Research and Markets: Security Remains the Key Issue Restricting the Take-Up of Online Financial Services
Dublin (PRWEB) July 27, 2005
Research and Markets (http://www. researchandmarkets. com/reports/c21338 (http://www. researchandmarkets. com/reports/c21338)) has announced the addition of Financial Services Organisations on the Internet - Market Assessment 2005 to their offering
This report analyses the development of personal online financial services in the UK and their outlook for the future. Retail banking remains the most important sector of the market, with an estimated 20 million users at the end of 2004. Other areas with relatively high levels of penetration in terms of online customers include personal loans, building societies and general insurance. However, the Internet has yet to make any significant impact in areas such as pensions and mortgages, where, given the complicated nature of the products, consumers still prefer face-to-face contact with providers. Meanwhile, the independent investment sector has experienced a decline in terms of volume, which mirrors the fall in stock markets that has taken place since 2000; despite the rally that has taken place over the past 2 years (since 2003), UK shares remain well below the peak they reached in 1999.
Take-up of online financial services is clearly related to the proportion of homes with access to the Internet. In the final quarter of 2004, 52% of UK households (12.6 million) could access the Internet from home, compared with only 9% (2.2 million) in the final quarter of 1998, according to National Statistics data. The increasing penetration of broadband Internet access is also likely to boost demand for online financial services. By April 2005, more than 5 million people in Great Britain had broadband access. It is likely that more than half of all Internet users in the UK will be on a broadband connection by 2006 or 2007. British Telecommunications (BT) has already stated that, by summer 2005, 99.6% of British homes will be connected to exchanges capable of providing broadband Internet access.
Security is probably the main barrier the industry faces in persuading more consumers to go online. There have certainly been many instances of breaches of security. `Phishing' attacks, which typically use fake versions of bank websites to grab login details of customers, boomed during 2004. Many household names have been the subject of security scares, so the growing level of consumer concern is unsurprising. Research specifically commissioned for this report found that security is an issue that concerns almost six out of ten adults, and could deter around four in ten people from managing their finances online. Furthermore, approximately half of all 45 to 54 year-olds — who are generally among the wealthiest members of society and are therefore the prime target of financial-services organisations — are so concerned about online security and identify fraud that these issues would prevent them from managing their finances online.
In terms of future prospects, this report predicts that overall demand for online financial services will continue to increase at a healthy rate over the next 5 years (to 2009). However, growth in key sectors such as online banking is expected to slow as the market matures, while the state of the economy between 2005 and 2009 is likely to have a negative impact on demand for products such as consumer loans. According to this report significant growth in the pensions and life insurance sector is not expected, due to the complicated nature of these products. There also seems to be little prospect of the stock market picking up so sharply that investors will flood back to independent online brokers or to stocks and shares individual savings accounts (ISAs). Meanwhile, demand for mortgages is likely to be affected by stagnation in the housing market over the next few years. However, the general insurance sector should continue to fare well.
It is believed that security will continue to be a key issue restricting take-up. The fact that many consumers are reluctant to trust their finances to the Internet is likely to limit the growth of online banking, in particular.
For more information visit http://www. researchandmarkets. com/reports/c21338 (http://www. researchandmarkets. com/reports/c21338)
Laura Wood
Senior Manager
Research and Markets
Fax: +353 1 4100 980
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