Consumer Attitudes to Borrowing Online

Introduction

Consumer attitudes toward using the online channel for borrowing are constantly evolving. Ongoing technological advancement as well as demographic and lifestage complexities are driving these shifts in attitude. Lenders must understand what consumers want from the online channel in order to maximize the advantages that it can bring to their business.

Scope

*Using global data from our FSCI survey this report analyzes how consumer attitudes towards borrowing online are changing.

*The report analyzes the causes of these shifts and identifies strategies that can be employed by lenders to attract & retain online customers.

*The report discusses the opportunities and threats faced by lenders wanting to develop their online strategy.

*A number of key trends have been identified that describe the impact of new technologies upon the market for loans.

Highlights

The online channel is becoming increasingly important for borrowing-related activity, such as searching for suitable deals. Across nearly all markets, consumers are more likely to take out loans online direct from a provider rather than use an aggregator site.

Continuing concerns over online security are a worry for consumers, which may become more of an issue as dependence on this channel rises. Among those who have never bought financial products online, there is considerable doubt as to the safety of borrowing online.

Web 2.0 technologies and the emergence of social networking give banks greater scope to engage with their borrowing customers, and enable them to target their loan offerings more effectively. Blogs, video content and personalized recommendations can all help to strengthen relationships and build loyalty.

Reasons to Purchase

*Access the results of Datamonitor's Global FS Consumer Insight survey, enabling you to understand shifting online attitudes and behaviors.

*Identify why these changes are occurring, and understand the future implications for online borrowing.

*Identify actionable strategies that can help encourage consumers to engage with the online channel.

Report Highlights

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Overview 1
Catalyst 1
Summary 1
Methodology 1
Table of Contents 2
Table of figures 3
Table of tables 4
Introduction 5
Financial Services Consumer Insight: dispelling the myths surrounding online behaviors 5
Understanding consumers' attitudes towards financial services is vital for providers 5
The Future Decoded 6
Trend: Online activity continues to grow across the world 6
The majority of online consumers have bought financial products and services online 7
Older consumers are almost as likely to buy financial services online as younger consumers 8
Insight: The online channel is increasingly important for borrowing-related activity 9
There is significant regional variation in the propensity of consumers to borrow online 9
Consumers' take-up of online borrowing facilities varies across countries 9
Older searchers of online deals are more likely to convert to borrowers than younger searchers 11
The wealthier consumers are, the more inclined they are to search for loan deals online 12
The more financially knowledgeable consumers are, the more likely they are to search out deals 14
Insight: Consumers exhibit caution when searching and applying for loans online 15
Consumers prefer to apply for loans direct from a provider rather than through an aggregator site 15
Consumers do not buy exclusively on the basis of price 16
Price-focused consumers are much more likely to apply for loan deals online 17
Insight: Consumers still desire human contact when searching and applying for loans 19
Consumers cite a preference for dealing with people as a key reason for not buying online 19
Financial intelligence and use of financial advice in borrowing 20
Trend: Security remains a significant barrier to the further adoption of online banking 21
Criminal activity directed at online consumers is on the rise 22
Commonwealth Bank in Australia was subjected to three separate phishing attacks in just one week 23
NatWest has introduced measures to combat the threat of phishing 23
Insight: Many consumers harbor doubts about the safety of borrowing online 23
Perceptions of safety are closely linked to previous experience of online searches and applications 24
Confidence in security directly impacts upon propensity to borrow online 25
Insight: Rising dependence on online channels increases vulnerability to attacks 26
Social networking sites were compromised by hackers targeting a specific blogger 26
Three individuals have been charged with stealing 130 million credit card numbers in the US 27
Trend: Web 2.0 presents new opportunities for banks to engage with their borrowing customers 27
Social networking is here to stay 28
Social media have been adopted by all sections of the population 28
Insight: Banks can exploit new media to increase customer engagement 28
Providers need to carefully consider how to make use of new media 28
Wells Fargo transforms the internet from a liability into an asset for itself 28
Wells Fargo was the first bank to enter the world of blogging 30
YouTube provided another opportunity for Wells Fargo to engage with its customers 30
CompareTheMarket.com has scored a hit with its current 'meerkat' campaign 30
The Compare the Meerkat campaign encompasses, Facebook, YouTube and Twitter 31
The campaign has succeeded in boosting traffic to the CompareTheMarket.com website 32
Other aggregators have been forced to respond to the success of the 'meerkat' campaign 32
Insight: Providers should avoid using social media for traditional sales and marketing approaches 33
Social media can help create a more conducive environment for building business 33
Social media is a valuable tool for providers, but there can be pitfalls 33
UBank makes a rare slip-up 33
The furniture store Habitat was lambasted for exploiting the Iran crisis to promote itself on Twitter 34
Insight: New technology enables banks to target their loan offerings more efficiently 34
BBVA has launched an innovative online service that identifies the needs of individual customers 34
Applications such as Tú Cuentas increase the possibilities for the cross-selling of loan products 36
Several banks now boast the capacity to instantly communicate online with prospective loan applicants 36
Web chat presents fraudsters with new opportunities 37
Action Points 39
Action point: Take advantage of Web 2.0 and social media to enhance customer engagement 39
Banks should move beyond basic sales pitches focused primarily on rate 39
Use new channels as a proxy for face-to-face contact 41
Exploit new technology to create a richer customer experience 41
Action point: Target loan products at older consumers 41
Video and social media can be used to reach this market 43
Action point: Take steps to improve online security, and perceptions of security 44
Banks need to tighten up their security protocols to reassure customers 44
Mobile technology can be incorporated into authentication procedures 45
Greater efforts to educate and reassure the public are needed 45
APPENDIX 47
Supplementary data 47
Definitions 59
Asia Pacific 59
BRIC 59
Europe 59
Phishing attack 59
Methodology 60
Further reading 60
Ask the analyst 61
Datamonitor consulting 61
Disclaimer 61
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List of Tables
Table 1: Global internet usage, over time 47
Table 2: Internet users per 100 inhabitants, by geographical area, over time 48
Table 3: Purchase of financial products online, by country 48
Table 4: Current usage of personal loans, by country 49
Table 5: Online loan behavior and current loan usage, by country 50
Table 6: Online loan behavior, by age 50
Table 7: Online loan behavior, by household income (US) 51
Table 8: Online loan behavior, by household income (UK) 51
Table 9: Online loan behavior, by household income (Australia) 52
Table 10: Online loan behavior, by level of financial knowledge 52
Table 11: Direct vs. comparison site sales of online loans, by country 53
Table 12: Attitudes to price, by whether or not have bought financial products online, by country 54
Table 13: Attitudes to price, by age 54
Table 14: Effect of importance of price on driving online loan application 55
Table 15: Reasons for not banking online 55
Table 16: Propensity to search, but not apply, for loans online, by country 56
Table 17: Propensity to discuss borrowing needs in person, by country 57
Table 18: Attitudes to safety of borrowing online, by country 58
Table 19: Attitudes to safety of borrowing online, by online loan behavior 58
Table 20: Online loan behavior, by level of concern about safety of online borrowing 59
Table 21: Conversion rates for online loan searchers, by age 59
List of Figures
Figure 1: Internet use has expanded rapidly since the mid-1990s 6
Figure 2: Internet penetration in the BRIC markets lags behind the rest of the world 7
Figure 3: In nearly all markets, most online consumers have purchased financial products online 8
Figure 4: Personal loans are more common in Europe than in Asia 9
Figure 5: Russian consumers are happy to search for loan deals online, but do not apply often 10
Figure 6: Younger age groups are much more likely to search for loans online 11
Figure 7: There is a correlation between household income and propensity to search for deals online 13
Figure 8: Consumers who are financially literate are more inclined to search for deals 14
Figure 9: Buying loans direct from provider is more popular than buying through an aggregator site 15
Figure 10: Those who have bought online are more concerned about price than those who have not 16
Figure 11: Older consumers are least likely to be focused solely on price 17
Figure 12: Desire for a good price is a key driver of online application 18
Figure 13: Preference for face-to-face contact remains a key reason for not migrating to online banking 19
Figure 14: A sizeable proportion of consumers are reluctant to ever apply for loans online 20
Figure 15: In nearly all markets, there is a desire to deal with providers in person regarding loans 21
Figure 16: Concern over online security is the main reason driving non-usage of online banking 22
Figure 17: Skepticism over safety of online loan application is higher among non-online users 24
Figure 18: Consumers with no prior experience of applying for loans online feel less confident 25
Figure 19: Impact of security concerns on online usage 26
Figure 20: Wells Fargo has embraced social media, including Twitter, YouTube and blogs 29
Figure 21: CompareTheMarket.com's new campaign is a well-integrated multi-channel initiative 31
Figure 22: Popularity of the CompareTheMarket.com site shot up in the wake of the marketing campaign 32
Figure 23: Tú Cuentas from BBVA allows customers to analyze their financial situation in a range of ways 35
Figure 24: Barclays Bank invites consumers interested in its loans to chat online 37
Figure 25: RBC and NatWest have made efforts to position themselves as friends of the customer 40
Figure 26: Conversion rates increase in line with age of consumer 42
Figure 27: Several providers already cater for older consumers 43
Figure 28: Waitrose has used online video streaming technology to reach out to consumers 44
Figure 29: ING Direct provides comprehensive information on verifying the validity of its website 46
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