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Contents
Report homepage
Contents
Introduction and Abbreviations
Executive Summary
Market Drivers
Market Size and Segmentation
The Supply Structure and Profiles
Advertising and Promotion
The Consumer
The Future
Forecast
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Online Banking - Ireland - May 2004
Table of Contents

Introduction and Abbreviations

Executive Summary

Market dynamics suggest a positive future for online banking

Target market for online banking shows signs of growth

Phenomenal growth in number of online banking users masks a more limited reality

Local banks dominate the online banking market but competition is emerging

Advertising and promotion will be crucial to growth of online banking

Online banking most popular among affluent and 25-49-year-old consumers

Online banking users make frequent use of service – a trend more evident in RoI

Consumer attitudes towards online banking differ in RoI and NI

Attachment to traditional banking and negative perceptions proving to be a barrier to online banking

Market Drivers

Demographics

Figure 1: Population trends, by age group, in thousands, RoI, 1998, 2003 and 2008
Figure 2: Population trends, by age group, in thousands, NI, 1998, 2003 and 2008

Consumer confidence

Figure 3: Index of consumer expectation in RoI, 1996-2003

Disposable income

Figure 4: Personal disposable income per capita at current prices and year-on-year (YoY) % growth, RoI, NI and UK, 1995-2002
Figure 5: Personal disposable income per capita at constant (1995) prices, RoI, NI and UK, 1995-2002

Unemployment

Figure 6: Employment and unemployment trends, by gender, RoI, 1999-2004
Figure 7: Employment and unemployment trends, by gender, NI, 1999-2004

Technology

Growing acceptance of the Internet among Irish consumers

Figure 8: Internet penetration (any access – home and elsewhere), GB, RoI and NI, 2000 and 2003

Online business banking leading the way

Banks are facilitating the uptake of online banking

Figure 9: Number of ATMs provided by the five main clearing bank groups in RoI, 1998-2003
Figure 10: Number of ATMs provided by the four main home-based banks in NI, 1997-2001

New entrants

Wide ownership of basic financial products provides opportunity for online banking

Figure 11: Most competitive credit card providers by lowest standard rate, UK, February 2004

Legislation

Benefits of online banking

Barriers to online banking

Market Size and Segmentation

Market size

Figure 12: Market size (by number of online banking users), all-Ireland, 2001-03
Figure 13: Market size (by number of online banking users), RoI and NI, 2001-03

Market segmentation

Figure 14: Breakdown of online banking usage, RoI, February 2004
Figure 15: Breakdown of online banking usage, NI, February 2004

The Supply Structure and Profiles

Pure-play banks

Cahoot

Egg

First Direct

IF – Intelligent Finance

One Direct

Smile

Clicks and mortar

Abbey National

Alliance & Leicester

Allied Irish Bank/First Trust Bank

Bank of Ireland

HBOS

HSBC

Northern Bank/National Irish Bank

Permanent TSB

Ulster Bank Group

Competition emerging from new quarters

Supermarkets and retailers moving into personal finance market

Figure 16: Supermarkets and retailers should not get involved in personal finance, RoI and NI, 2003

Advertising and Promotion

Advertising expenditure

Figure 17: Total advertising expenditure on telephone/online banking by bank/brand, RoI, 2001 and 2003
Figure 18: Advertising expenditure on online banking, broken down by brand, NI, 1999-2003

Mass market or bust for some banks

Online advertising expected to grow in importance

Figure 19: Overall advertising expenditure by all companies, RoI, 1998-2003
Figure 20: Overall advertising expenditure by all companies, NI, 1998-2002

New technology offers potential

Figure 21: Mobile phone penetration in RoI and NI, 1998 and 2003
Figure 22: Penetration of digital, satellite and cable television in RoI, 2001 and 2003
Figure 23: Penetration of digital, satellite and cable television in NI, 2001 and 2003

Branding

Advertising intensity driven by a range of factors

Figure 24: Promotional intensity matrix, for specific financial products

The Consumer

Consumers’ familiarity with Internet will dictate their use of online banking

Figure 25: The evolution of an e-consumer

Consumer research into online banking

Figure 26: RoI and NI sample sizes, 2004

Overall penetration of online banking

Figure 27: Penetration of online banking, RoI and NI, February 2004

RoI consumers

Online banking consumer profile

Figure 28: Composition of online banking customer base (%), RoI, February 2004

Frequency of use of the total population

Figure 29: Frequency of online banking usage, by %, RoI, February 2004

25-49-year-olds and the affluent most frequent users of online banking

Figure 30: Frequency of online banking usage, by age and socio-economic group, RoI, February 2004

Full-time workers are heavy users

Figure 31: Frequency of online banking usage, by employment status and region, RoI, February 2004

Attitudes towards online banking

Many RoI consumers remain sceptical about online banking

Figure 32: Agreement with statements relating to online banking, RoI, February 2004

Users in RoI are positive about online banking but are reluctant to do away with branch banking altogether

Figure 33: Agreement with statements relating to online banking, by user group, RoI, February 2004

Non-users in RoI lack knowledge of online banking and still prefer to visit their bank branch

Younger and more affluent consumers are the most receptive to online banking

Figure 34: Agreement with statements relating to doubts about online banking, by age and socio-economic group, RoI, February 2004

Consumers in full-time employment still to be sold on the benefits of online banking – in contrast with full-time students

Figure 35: Agreement with statements relating to doubts about online banking, by employment status and region, RoI, February 2004

Significant barriers to uptake exist among consumers in Connacht/Ulster, which banks will have to address

Correlation between age and attitudes towards online banking

Figure 36: Agreement with statements relating to benefits of online banking, by age and socio-economic group, RoI, February 2004

Appreciation of online banking benefits increases with affluence although consumers remain loyal to well-known banks

Students’ attitudes towards online banking bode well for the future

Figure 37: Agreement with statements relating to benefits of online banking, by employment status and region, February 2004

Dubliners indifferent to advantages of online banking

Online banking activity

Figure 38: Breakdown of online banking usage by type of transaction, RoI, February 2004

25-49-year-olds and ABC1 consumers are the most confident users of online banking in RoI…

...while Dubliners and those in the rest of Leinster also show signs of confidence when using online banking

NI consumers

Online banking consumer profile

Figure 39: Composition of online banking customer base (%), NI, February 2004

Frequency of use of the total population

Figure 40: Frequency of online banking usage by %, NI, February 2004

Ownership of multiple financial products can determine frequency of online banking usage

Figure 41: Frequency of online banking usage, by age and socio-economic group, NI, February 2004

Heaviest users are consumers in full-time employment residing in Belfast City

Figure 42: Frequency of online banking usage, by employment status and region, NI, February 2004

Attitudes towards online banking

Figure 43: Agreement with statements relating to online banking, NI, February 2004

NI users still prefer to use well-known banks but are prepared to use other online banks in addition to their existing bank

Figure 44: Agreement with statements relating to online banking, by user group, NI, February 2004

High preference for branch banking among non-users is main barrier to online banking

Younger NI consumers most positive towards online banking while older consumers still prefer branch banking

Figure 45: Agreement with statements relating to doubts about online banking, by age and socio-economic group, NI, February 2004

As in RoI, affluent consumers show least loyalty to branch banking

Loyalty to branch banking is lowest among NI consumers in full-time education, suggesting they will be most receptive to online banking

Figure 46: Agreement with statements relating to doubts about online banking, by employment status and region, NI, February 2004

Benefits of online banking rated most highly by 16-49-year-olds

Figure 47: Agreement with statements relating to benefits of online banking, by age and socio-economic group, NI, February 2004

Full-time employed most likely to shop around for financial products, which presents opportunity for pure-plays and smaller players

Figure 48: Agreement with statements relating to benefits of online banking, by employment status and region, NI, February 2004

Online banking activity

Figure 49: Breakdown of online banking usage, by type of transaction, NI, February 2004

RoI and NI consumer comparisons and conclusions

The online banking consumer profile differs in RoI and NI

ABC1 consumers aged between 25-49 are most frequent users of online banking in both RoI and NI

Majority of online banking users will use it at least once a week

Figure 50: Frequency of online banking usage, (%), RoI and NI, February 2004

RoI online banking users display most positive sentiment for online banking

Non-users in NI still show high attachment to traditional branch banking

Security concerns more prevalent among NI consumers

Loyalty to well-known banks is higher in NI

Attitudes reveal that educating the consumer about online banking is a priority

RoI consumers less likely to shop around but more aware of the convenience and accessibility of online banking

Attitudes towards online banking based on perception rather than experience

Potential exists in RoI for pure-play banks

NI consumers still to realise potential of online banking

Online banking does not play a major role in the choice of financial provider

The Future

Online banking yet to blossom

Role of ATMs provides indication of future impact of online banking

Changes in the competitive structure to have major bearing on market

Promotion of online banking crucial, with growing potential for new communication channels and a possible role for the more personal touch

Customised online banking products vs the ‘one size fits all’ approach

Forecast

Figure 51: Penetration of online banking, by age, RoI and NI, February 2004
Figure 52: Forecast of the number of online banking users, Scenario 1, RoI and NI, 2003-08
Figure 53: Forecast of the number of online banking users, Scenario2, RoI and NI, 2003-08