
                                                                                                                                                      • Figure 88: Ownership of selected types of technology, by target groups, May 2011
                                                                                                                                                      • Figure 89: Ownership and usage of contactless payment card technology, by target groups, May 2011
                                                                                                                                                      • Figure 90: Commenting about financial provider customer services, by target groups, May 2011
                                                                                                                                                      • Figure 91: Target groups, by demographics, May 2011

                                                                                                                                                  Companies Covered

                                                                                                                                                  • American Express UK
                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                  • British Bankers' Association (BBA)
                                                                                                                                                  • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                  • Financial Ombudsman Service
                                                                                                                                                  • First Direct
                                                                                                                                                  • Google UK
                                                                                                                                                  • HSBC Private Bank (UK) Limited
                                                                                                                                                  • J. Sainsbury
                                                                                                                                                  • Kantar Media
                                                                                                                                                  • Marks & Spencer
                                                                                                                                                  • MasterCard UK
                                                                                                                                                  • Money Saving Expert
                                                                                                                                                  • NatWest
                                                                                                                                                  • NUS [National Union of Students]
                                                                                                                                                  • Office of Fair Trading
                                                                                                                                                  • Pret A Manger
                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                  • Tesco Plc
                                                                                                                                                  • Ulster Bank Ltd
                                                                                                                                                  • Virgin Media Ltd
                                                                                                                                                  • Wm Morrison Supermarkets

                                                                                                                                                  Financial Services: Consumers and New Technology - UK - August 2011

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