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Financial Services: Technology and the Internet - UK - August 2009

Technology has created both opportunities and challenges for the financial services industry over the last decade. The expansion of online banking services has fundamentally altered the retail banking sector, while the development of online distribution channels is having an impact across the financial services industry. At the same time, a proliferation of websites that provide product comparisons, best buys, expert opinion and personal finance discussion boards are beginning to have an impact on consumer behaviour and the wider market for financial advice.

The use of technology, including PCs and mobile phones has, become integral to everyday life and the evolution of these products is continuing to shape innovation in the financial services industry. Recent developments include the expansion of mobile banking services and the emergence of contactless and mobile payments. However, as a significant number of people still retain some concerns about online banking security, providers are likely to face significant challenges in convincing people of the benefits of these newer forms of technology.

This report examines the impact of technology and the internet on the financial services sector. It considers recent developments in online and mobile banking and contactless payments, and also the emergence of the internet as a source of financial advice. Mintel’s exclusively commissioned consumer research provides an insight into the appetite for new technology, as well as the potential barriers. It also examines usage of the most popular personal finance websites, attitudes towards online sources of advice and the growing influence of social media.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Future Opportunities

          • Tackling security concerns
            • Beyond the basics
              • The high street vs online
                • Opportunities to expand mobile banking
                  • Shift in market for financial advice
                  • Market in Brief

                    • Technology ownership
                      • Figure 1: British internet penetration at home/work/place of study or elsewhere, April 2002-April 2009
                    • Almost 90% use the internet for some banking activities
                      • Figure 2: Overview of preferred channels for banking activities (combined), June 2009
                    • Online banking increases but concerns persist among consumers
                      • Online channels are surpassing traditional sources of financial advice
                        • Figure 3: Most popular sources of advice for financial products, June 2009
                      • Moneysupermarket.com and MoneySavingExpert.com lead the way
                        • Mobile banking is a niche activity but there is scope to expand
                          • Security concerns are likely to limit the uptake of contactless payments
                          • Technology Ownership and Usage

                            • Key points
                              • 70% of adults have internet access
                                • Figure 4: British internet penetration at home/work/place of study or elsewhere, April 2002-April 2009
                              • Financial activities are common reason for using the internet
                                • Figure 5: Types of activity undertaken on the internet in the last three months, October 2008 and April 2009
                              • Technology device ownership
                                • Figure 6: Technology device ownership summary, July 2009
                              • Factors that determine technology ownership
                                • Figure 7: Technology device ownership summary, July 2009
                              • New finance related technology is endorsed by government
                              • Consumer Context

                                • Key points
                                  • The economic context
                                    • Changing attitudes and behaviour
                                      • Recession leads to increased financial engagement
                                        • Figure 8: Savings, investment, borrowing and debt repayment – consumers’ expected activity, quarterly indices, 2002-09 (Q2)
                                    • Online Banking

                                      • Key points
                                        • Shift towards online transactions
                                          • Figure 9: The number of personal customers registered for telephone and internet banking, and the number of transactions, 2003-07
                                        • Around 34 million use internet for banking activities
                                          • Figure 10: Overview of preferred channels for banking activities (combined), June 2009
                                        • Convenience is the main attraction for consumers
                                          • Online banking has advantages and challenges for providers
                                            • Online banking vs. branch network
                                              • Banking crisis could undermine appeal of online-only providers
                                                • Tackling security concerns, as online banking fraud rises
                                                  • Figure 11: Online banking fraud losses, 2004-08
                                                • Recent online banking developments dominated by security improvements
                                                • Mobile Banking

                                                  • Key points
                                                    • Mobile phones are ubiquitous
                                                      • Figure 12: Mobile phone subscribers, 2003-08
                                                    • Mobile banking – a niche but evolving activity
                                                      • A range of mobile banking services is available
                                                        • Different approaches to charging structures
                                                          • Recent mobile banking developments
                                                            • Interest among consumers but there are barriers to overcome
                                                              • Figure 13: Attitudes towards mobile banking, June 2009
                                                            • Security fears may be overstated
                                                              • Expansion of smartphones will boost mobile banking
                                                              • Contactless and Mobile Payments

                                                                • Key points
                                                                  • An evolution in UK payments
                                                                    • Figure 14: Volume of cheque*, plastic card** and automated payments^ transactions, millions, 2002-18
                                                                  • Moving towards a cashless society
                                                                    • More than three million contactless payment cards in circulation
                                                                      • Banks take different approaches to rollout
                                                                        • The role of retailers
                                                                          • The consumer perspective
                                                                            • Figure 15: Attitudes towards contactless payment technology, June 2009
                                                                          • Recent market developments
                                                                            • Mobile payments – the next big thing?
                                                                              • Development of mobile wallet concept
                                                                                • Helping to tackle financial inclusion
                                                                                  • Pre-paid cards as a launch pad into mobile banking
                                                                                  • Online Advice and Money Management

                                                                                    • Key points
                                                                                      • Online sources of advice are changing the advice landscape
                                                                                        • Figure 16: Most popular sources of advice for a range of financial products, (includes banking, general insurance and long-term products) June 2009
                                                                                      • But online advice doesn’t always translate to online sales
                                                                                        • Usage of personal finance websites
                                                                                          • Figure 17: Usage of selected personal finance websites, June 2009
                                                                                        • Independent money websites strike a chord among consumers
                                                                                          • Taking an independent approach to financial matters
                                                                                            • A new breed of money management providers
                                                                                              • An opportunity for financial service providers?
                                                                                                • Making finance fun
                                                                                                  • Mobile money management
                                                                                                  • Financial Services and Social Media

                                                                                                    • Key points
                                                                                                      • Social networking has become a mass-market activity
                                                                                                        • Figure 18: Usage of selected social networking sites, June 2009
                                                                                                      • Advantages of using social media
                                                                                                        • Examples of online communities
                                                                                                          • Communities for finance professionals
                                                                                                            • Challenges of using social media
                                                                                                              • Consumer activism
                                                                                                                • Gaining and maintaining interest
                                                                                                                  • An evolving marketplace
                                                                                                                  • The Consumer – Purchasing Financial Products Online

                                                                                                                    • Key points
                                                                                                                      • General insurance products are more likely to be purchased online
                                                                                                                        • Figure 19: Online purchasing of financial products, June 2009
                                                                                                                      • Online purchasing behaviour – a three-way split
                                                                                                                        • Figure 20: Repertoire of number of financial services products bought online, June 2009
                                                                                                                      • Online purchasing is more likely among high earners
                                                                                                                        • Figure 21: Demographic overview of repertoire of number of financial services products bought online, June 2009
                                                                                                                      • General insurance – the ‘starter purchase’
                                                                                                                        • Figure 22: Buying financial services products over the internet, by repertoire of number of financial services products bought online, June 2009
                                                                                                                      • Age is not the barrier often cited…
                                                                                                                        • Figure 23: Financial products bought online, by gender, age, socio-economic group and gross annual household income, June 2009
                                                                                                                      • … but younger adults will be easier to convert to online channels
                                                                                                                        • Figure 24: Financial products that people would consider buying online, by gender, age, socio-economic
                                                                                                                      • Under-24s need more support to use online channels
                                                                                                                        • Figure 25: Financial products that people would consider buying but not online, by gender, age, socio-economic group and gross annual household income, June 2009
                                                                                                                    • The Consumer – Channel Preferences for Banking Activities

                                                                                                                      • Key points
                                                                                                                        • Online is becoming increasingly popular for regular banking activities…
                                                                                                                            • Figure 26: Preferred channels for banking services, June 2009
                                                                                                                          • … but face-to-face channels still have the edge for advice and queries
                                                                                                                            • Men are more likely to complete more detailed transactions online
                                                                                                                              • Figure 27: Online banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
                                                                                                                            • What people want from their bank branch
                                                                                                                              • Figure 28: Face-to-face banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
                                                                                                                            • Telephone banking – a support service?
                                                                                                                              • Figure 29: Telephone banking activities, by gender, age, socio-economic group and gross annual household income, June 2009
                                                                                                                            • A multi-channelled model?
                                                                                                                              • Figure 30: Overview of preferred channels for banking activities (combined), June 2009
                                                                                                                            • Mobile remains a niche banking channel
                                                                                                                            • The Consumer – Attitudes Towards Online Banking

                                                                                                                              • Key points
                                                                                                                                • Online banking provokes mixed opinions
                                                                                                                                  • Figure 31: Attitudes towards online banking and security, June 2009
                                                                                                                                • Shifting attitudes as convenience becomes more important
                                                                                                                                  • Figure 32: Positive and negative attitudes towards online banking and security, by gender and age group, June 2009
                                                                                                                                • Tackling security concerns and providing a sense of control
                                                                                                                                  • Figure 33: Positive and negative attitudes towards online banking and security, by attitudes towards online banking and security, June 2009
                                                                                                                                • Online banking users have security concerns
                                                                                                                                  • Figure 34: Attitudes towards online banking and security, by preferred channels for banking services, June 2009
                                                                                                                                • Security concerns influence online purchasing behaviour
                                                                                                                                  • Figure 35: Attitudes towards online banking, by the likelihood to have arranged current account online, June 2009
                                                                                                                                • Higher earners are more likely to opt for online providers
                                                                                                                                  • Figure 36: Attitudes towards the security of high vs online providers, by age group, socio-economic group and gross annual household income, June 2009
                                                                                                                                • Banking crisis – positive for high street providers?
                                                                                                                                • The Consumer – Channel Preferences for Financial Advice

                                                                                                                                  • Key points
                                                                                                                                    • Bank staff and price comparison sites are most popular sources of advice
                                                                                                                                      • Figure 37: Most popular sources of advice for a range of financial products, June 2009
                                                                                                                                    • Different sources of advice for different financial products
                                                                                                                                      • Figure 38: Preferred sources of advice when arranging financial products, by type of product, June 2009
                                                                                                                                    • Online sources of advice appeal to under-35s and more affluent groups
                                                                                                                                      • Figure 39: Key demographics for preferred sources of financial advice, June 2009
                                                                                                                                    • Most people use multiple sources of financial advice
                                                                                                                                      • Figure 40: Cross-analysis of sources of advice when arranging financial products, June 2009
                                                                                                                                    • Online advice is likely to be crucial in the expansion of new technology
                                                                                                                                      • Figure 41: Preferred sources of financial advice, by selected attitudes towards online banking, mobile banking and contactless payment cards, June 2009
                                                                                                                                  • The Consumer – Attitudes Towards Online Sources of Advice

                                                                                                                                    • Key points
                                                                                                                                      • 20 million internet users use price comparison sites
                                                                                                                                        • Figure 42: Attitudes towards online sources of financial advice, June 2009
                                                                                                                                      • Are financial forums reducing the demand for professional advice?
                                                                                                                                        • Figure 43: Attitudes towards online sources of financial advice, by sources of advice most likely to be used to arrange financial products, June 2009
                                                                                                                                      • Price comparison sites as a research tool rather than a distribution channel
                                                                                                                                        • 16-24-year-olds most likely to lack trust in online advice
                                                                                                                                          • Figure 44: Attitudes towards online sources of financial advice, by gender and age group, June 2009
                                                                                                                                        • Internet usage has impact on attitudes towards online advice
                                                                                                                                          • Figure 45: Attitudes towards online sources of financial advice, by gross annual household income and daily personal internet usage, June 2009
                                                                                                                                      • The Consumer – The Key Online Brands

                                                                                                                                        • Key points
                                                                                                                                          • Moneysupermarket.com top personal finance websites
                                                                                                                                            • Figure 46: Frequency of usage of internet sites, June 2009
                                                                                                                                          • Most people use a variety of finance and social networking websites
                                                                                                                                            • Figure 47: Repertoire of number of internet sites used, June 2009
                                                                                                                                            • Figure 48: Usage of internet sites by repertoire of number of internet sites used, June 2009
                                                                                                                                          • Users of price comparison sites use several different brands
                                                                                                                                            • Figure 49: Cross-analysis of usage of selected internet sites, June 2009
                                                                                                                                          • More affluent are more likely to turn to online sources of information
                                                                                                                                            • Figure 50: Demographic overview of users of different types of internet sites, June 2009
                                                                                                                                          • Discussion boards are replacing traditional channels of advice
                                                                                                                                            • Figure 51: Advice or guidance most likely to use to arrange financial products, by types of internet sites used, June 2009
                                                                                                                                          • Websites influence purchasing behaviour
                                                                                                                                            • Figure 52: Attitudes towards online sources of financial advice, by types of internet sites used, June 2009
                                                                                                                                        • The Consumer – Attitudes Towards Mobile Banking

                                                                                                                                          • Key points
                                                                                                                                            • Two fifths are interested in mobile banking…
                                                                                                                                              • Figure 53: Attitudes towards mobile banking, June 2009
                                                                                                                                            • … but security concerns and a perceived lack of need could hamper the uptake
                                                                                                                                              • Almost four million 16-24-year-olds are interested in mobile banking
                                                                                                                                                • Figure 54: People interested in mobile banking, by gender, age, and gross annual household income, June 2009
                                                                                                                                              • A bonus for busy professionals
                                                                                                                                                • Allaying fears and promoting mobile banking
                                                                                                                                                  • Figure 55: Barriers to mobile banking, by age group, June 2009
                                                                                                                                                • Telephone banking could provide a lead into mobile banking
                                                                                                                                                  • Figure 56: Attitudes towards mobile banking, by preferred channels for banking services, June 2009
                                                                                                                                                • Balancing online and mobile banking channels
                                                                                                                                                  • Figure 57: Attitudes towards mobile banking, by postive and negative attitudes to online banking, June 2009
                                                                                                                                              • The Consumer – Attitudes Towards Contactless Payment Cards

                                                                                                                                                • Key points
                                                                                                                                                  • Security worries may hamper the uptake of contactless payment cards
                                                                                                                                                    • Figure 58: Attitudes towards contactless payment technology, June 2009
                                                                                                                                                  • Under-35s are the most likely to appreciate contactless payment facilities
                                                                                                                                                    • Figure 59: Positive attitude to contactless payment cards, by gender, age, and socio-economic group, June 2009
                                                                                                                                                  • Lost cards are a bigger issue among likely users
                                                                                                                                                    • Figure 60: Attitudes of those postive about contactless payment cards, June 2009
                                                                                                                                                  • Chip and PIN has support across the demographic spectrum
                                                                                                                                                    • Figure 61: Negative attitudes towards contactless payments, by gender, age and gross annual household income
                                                                                                                                                  • Experience of contactless technology has positive and negative impact
                                                                                                                                                    • Figure 62: Cross-analysis of attitudes towards contactless payment cards, June 2009
                                                                                                                                                  • Positive indications for mobile payments
                                                                                                                                                    • Figure 63: Attitudes towards contactless payments, by interest in mobile banking, June 2009
                                                                                                                                                  • Online channels will be important
                                                                                                                                                    • Figure 64: Attitudes towards contactless payment technology, by likelihood to purchase a credit card over the internet, June 2009
                                                                                                                                                • Appendix – The Consumer – Channel Preferences for Banking Activities

                                                                                                                                                    • Figure 65: Overview of preferred channels for banking activities, by demographics, June 2009
                                                                                                                                                • Appendix – The Consumer – Attitudes Towards Online Banking

                                                                                                                                                    • Figure 66: Full demographic breakdown of positive/negative attitudes towards online banking and views on high street and online providers, June 2009
                                                                                                                                                • Appendix – The Consumer – Channel Preferences for Financial Advice

                                                                                                                                                    • Figure 67: Preferred sources of advice when arranging financial products, full demographic breakdown, June 2009
                                                                                                                                                • Appendix – The Consumer – Attitudes Towards Online Sources of Advice

                                                                                                                                                    • Figure 68: Demographic breakdown of attitudes towards online sources of financial advice, June 2009
                                                                                                                                                • Appendix – The Consumer – The Key Online Brands

                                                                                                                                                    • Figure 69: Frequency of usage of internet sites, by demographics, June 2009
                                                                                                                                                • Appendix – The Consumer – Attitudes Towards Mobile Banking

                                                                                                                                                    • Figure 70: Most popular attitudes towards mobile banking, by demographics, June 2009
                                                                                                                                                    • Figure 71: Next most popular attitudes towards mobile banking, by demographics, June 2009
                                                                                                                                                • Appendix – The Consumer – Attitudes Towards Contactless Payment Cards

                                                                                                                                                    • Figure 72: Attitudes towards contactless payment technology, by demographics, June 2009

                                                                                                                                                Companies Covered

                                                                                                                                                • American Express UK
                                                                                                                                                • Asda Group Ltd
                                                                                                                                                • Barclaycard
                                                                                                                                                • Barclays Bank plc
                                                                                                                                                • Bebo Inc
                                                                                                                                                • British Bankers' Association (BBA)
                                                                                                                                                • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                • Cahoot
                                                                                                                                                • Citigroup Private Bank
                                                                                                                                                • Co-operative Group
                                                                                                                                                • ComparetheMarket.com
                                                                                                                                                • Facebook, Inc.
                                                                                                                                                • First Direct
                                                                                                                                                • Gfk NOP
                                                                                                                                                • GoCompare
                                                                                                                                                • Google UK
                                                                                                                                                • GSM Association (GSMA)
                                                                                                                                                • HM Revenue & Customs
                                                                                                                                                • HSBC Private Bank (UK) Limited
                                                                                                                                                • John Gilbert Financial Research
                                                                                                                                                • Kelkoo S.A.
                                                                                                                                                • Lidl (UK)
                                                                                                                                                • LinkedIn
                                                                                                                                                • Lloyds Banking Group
                                                                                                                                                • MasterCard UK
                                                                                                                                                • Microsoft Ltd (UK)
                                                                                                                                                • MoneySupermarket.com Limited
                                                                                                                                                • Monilink
                                                                                                                                                • MySpace.com
                                                                                                                                                • NatWest
                                                                                                                                                • Newcastle Building Society Limited
                                                                                                                                                • Nokia Corporation (UK)
                                                                                                                                                • Northern Rock plc
                                                                                                                                                • Ofcom
                                                                                                                                                • Office of Fair Trading
                                                                                                                                                • PriceRunner UK
                                                                                                                                                • Royal Bank of Scotland Group plc
                                                                                                                                                • The Motley Fool
                                                                                                                                                • Twitter, Inc.
                                                                                                                                                • Virgin Media Ltd
                                                                                                                                                • Visa Europe
                                                                                                                                                • Vodafone Group Plc (UK)
                                                                                                                                                • Yahoo! UK & Ireland
                                                                                                                                                • YouTube, Inc.
                                                                                                                                                • Zopa Ltd

                                                                                                                                                Financial Services: Technology and the Internet - UK - August 2009

                                                                                                                                                £2,195.00 (Excl.Tax)