The Impact of Income on Consumer Trends in Financial Services

Introduction
In the recovering Financial Services marketplace new and existing providers are competing to grow their share of an increasingly wary and cynical customer base. Datamonitor has identified ten consumer trends that provide a vital tool for providers wanting to succeed. FS providers need to construct tailored products to meet the unique demands of consumers with different incomes.

Features and benefits
Actionable strategies for providers of a range of financial services products will help boost customer retention and increase revenue.
A global scope, with regional and country level analysis, allows for trend tracking across markets.
Highlights
Higher income consumers are looking for transparency from their FS providers; they demand to be made aware of all the details and ramifications of a product but do not want to be confused by an array of jargon and small print

Lower income consumers are more likely to have lost faith in the security and abilities of the FS community

The highest income band will be particularly receptive to ethical investment opportunities as there is little to no sacrifice in performance, which can be a deal breaker for the demanding affluent consumer.

Your key questions answered
Understand the underlying trends in income and expenditure occurring across the major economies worldwide
Discover acquisition opportunities through insight into the role of income in product holding across the major FS markets
Understand how to construct tailored product propositions attuned to different income levels

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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Methodology 1
Executive Summary 2
The financial services landscape has changed post-downturn 2
INSIGHT: Higher income consumers have a more sophisticated financial shopping basket 3
TREND: Higher income consumers are more trusting of their financial services provider but also more demanding 3
TREND: Consumer’s demands and expectations of their FS provider increase with income 3
TREND: General themes consumers look for in an FS provider are broadly similar despite differences in wealth 4
INSIGHT: Income is a dividing factor on comfort and ethicality 4
INSIGHT: Wealthier consumers remain unconvinced by premium banking facilities 4
INSIGHT: Value remains is king, particularly for higher income consumers 4
TREND: The global economic downturn changed views about conspicuous consumption 4
Action points 4
INTRODUCTION: THE IMPORTANCE OF TREND-TRACKING TO FINANCIAL SERVICES 12
The post-recessionary financial services market presents new challenges for the industry 12
Datamonitor is committed to creating a holistic view of 'the consumer' 13
Tracking consumer mega-trends is fundamental to long-term success 14
A trend hierachy 20
The megatrends have different levels of importance for consumers across the globe 20
THE FUTURE DECODED 21
MEGA-TREND SYNOPSIS: Wealth Complexity 21
INSIGHT: Higher income consumers have a more sophisticated financial shopping basket 21
TREND: Higher income consumers are more trusting of their financial services provider but also more demanding 35
TREND: Consumer’s demands and expectations of their FS provider increase with income 39
TREND: General themes consumers look for in an FS provider are broadly similar despite differences in wealth 45
INSIGHT: Income is a dividing factor on comfort and ethicality 45
INSIGHT: Wealthier consumers remain unconvinced by premium banking facilities 57
INSIGHT: Value remains is king, particularly for higher income consumers 60
TREND: The global economic downturn changed views about conspicuous consumption 63
Action points 68
ACTION POINT: FS institutions must rebuild low income consumers’ trust in their providers 68
ACTION POINT: Pension funds looking to attract higher income consumers should look to improve their ESG credentials, particularly those looking to the BRIC 69
ACTION POINT: Banks must ensure that they have a honed premium banking offering to entice the affluent consumers currently sitting on the fence 72
FS institutions vary in their provision of current accounts targeted at the affluent 72
ACTION POINT: Insurers must return to their initial offering to entice low income consumers: peace of mind 76
APPENDIX 77
Definitions 90
Methodology 91
Further reading 92
Ask the analyst 92
Datamonitor consulting 93
Disclaimer 93


TABLE OF FIGURES
Figure 1: Datamonitor’s mega-trends are having a long-term and substantive impact on the marketing landscape and can be grouped into two categories 3
Figure 2: Looking at consumers as a whole will help to address their needs 13
Figure 3: Datamonitor’s mega-trends are having a long-term and substantive impact on the marketing landscape and can be grouped into two categories 15
Figure 4: Consumer behavior and the innovations targeting it inevitably fit into a ‘trend hierarchy’ 18
Figure 5: Higher income consumers are more likely to hold current accounts and savings accounts 21
Figure 6: Higher income savers are more likely to devote a higher percentage of their income to savings 24
Figure 7: Higher income consumers favor notice savers more than their lower income peers 25
Figure 8: Life insurance holding varies hugely by income distribution 29
Figure 9: Product holding increases with income before plateauing 31
Figure 10: Debt product holding shows a strongly positive relationship with income 32
Figure 11: Trust for the FS institution is generally increasing in income 35
Figure 12: The Datamonitor Trust Process – higher income consumers have a greater level of interaction with their FS providers, this flows through to greater expectations and demands on their service 35
Figure 13: The major markets for credit unions reveal an increasing trend 37
Figure 14: Higher income consumers are more concerned with transparency and honesty 39
Figure 15: High income and low income consumers react very differently to messages of Authenticity 41
Figure 16: Individualism is more important to high income consumers 42
Figure 17: High income consumers are less interesting in comfort from their provider 45
Figure 18: Higher income consumers are still seeking to be looked after, but they want service rather than comfort 46
Figure 19: Higher income consumers are motivated by the ethical credentials of their providers 47
Figure 20: It is the highest earning consumers that are driving demands for ethical FS 48
Figure 21: Honesty, ease of access and ethicality are all more important to higher income consumers 50
Figure 22: Trustworthiness is especially important to higher income consumers when comparing cards providers 51
Figure 23: Speed is slightly more important to high income consumers seeking a personal loan provider 52
Figure 24: Low income consumers are more motivated by a comforting life insurer 53
Figure 25: An ethical offering is slightly more important to higher income consumers though still low 53
Figure 26: Higher income consumers are looking for clarity and simplicity from their mortgage providers 54
Figure 27: Higher income consumers are looking for a personalized pension plan 56
Figure 28: A majority of disquiet for premium banking services is robust across income levels 57
Figure 29: Features consumers seek from their premium accounts are fairly consistent across income bands 59
Figure 30: Interest rates and price are actually more important for higher income consumers 60
Figure 31: A dislike of conspicuous consumption is robust across income levels 63
Figure 32: There exists a high deviation in how consumers perceive conspicuous consumption 65
Figure 33: Some FS providers have already made marketing promotions focused around comfort and rebuilding confidence 68
Figure 34: Growing incomes in emerging economies and the differing consumer attitudes to ethical investment present opportunities 69
Figure 35: Higher income consumers will be receptive to ethical retirement options 71
Figure 36: The road to valued premium banking 72
Figure 37: Lloyds TSB’s “Added Value” accounts offer options but fall short of true excellence 73
Figure 38: Metro Bank have focused on building a strong reputation to the mass market and as of yet have no premium offering 75


TABLE OF TABLES
Table 1: Percentage of consumers with a current account split by income band 21
Table 2: Percentage of consumers with a savings account split by income band 22
Table 3: Percentage of saving account holders who are not currently saving, split by income band 24
Table 4: Percentage of saving account holders who are have an instant access saving account 26
Table 5: Percentage of saving account holders who are have a notice access saving account 26
Table 6: Percentage of saving account holders who are have a fixed term saving account 27
Table 7: Percentage of consumers with life insurance split by income band 29
Table 8: Percentage of consumers with a pension split by income band 30
Table 9: Percentage of consumers with a credit card split by income band 33
Table 10: Percentage of consumers with a mortgage split by income band 33
Table 11: Percentage of consumers with a personal loan split by income band 34
Table 12: Percentage of consumers who agreed with the statement " My FS provider must tell me when they've made a mistake" split by income 39
Table 13: Percentage of consumers who agreed with the statement "It is vital to me that my FS provider has been around for a long time " split by income 41
Table 14: Percentage of consumers who agreed with the statement " I like to be offered a range of services by my FS provider so I feel they are looking after my personal needs " split by income 43
Table 15: Percentage of consumers who agreed with the statement "It is important to me that I feel looked after by my FS provider" split by income 46
Table 16: Percentage of consumers who agreed with the statement " It is important to me that my FS provider has a clear 'green' policy " split by income 49
Table 17: Percentage of consumers who agreed with the statement " I am happy to pay a fee for premium banking facilities " split by income 57
Table 18: Percentage of consumers who agreed with the statement "my financial decisions are dictated by price and cost" 62
Table 19: Percentage of consumers who agreed with the statement "I think it is inappropriate for consumers to flaunt their wealth" 65
Table 20: Percentage of consumers with health insurance split by income band 76
Table 21: Percentage of consumers with home contents insurance split by income band 76
Table 22: Percentage of consumers with motor insurance split by income band 77
Table 23: Percentage of consumers with pet insurance split by income band 78
Table 24: Percentage of consumers with travel insurance split by income band 79
Table 25: Percentage of consumers with other insurance split by income band 79
Table 26: Average trust where 4= I completely trust them, and 1= I don’t trust them at all 80
Table 27: Percentage of consumers who saw an interest free overdraft as the most important service of premium bank accounts 85
Table 28: Percentage of consumers who saw a personal contact as the most important service of premium bank accounts 85
Table 29: Percentage of consumers who saw home insurance as the most important service of premium bank accounts 86
Table 30: Percentage of consumers who saw free foreign transactions as the most important service of premium bank accounts 87



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