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Description

Description

“COVID-19 will cause many financial services categories to contract in 2020 as opportunities for sales have been severely restricted and consumer confidence has been rocked. However, many categories remain essential so should recover well in the long term. Greater awareness of their financial vulnerabilities could lead consumers to take a more considered approach to their finances after the crisis, with more focus on savings and the quality of insurance products.”

–   Rich Shepherd, Associate Director – Financial Services

This Report will cover the following areas:

  • The impact of COVID-19 on financial services categories in the UK in the short, medium and long term.
  • The impact of COVID-19 on the marketing mix in financial services.
  • The main opportunities and threats posed by COVID-19 in the financial services industry.
  • How COVID-19 will change consumer behaviour in the short, medium and long term.

What's included

What's included

Table of contents

Table of contents

  1. Overview

      • Key issues covered in this Report
        • COVID-19: UK context
          • Economic and other assumptions
          • Executive Summary

              • Short, medium and long-term impact on the industry
                • Figure 1: Expected impact of COVID-19 on financial services, short, medium and long term, [5 June 2020]
              • Short term
                • Medium term
                  • Long term
                    • Market forecasts
                      • Mortgage lending set to dive in 2020 but a sharp recovery is expected
                        • Figure 2: Forecast of gross mortgage lending (adjusted for COVID-19), 2015-25
                      • Consumer credit dented by falling appetite for big-ticket purchases
                        • Figure 3: Forecast of gross consumer credit lending (adjusted for COVID-19), 2015-25
                      • Savings look likely to be boosted by cautious consumers
                        • Figure 4: Forecast of total retail savings deposits (adjusted for COVID-19), 2015-25
                      • Cost pressures to cause a dip in general insurance premiums
                        • Figure 5: Forecast of general insurance gross written premiums, domestic business (adjusted for COVID-19), 2015-25
                      • … while protection will suffer a sharp decline this year
                        • Figure 6: Forecast of protection insurance gross written premiums, individual business (adjusted for COVID-19), 2015-25
                      • Pensions to take a temporary hit
                        • Figure 7: Forecast of new pensions premiums, regular premiums only (adjusted for COVID-19), 2015-25
                      • Changing market dynamics
                        • Insurance claims will hit a record high
                          • FinTechs will feel the heat of funding pressures
                            • Payment holidays pose cashflow challenges for lenders…
                              • … while lenders face a rise in problem debt
                                • Impact on the marketing mix
                                  • Consumers will step up price demands
                                    • Familiarity will be a valuable commodity
                                      • Online-first finance
                                      • Opportunities and Threats

                                        • Markets linked to travel and auto industries were exposed most quickly
                                          • Crisis offers an opportunity for banks to change perceptions…
                                            • Helping consumers to manage the recession
                                              • … but banks are not immune to the effects of COVID-19
                                                • Insurers could take a reputational hit
                                                  • An acid test of digital finance
                                                  • How a COVID-19 recession will reshape the market

                                                    • Rising unemployment and falling confidence will hit long-term lending
                                                      • Investors will be tested, with inexperienced ones likely to withdraw funds
                                                        • Savings will be prioritised over managing debts
                                                          • Figure 8: Planned financial activity over the next three months, January 2019-May 2020
                                                        • Learnings from the post-financial crisis recession
                                                          • Greater availability of credit will provide a much quicker lending recovery
                                                            • Figure 9: Gross mortgage lending, 2007-13
                                                          • Consumers find a way to boost their savings in a crisis…
                                                            • Figure 10: Total retail savings deposits, 2007-13
                                                          • … but any uplift in savings is likely to be temporary
                                                            • Figure 11: Household savings ratio, Q1 2006-Q3 2019
                                                          • Consumers became more demanding…
                                                            • … leading to dampened insurance premium growth
                                                              • Figure 12: Domestic home insurance gross written premiums, 2007-13
                                                          • The Impact of COVID-19 on Consumers

                                                            • Anxiety levels align with case curve...
                                                                • Figure 13: Mintel COVID-19 exposure anxiety index, 28 February – 3 June 2020
                                                              • … but consumers remain anxious about their health
                                                                  • Figure 14: People’s level of concerns about the risk of being exposed to the coronavirus, 28 February – 3 June 2020
                                                                • COVID-19 concerns by demographics
                                                                    • Figure 15: Proportion of consumers showing the highest degree of concern (4 or 5 out of 5) regarding the risk of being exposed to the coronavirus, by age, 28 February – 3 June 2020
                                                                  • UK begins to soften lockdown measures
                                                                      • Figure 16: Government COVID-19 lockdown exit strategy, published 11 May 2020
                                                                    • Lockdown fears moderate
                                                                        • Figure 17: People’s level of concerns about how the outbreak might affect their lifestyle, 28 February - 3 June
                                                                      • A bleak outlook for the economy
                                                                          • Figure 18: Consumer views on the impact of the COVID-19 outbreak on the UK economy and their own finances, 28 May – 3 June 2020
                                                                        • Consumers cut back outgoings, and add to savings
                                                                            • Figure 19: How consumers have been affected or changed their behaviour as a result of the outbreak, 21-28 May 2020
                                                                          • Household finances hold steady for most
                                                                              • Figure 20: Changes in financial situation since the start of the COVID-19 outbreak, 21-28 May 2020
                                                                            • COVID-19 is yet to meaningfully affect most households’ well-being…
                                                                                • Figure 21: The financial well-being index, January 2015-May 2020
                                                                              • … but confidence for the year ahead plummets
                                                                                  • Figure 22: Consumers’ financial confidence for the coming year, May 2020
                                                                                • Middle age groups feel particularly vulnerable…
                                                                                  • … and self-employed respondents show the importance of the COVID-19 support package
                                                                                  • How COVID-19 Has Already Affected Financial Services

                                                                                    • Retail banking
                                                                                      • Half are avoiding using cash
                                                                                        • Figure 23: Changes in shopping habits as a result of COVID-19, April-May 2020
                                                                                      • Providers have encouraged use of online services
                                                                                        • The travel money market has been put on hold
                                                                                          • Savings and investments
                                                                                            • Investment markets have been ravaged
                                                                                              • Saving activity has increased
                                                                                                • Borrowing
                                                                                                  • Payment holidays will be a lifeline for many
                                                                                                    • An interest rate cut, but not for all
                                                                                                      • Mortgages have been hit by a frozen housing market…
                                                                                                        • …with car finance lenders in a similar position
                                                                                                          • Current account providers have amended overdraft rules to support customers
                                                                                                            • Insurance
                                                                                                              • Travel insurance hit by a spike in claims and removed from sale
                                                                                                                • Insurers have also pulled income protection
                                                                                                                  • Business insurance policyholders are unlikely to be covered
                                                                                                                    • Admiral sets a precedent with motor insurance refunds
                                                                                                                    • Which Behaviours Will Change in the Short Term?

                                                                                                                      • Income cuts will limit usual downturn savings behaviour…
                                                                                                                        • Figure 24: Planned financial activity over the next three months, January 2019-April 2020
                                                                                                                      • … but the value of savings should still increase
                                                                                                                        • Revolving credit will become a necessary source of funds
                                                                                                                          • Consumers must be helped in avoiding pensions mishaps
                                                                                                                            • Opportunities for peer-to-peer payment services
                                                                                                                              • Protection comes into focus…
                                                                                                                                • … but consumers are likely to shelve environmental concerns in the short term
                                                                                                                                • Which Behaviours Will Change in the Medium Term?

                                                                                                                                  • A short-term housing boom?
                                                                                                                                    • Demand for loans will rise
                                                                                                                                      • Car finance will also rebound quickly
                                                                                                                                        • Self-employed will look to protect themselves
                                                                                                                                          • Insurance conditions will face greater scrutiny…
                                                                                                                                            • Arranging travel cover will become a more serious task
                                                                                                                                              • … but price will still be key
                                                                                                                                              • Which Behaviours Will Change in the Long Term?

                                                                                                                                                • Significant mainstream change in behaviour is unlikely...
                                                                                                                                                  • … but a more careful outlook is likely to persist
                                                                                                                                                    • COVID-19 will be a formative experience for Gen Z
                                                                                                                                                      • The digitisation of personal finance will accelerate…
                                                                                                                                                        • … and previous trends will return to the fore
                                                                                                                                                        • Lessons from Other Markets

                                                                                                                                                          • An opportunity to build a more responsible relationship with credit
                                                                                                                                                            • Families can offer valuable, often untapped support
                                                                                                                                                              • An outpouring of love for the NHS

                                                                                                                                                              About the report

                                                                                                                                                              This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                              • The Consumer

                                                                                                                                                                What They Want. Why They Want It.

                                                                                                                                                              • The Competitors

                                                                                                                                                                Who’s Winning. How To Stay Ahead.

                                                                                                                                                              • The Market

                                                                                                                                                                Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                              • The Innovations

                                                                                                                                                                New Ideas. New Products. New Potential.

                                                                                                                                                              • The Opportunities

                                                                                                                                                                Where The White Space Is. How To Make It Yours.

                                                                                                                                                              • The Trends

                                                                                                                                                                What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                              Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

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