| MP65262 |
| MAPS : Financial Services Organisations on the Internet : 2002 |
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This report covers: financial services, on the internet, organisations, retail banking, loan providers, building societies, general insurance, mortgage providers, financial advisers, independent investment, brokers and funds supermarkets, internet banks, traditional banks,
Companies covered include: Alliance & Leicester, Cahoot, Egg, First-E, Intelligent Finance, Lloyds, Smile, Barclays, Lloyds,Charcol, Charles Schwab, Holdings, Direct line, Egg, E*Trade, Fidelity Fundswork, Legal & General, Rightmove, Nationwide,
EXECUTIVE SUMMARY
| Executive Summary |
| Over the next 5 years to 2007, online financial services will not expand as fast as many have predicted. |
| BANKS IN THE LEAD |
| In the late 1990s, pioneering work by innovative stand-alone Internet banks led to a sudden rush into Internet provision by the traditional banks. Some moved too quickly and experienced security system failures that a delayed launch might have avoided. However, retail banking has now accepted the Internet as a standard current account channel. |
| THE PROPERTY BOOM |
| The crisis in the housing market, where demand exceeds supply, boosted online homemaking sites. These already had a high profile in 2000 but by 2002, they were much larger and more comprehensive. Such sites lead the homemaker to other sites offering cheaper mortgages, as well as other financial sites on the Internet. |
| INSURANCE — A MIXED PICTURE |
| General insurance is gradually gaining in popularity as a commodity bought via the Internet. It is important to differentiate from general personal lines insurance, which can be bought at a reasonable price direct from a number of companies or through a funds supermarket. The success of online insurance may lead to the shrinkage of call centres. |
| Growth in the online life insurance and pension provision market has been slow, hampered by the complexity of the product and by regulatory change in the face of bad publicity. In view of this, the number of life products advertised online is comparatively small and demand from consumers is poor. |
| INVESTMENT OUTLOOK |
| Funds supermarkets have developed during the past 5 years and are likely to take a more prominent role following the changes in UK legislation regarding the 'polarisation' of sales of financial products. Until 2002, there were two main sales channels for financial investments — independent financial advisers (IFAs) and tied agents or direct sales. From 2002, it will be possible for tied agents and direct sales staff to sell financial services products from companies other than their principal one. This should bring more choice and competition to the market and should reduce the market power of IFAs. This will depend on the market and on economic pressures. It will have some impact on IFAs and on the in-house marketing of products by financial services providers. The fortunes of the industry over the next 5 years depend on the state of the stock market rather than on turmoil in distribution. |
| THE FUTURE |
| The revolution in the distribution channels leading to online financial services will be consolidated before 2007. Technological change envisaged includes the development of a smart card that carries cash and financial information on it and can be interfaced with the Internet, the eventual introduction of third generation (3G) mobile telephony, affordable broadband connections, which will make the Internet easier to use, improved payment transfer through electronic systems, and greater Internet security. |
TABLE OF CONTENTS
| Executive Summary 1 |
| BANKS IN THE LEAD 1 |
| THE PROPERTY BOOM 1 |
| INSURANCE — A MIXED PICTURE 1 |
| INVESTMENT OUTLOOK 2 |
| THE FUTURE 2 |
| 1. Introduction 14 |
| Background 14 |
| DEFINITION 14 |
| 2. Strategic Overview 16 |
| MARKET DYNAMICS AND SEGMENTATION 16 |
| Market Sectors 16 |
| Retail Banking 16 |
| Loan Providers 16 |
| Building Societies 16 |
| General Insurance 17 |
| Mortgage Providers 17 |
| Financial Advisers 17 |
| Independent Investment (Brokers and Funds Supermarkets) 17 |
| Pensions and Life Insurance 17 |
| The Current Status of the Market 18 |
| Retail Banking 18 |
| Loan Providers 18 |
| General Insurance 18 |
| Mortgage Providers 18 |
| Financial Advisers 19 |
| Independent Investment (Brokers and Funds Supermarkets) 19 |
| Pensions and Life Insurance 19 |
| Total Industry Value and Growth 19 |
| Table 1: UK Users of Financial Services on the Internet by Volume (million users), 1997-2002 20 |
| Figure 1: UK Users of Financial Services on the Internet by Volume (million users), 1997-2002 20 |
| The Largest Sector 21 |
| The Sector with the Highest Growth Rate 21 |
| The Sector with the Lowest Growth Rate 21 |
| The Smallest Sector 21 |
| DISTRIBUTION 21 |
| Distribution of Electronic Cash 21 |
| Mediated Access 22 |
| COMPETITIVE STRUCTURE 22 |
| Retail Banking 22 |
| General Insurance 23 |
| Mortgage Providers 23 |
| Financial Advisers 23 |
| Independent Investment (Brokers and Funds Supermarkets) 24 |
| ADVERTISING 24 |
| THE CONSUMER 24 |
| Unemployment and Earnings 24 |
| Table 2: Proportion of UK Workforce Claiming Unemployment and Average Earnings Growth Rate (%), 1997-2001 25 |
| Prices, Interest Rates and Savings 25 |
| Table 3: UK Consumer Expenditure Index and Retail Price Index (index 1995=100 and %), 1997-2001 25 |
| Table 4: Interest Rates, Savings Ratio, Equity Prices and House Prices (% and index 1995=100), 1997-2001 26 |
| Demographics 26 |
| Table 5: UK Population Projections by Age, (000 and %), 1996, 2001 and 2006 27 |
| MARKET FORECASTS 28 |
| REGULATIONS — ELECTRONIC COMMERCE DIRECTIVE 28 |
| MARKETING 29 |
| 3. Retail Banking 30 |
| BACKGROUND 30 |
| Internet Banks 30 |
| Alliance & Leicester 30 |
| Cahoot 30 |
| Egg 30 |
| First-E 30 |
| Intelligent Finance 30 |
| Lloyds TSB 31 |
| Smile 31 |
| Traditional Banks 31 |
| Barclays 31 |
| Lloyds TSB 31 |
| Quality of Online Banks 32 |
| Table 6: Virtual Online Banking Survey League Table, Years Ending March 2002 and December 2001 33 |
| MARKET SIZE 34 |
| Table 7: Number of Major British Banking Groups' Bank Accounts Accessible by Computer, 1997-2002 34 |
| Figure 2: Number of Major British Banking Groups' Bank Accounts Accessible by Computer, 1997-2002 35 |
| Table 8: Number of UK Online Bank Customers (million), 2001 36 |
| Figure 3: Number of UK Online Bank Customers (million), 2001 36 |
| Table 9: UK Stand-Alone Internet Banks by Number of Online Customerse (000), 2001 37 |
| Figure 4: UK Stand-Alone Internet Banks by Number of Online Customerse (000), 2001 38 |
| CONSUMER TRENDS 38 |
| Proportion of Adults Intending to Start Conducting Day to Day Financial Transactions Via a Bank Internet Website 39 |
| Advertising 39 |
| Online Banking 39 |
| Table 10: Main Media Advertising Expenditure by Companies Engaged in Online Banking (£000), Years Ending March 2001 and 2002 40 |
| High Interest Current Accounts 41 |
| Table 11: Main Media Advertising Expenditure on Online High Interest Current Accounts (£000), Years Ending March 2001 and 2002 41 |
| Figure 5: Main Media Advertising Expenditure on Online High Interest Current Accounts (£000), Years Ending March 2001 and 2002 42 |
| Online Savings Accounts 42 |
| Table 12: Main Media Advertising Expenditure on Online Savings Accounts (£000), Years Ending March 2001 and 2002 43 |
| Figure 6: Main Media Advertising Expenditure on Online Savings Accounts (£000), Years Ending March 2001 and 2002 44 |
| DISTRIBUTION 44 |
| Table 13: UK Branch Networks Major British Banking Groups' Banks (number of branches), 1998-2002 45 |
| Figure 7: UK Branch Networks Major British Banking Groups' Banks (number of branches), 1998-2002 46 |
| 5. Building Societies 47 |
| Background 47 |
| Market Size 47 |
| Table 16: Users of Building Societies on the Internet (million users and index 1997=100), 1997-2002 47 |
| MARKET SHARES 47 |
| Table 17: Five Largest Building Society Mortgage Lenders by Mortgage Balances Outstanding (£bn and %), Year Ending 31st December 2000 48 |
| Figure 9: Five Largest Building Society Mortgage Lenders by Mortgage Balances Outstanding (£bn and %), Year Ending 31st December 2000 49 |
| CONSUMER TRENDS 49 |
| Proportion of Adults Who Conduct Their Day to Day Financial Transactions via a Building Society Internet Website 50 |
| Proportion of Adults Who Intend to Start Conducting Their Day to Day Financial Transactions via a Building Society Internet Website 50 |
| ADVERTISING 51 |
| DISTRIBUTION 51 |
| Table 18: Branch Networks of UK Non-Converted Building Societies (number of branches), 1998-2002 51 |
| 6. General Insurance 52 |
| Background 52 |
| Market Size 52 |
| Table 19: Users of General Insurance Companies on the Internet (million users and index 1997=100), 1997-2002 52 |
| MARKET SHARES 52 |
| CONSUMER TRENDS 53 |
| Proportion of Adults Who Have Used a General Insurer's Internet Website 53 |
| Proportion of Adults Who Intend to Start Using a General Insurer's Internet Website in the Future 53 |
| MARKETING ACTIVITY 54 |
| ADVERTISING 54 |
| 10. Pensions and Life Insurance 56 |
| Background 56 |
| Market Size 56 |
| Table 25: Users of Life Insurance and Pensions Products on the Internet (million users and index 1997=100), 1997-2002 57 |
| CONSUMER TRENDS 57 |
| Proportion of Adults Using a Life Insurer or Pension Company Internet Website 57 |
| Proportion of Adults Intending to Use a Life Insurer or Pensions Company Internet Website in the Future 57 |
| ADVERTISING 57 |
| 8. Financial Advisers 59 |
| Background 59 |
| Market Size 59 |
| Table 21: Users of Financial Advisers on the Internet (million users and index 1997=100), 1997-2002 59 |
| CONSUMER TRENDS 59 |
| Proportion of Adults Using a Financial Adviser's Internet Website 60 |
| Proportion of Adults Intending to Use a Financial Adviser's Internet Website in the Future 60 |
| ADVERTISING 61 |
| 7. Mortgage Providers 62 |
| Background 62 |
| Market Size 62 |
| Table 20: Number of Users of Mortgage Providers' Websites (million users and index 1997=100), 1997-2002 63 |
| CONSUMER TRENDS 63 |
| Proportion of Adults Using an Internet Website to Look for a Mortgage 63 |
| Proportion of Adults Intending to use an Internet Website to Look for a Mortgage in the Future 63 |
| Proportion of Adults Using a Website to Look for a Home 64 |
| Proportion of Adults Intending to use a Website to Look for a Home in Future 64 |
| 4. Loan Providers 66 |
| BACKGROUND 66 |
| Market Size 66 |
| Table 14: Number of Users of the Internet to Look for a Personal Loan (million users and index 1997=100), 1997-2002 66 |
| CONSUMER TRENDS 66 |
| Proportion of Adults Using a Website to Look for a Personal Loan 67 |
| Proportion of Adults Intending to Start Using a Website to Look for a Personal Loan in the Future 67 |
| ADVERTISING 67 |
| Table 15: Main Media Advertising Expenditure by Enterprises Engaged in Online Personal Loans (£000), Years Ending March 2001 and 2002 68 |
| Figure 8: Main Media Advertising Expenditure by Enterprises Engaged in Online Personal Loans (£000), Years Ending March 2001 and 2002 68 |
| 9. Independent Investment 69 |
| MARKET SIZE 69 |
| Table 22: Online Execution-Only Trades by Volume (million), Years Ending March 1999-2002 69 |
| CONSUMER TRENDS 69 |
| Proportion of Adults Using an Online Stockbroker 69 |
| Proportion of Adults Intending to Start Using an Online Stockbroker in the Future 70 |
| ADVERTISING 70 |
| Table 23: Main Media Advertising Expenditure by Companies Engaged in Online Investment Services (£000), Years Ending March 2001 and 2002 71 |
| Figure 10: Main Media Advertising Expenditure by Companies Engaged in Online Investment Services (£000), Years Ending March 2001 and 2002 72 |
| Table 24: Main Media Advertising by Companies Engaged in Online Stockbroker/Share Dealing (£000), Years Ending March 2001 and 2002 73 |
| Distribution 74 |
| 11. An International Perspective 75 |
| US MARKET DEVELOPMENTS 75 |
| Payments 75 |
| Smart Cards 75 |
| INTERNET PENETRATION 77 |
| Table 26: Households† with Internet Access and Connection Rate by Country (%), January to March 2002 78 |
| Figure 11: Households† with Internet Access and Connection Rate by Country (%), January to March 2002 79 |
| Competitor Environment 80 |
| 12. PEST Analysis 81 |
| POLITICAL Factors 81 |
| ECONOMIC Factors 81 |
| SOCIAL Factors 81 |
| TECHNOLOGICAL Factors 82 |
| 13. Consumer Dynamics 84 |
| Introduction 84 |
| OVERVIEW 84 |
| Table 27: Overall Response to Questions by Consumers (% of respondents), 2002 85 |
| CONDUCTING FINANCIAL TRANSACTIONS VIA A BANK Internet WEBSITE 88 |
| "I Conduct my Day to Day Financial Transactions via a Bank Internet Website" 88 |
| "I Intend to Start Conducting my Day to Day Financial Transactions via a Bank Internet Website" 89 |
| Table 28: Conducting Day to Day Financial Transactions via a Bank Internet Website (% of respondents), 2002 90 |
| CONDUCTING FINANCIAL TRANSACTIONS VIA A BUILDING SOCIETY Internet WEBSITE 92 |
| "I Conduct my Day to Day Financial Transactions via a Building Society Internet Website" 92 |
| "I Intend to Start Conducting my Day to Day Financial Transactions via a Building Society Internet Website" 92 |
| Table 29: Conducting Day to Day Financial Transactions via a Building Society Internet Website (% of respondents), 2002 93 |
| USING A GENERAL INSURER'S Internet WEBSITE 95 |
| "I Have Used a General Insurer's Internet Website" 95 |
| "I Intend to Start Using a General Insurer's Internet Website" 95 |
| Table 30: Using a General Insurer's Internet Website (% of respondents), 2002 96 |
| USING A LIFE INSURER OR PENSION COMPANY Internet WEBSITE 98 |
| "I Have Used a Life Insurer or Pension Company Internet Website" 98 |
| "I Intend to Start Using a Life Insurer or Pensions Company Internet Website" 98 |
| Table 31: Using a Life Insurer or Pension Company Internet Website (% of respondents), 2002 99 |
| USING A FINANCIAL ADVISER'S Internet WEBSITE 101 |
| "I Have Used a Financial Adviser's Internet Website" 101 |
| "I Intend to Start Using a Financial Adviser's Internet Website in the Future" 101 |
| Table 32: Using a Financial Adviser's Internet Website (% of respondents), 2002 102 |
| USING AN Internet WEBSITE TO LOOK FOR A MORTGAGE 104 |
| "I Have Used an Internet Website to Look For a Mortgage" 104 |
| "I Intend to Use an Internet Website to Look For a Mortgage in the Future" 104 |
| Table 33: Using an Internet Website to Look for a Mortgage (% of respondents), 2002 106 |
| USING A WEBSITE TO LOOK FOR A PERSONAL LOAN 108 |
| "I Have Used a Website to Look for a Personal Loan" 108 |
| "I Intend to Start Using a Website to Look for a Personal Loan in the Future" 108 |
| Table 34: Using a Website to Look for a Personal Loan (% of respondents), 2002 109 |
| USING AN ONLINE STOCKBROKER 111 |
| "I Have Used an Online Stockbroker" 111 |
| "I Intend to Start Using an Online Stockbroker in the Future" 111 |
| Table 35: Using an Online Stockbroker (% of respondents), 2002 112 |
| USING a WEBsite TO LOOK FOR A HOME 114 |
| "I Have Used a Website to Look For a Home" 114 |
| "I Intend to Start Using a Website to Look for a Home in Future" 114 |
| Table 36: Using a Website to Look for a Home (% of respondents), 2002 115 |
| NONE OF THEse, DON'T KNOW 117 |
| "None of These" 117 |
| "Don't Know" 117 |
| Table 37: None of These, Don't Know (% of respondents), 2002 118 |
| 14. Company Profiles 120 |
| Barclays PLC 120 |
| Corporate Strategy 120 |
| Strengths and Weaknesses 120 |
| New Product Development 121 |
| Brand Development 121 |
| Innovations 122 |
| Advertising 122 |
| CHARCOL Ltd 122 |
| Corporate Strategy 122 |
| Strengths and Weaknesses 123 |
| Brand Developments 123 |
| Innovations 123 |
| Advertising 124 |
| CHARLES SCHWAB HOLDINGS UK 124 |
| Corporate Strategy 124 |
| Strengths and Weaknesses 124 |
| New Product Development 125 |
| Brand Development 125 |
| DIRECT LINE 125 |
| Corporate Strategy 125 |
| Strengths and Weaknesses 126 |
| New Product Development 126 |
| Brand Development 126 |
| Innovations 127 |
| Advertising 127 |
| EGG PLC 127 |
| Corporate Strategy 127 |
| Strengths and Weaknesses 127 |
| New Product Development 128 |
| Brand Development 128 |
| Innovations 128 |
| Advertising 129 |
| Profitability 129 |
| E*TRADE 129 |
| Corporate Strategy 129 |
| Strengths and Weaknesses 130 |
| New Product Development 130 |
| Brand Development 131 |
| Innovations 131 |
| Advertising 131 |
| Profitability 131 |
| FIDELITY FUNDSNETWORK 131 |
| Corporate Strategy 131 |
| Strengths and Weaknesses 132 |
| New Product Development 132 |
| Innovations 132 |
| LEGAL & GENERAL GROUP PLC 132 |
| Corporate Strategy 132 |
| New Product Development 133 |
| Brand Development 133 |
| Innovations 133 |
| NATIONWIDE 134 |
| Corporate Strategy 134 |
| Strengths and Weaknesses 134 |
| New Product Development 135 |
| Brand Development 135 |
| Innovations 135 |
| Profitability 136 |
| Future Company Developments 136 |
| RIGHTMOVE.CO.UK Ltd 136 |
| Corporate Strategy 136 |
| Strengths and Weaknesses 137 |
| New Product Development 137 |
| Brand Development 137 |
| Innovations 138 |
| Advertising 138 |
| 15. The Future 139 |
| Introduction 139 |
| Table 38: Selected Forecast Economic Criteria (% and index 1995=100), 2002-2007 139 |
| MARKET SIZE 139 |
| Table 39: Forecast Number of Users of Financial Services on the Internet by Volume (million users and index 2002=100), 2002-2007 140 |
| NEW DEVELOPMENTS 140 |
| CONSUMER ISSUES 141 |
| Barriers to Entry 141 |
| Regulations 141 |
| DEMOGRAPHIC CHANGES 142 |
| Table 40: UK Population Projections by Age (000 and %), 1996, 2001, 2006, 2011, 2016 and 2021 142 |
| Retail Banking Use 143 |
| Table 41: Forecast Use of Internet Banks by Volume (unit and index 2002=100), 2002-2007 143 |
| Loan Providers 144 |
| Table 48: Forecast Number of Users of Personal Loans Sites on the Internet by Volume (million users and index 2002=100), 2002-2007 144 |
| Building Societies 144 |
| Table 42: Forecast Number of Users of Building Societies on the Internet by Volume (million users and index 2002=100), 2002-2007 145 |
| General Insurance 145 |
| Table 43: Forecast Number of Users of General Insurance Companies on the Internet by Volume (million users and index 2002=100), 2002-2007 145 |
| Mortgage Providers 145 |
| Table 46: Forecast Number of Users of Mortgage Providers' Websites by Volume (million users and index 2002=100), 2002-2007 146 |
| Looking for a Home 146 |
| Table 47: Forecast Number of Users of Home Search Sites on the Internet by Volume (million users and index 2002=100), 2002-2007 146 |
| Financial Advisers 146 |
| Table 45: Forecast Number of Users of Financial Advisers on the Internet by Volume (million users and index 2002=100), 2002-2007 147 |
| Independent Investment (Brokers and Funds Supermarkets) 147 |
| Table 49: Forecast Number of Users of Stockbroking Websites by Volume (million users and index 2002=100), 2002-2007 147 |
| Pensions and Life Insurance 148 |
| Table 44: Forecast Number of Users of Life Insurance and Pension Products on the Internet by Volume (million users and index 2002=100), 2002-2007 148 |
| MARKET DYNAMICS 148 |
| Political Factors 148 |
| Economics Factors 149 |
| Social Factors 150 |
| Technological Factors 150 |
| 17. Glossary 152 |
| A-Z of DEFINITIONS 152 |
| Above-the-Line or Main Media Expenditure 152 |
| Annual Growth Rate 152 |
| Below-the-Line Advertising 152 |
| Cif 152 |
| Constant Prices 152 |
| Current Prices 152 |
| Fob 152 |
| Forecasts 153 |
| MSP 153 |
| `Real' 153 |
| RSP 153 |
| ABOUT THE SOURCES USED 153 |
| ACNielsen MMS 153 |
| Prodcom 153 |
| NOP 154 |
| Trade Association Data 154 |
| Trade Sources 154 |
| 16. Further Sources 155 |
| Associations 155 |
| Publications 156 |
| General Sources 157 |
| Bonnier Information Sources 158 |
| Government Publications 159 |
| Other Sources 160 |
| Fund Supermarkets 160 |
| Banks 161 |
| Building Societies 161 |
| Stand-Alone Internet Financial Providers 162 |
| General Insurance Companies 162 |
| Life Assurance and Pensions Companies 162 |
| Financial Advisers 162 |
| Stockbrokers 163 |
| Personal Loans 163 |
| Property 163 |
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Last updated by Amanda Porteous 2002
