Retail financial services in the EU

© 2012 TNS2 3Retail financial services in the EU

With a few notable exceptions, financial

services brands lag behind other consumer

products in their international reach. There

are barriers to entry such as regulation and

substantial country-by-country differences

in usage, purchase channels and consumer

attitudes.

Scandinavians have the highest ownership

of financial products, whether it is current

accounts, insurance, loans, credit cards,

mortgages or investments. This contrasts

with former communist countries where

ownership of financial products is low

although strong growth in credit cards and

current accounts reveals an appetite to catch

up fast.

Can financial services expand beyond state

boundaries? Yes, but there will be obstacles.

Customer inertia presents a challenge.

People do not diligently seek out the best

deal, they are slow to switch supplier, and

preference for face-to-face transactions

benefits existing retail providers.

Buying financial services online is

underdeveloped even in the most financially

sophisticated countries. In most, including

France, Spain and Italy it has barely any

traction at all. In contrast, use of the internet

to bank and to buy consumer goods is high

across much of Europe, and confidence is

growing.

The economic situation in the near-term

may augur badly for the expansion of

financial services across European borders.

But eventually that will change and when

it does the internet may prove an effective

route to market on a scale that will change

the buying model and substantially reduce

distribution costs.

Eurobarometer research – the research was

conducted by TNS Opinion & Social across

the 27 EU member states in September

2011. 26,856 face-to-face at home

interviews were conducted.

RUN ON FRO

IntroductionThis booklet examines differences in the market for retail financial services across the 27 EU countries and considers the opportunity to develop pan-European products.

© 2012 TNS4 5Retail financial services in the EU

Use of financial products varies widely by

country and product. Broadly, the ranking

runs: Scandinavia first, then Northern

Europe, followed by Southern Europe and

finally the countries that once made up the

communist bloc. Much of the disparity is

explained by the strong correlation between

financial participation and GDP. But it is also

the case that Eastern Europe is playing post-

communist catch-up.

Use of basic financial services is high,

and rising: 84% of people have a current

account, up from 71% in 2005. Credit card

ownership also rose from 34% to 40%

across the same period. Only 10% own

no financial products and much of this is

a function of age; one-third of those still

studying own no financial products at all.

Ownership of financial products %

Ownership of financial products in the EU %

Current account Credit card Life insurance Shares or bonds

Sweden

Hungary

98

6759

9

60

19

46

2

High penetration of financial services

Country differences are pronounced

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: All respondents from 27 EU countries.

Credit card

Life insurance

Mortgage

Personal loan

Shares or bonds

Investment fund

None

Current account 84Non-life insurance 51

40

31

19

1311

7

10

© 2012 TNS6 7Retail financial services in the EU

Strong growth in less developed markets

Growth in financial services is strongest in

less mature markets. Germany, for example,

has a high ownership of financial products,

so comparatively low levels of purchasing in

the past 5 years.

Eurobarometer Retail Financial Services report April 2012 / TNS Opinion & Social.Base: Owners of individual products.

Which of these products did you

purchase in the last 5 years? %

Even within the large economies of Western

Europe there are significant differences

in product ownership. Penetration of life

insurance, for example, ranges from 15%

in Italy to 45% in France. The data tells us

that life insurance is a high priority in France

but it does not tell us about the commercial

opportunity, in France or elsewhere. Product

ownership levels are what they are for a

reason and can be the legacy of culture,

regulation or tax law. However, it does raise

the issue of whether low ownership markets

offer growth potential.

Growth opportunities?

Ownership of financial products %

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents from 27 EU countries.

Life insurance Mortgages Investment funds

UK

France

Germany

Italy

38

45

34

15

27

22

1215

13

3

107

In contrast, Romania has low ownership

of financial products but a very high

proportion of these products were bought

in the last 5 years.

17% 22%

Non-life insurance

Personal loan

Germany

91% 86%

Non-life insurance

Personal loan

Romania

© 2012 TNS8 9Retail financial services in the EU

The EU picture conceals dramatic differences,

by country and product. The UK and

Germany are comparable economies with

mature financial markets, yet there are very

different routes to market. In the context of

creating pan-European financial brands this

is not insurmountable but it does present

a layer of complexity that most consumer

goods do not face.

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents.

Non-life insurance purchased in

last 5 years by channel

48%

9% 12% 47% 30%

36% 12% 3%

Directly from provider face-to-face

Through an intermediary

Direct from provider online

Direct from provider by telephone

GER

UK

www 1 2 34 5 67 8 9

0

Across the EU as a whole, there remains

a strong preference for face-to-face

transactions regardless of the product.

Intermediaries and advisors are also a

significant force, especially for more complex

and high value products. Buying online

from the provider is relatively insignificant,

even for straightforward products like a

credit card.

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents with any financial product.

Many routes to market

Channel of purchase for products

bought in last 5 years %

Credit card Mortgage

Investment fund Life insurance Non-life insurance

Face-to-face from provider

Online from provider

Through intermediary

Telephone direct to provider/others

70

15

8

5

64

1

29

5

5133

12 3

5135

6 6

43

22

18

15

© 2012 TNS10 11Retail financial services in the EU

Eurobarometer Cyber Security report July 2012 / TNS Opinion & Social. Base: all adults online. Questions asked were: Very confident + fairly confident in ability to use internet for things like banking and buying things online, and prefer to conduct transaction in person so you can inspect product or ask a real person.

The internet has enormous potential

to change the country-based nature of

financial services because it obviates the

need for a retail distribution or a network

of intermediaries. Internet usage is more

likely to be used by those who are better

educated, more financially literate, and

a good demographic fit with most financial

products. In many countries buying online

is still not something that everyone feels

comfortable with. But this will change

over time, and as it does, financial services

will benefit.

The UK, Netherlands and Scandinavia

are the most comfortable buying online

Bought online %

% P

refe

rrin

g f

ace-

to-f

ace

tran

sact

ion

s

Spain Italy

France

EU Average

GermanyUK

Netherlands

Denmark

% Confident buying or banking online

Prefer face-to-face transactions

Confident with online transactions

40 50 60 70 80 90 100

10

20

30

40

50

www

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social. Base: all respondents who purchased any product in last 5 years, 27 EU countries.

It is surprising how little the internet is used

to purchase financial services given that it

is convenient and allows easy comparison

of competing products. This is not due to

lack of access; over half of all adults use the

internet at least once a day and two-thirds

of all adults use the internet at least once

a week.

Buying online

Comfort levels using the internet vary

significantly by country and by product.

The Netherlands, UK and Scandinavia all

score relatively well on internet usage to buy

financial products online, but even in these

countries the story is patchy.

Custom and practice aside, not everyone

is confident using the internet and there

remains a strong preference for face-to-face

transactions, especially in Southern Europe.

Current account

Personalloan

Life insurance

Investmentfund

Creditcard

Non-life insurance

Shares or bonds

5 6 6

1215

18

24

© 2012 TNS12 13Retail financial services in the EU

There are significant differences in the

extent to which people are prepared to shop

around, as the comparison between the UK

and France shows.

In general, consumers in the original 15 EU

member states are less inclined to seek out

the best value product than those in the 12

new member states.

For example, 55% of those in the original 15

states said they took the first product they

found when obtaining a bank account. The

figure for the 12 new member states was 45%.

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social. Base: all respondents who purchased a financial product in the last 5 years.

of UK respondents say they took the first product they looked at

67% of French respondents say they took the first product they looked at

38%

A culture of inertia

The evidence is clear – we are lethargic when it

comes to seeking out best value from financial

products. We do not look around as much as

we should do, and we are more likely to take

a recommendation from the product provider

than an independent source. We are reluctant

to switch provider, happy with both the

companies and the services they offer.

Inertia rules.

For financial service providers this is both

cloud and silver lining. Happy customers help

customer retention but for those seeking to

expand into new markets, this reduces the

pool of available customers and increases

acquisition costs.

Whilst there is clearly a greater propensity to

shop around when considering higher value

items, 21% claim to have taken the first

mortgage they considered.

Agreeing I took the first product

I looked at %

Agreeing I took the first credit card

I looked at %

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social. Base: all respondents who purchased a financial product in the last 5 years.

21

26

26

27

40

42

52

52

Mortgage

Current account

Personal loan

Life insurance

Investment fund

Credit card

Non-life insurance

Shares or bonds

© 2012 TNS14 15Retail financial services in the EU

The most common source of recommendation

received prior to purchasing a financial

product is the provider that the customer

purchased from. Friends and family are the

next most important, followed by financial

advisors. Websites, newspapers and other

publications are a poor fourth. Whilst there

will be many instances where the product

provider is a good source of advice, the fact

that it is the most common source of advice

suggests that the consumer is somewhat

passive when it comes to seeking out best

value from financial products.

There is not a simple European overview

of where consumers seek advice before

purchasing financial products. We can make

a few sweeping generalisations: the more

financially literate countries are more likely to

buy without receiving any recommendations;

friends and family are an important source

of advice in opening a current account

(young age profile). But the reality is that the

EU averages conceal a patchwork quilt of

differences, by country and by product.

The ‘buying model’ is, largely, country specific

and product-specific, which helps explain

why financial services has proven resistant to

the globalisation that has become the norm

in many other consumer sectors.

A comparison of the principal source of

recommendation for insurance products and

credit cards across Germany, Italy and the UK

illustrates the broader point.

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents who purchased a financial product in the last 5 years. nb. Some people received recommendations from more than one source.

Percentage who received a recommendation from

the product provider before purchasing the product

Taking advice

Investment fund

Personal loan

Credit card

Mortgage

Shares or bonds

Current account

Life insurance

Non-life insurance

42

38

35

32

31

29

21

17

Q. Before you purchased the product did anyone recommend a particular product to you or did you read any recommendations anywhere. Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: product purchased in the last 5 years.

Principal source of recommendation for non-life insurance

products (eg any insurance other than life)

% receiving a recommendation

38%Germany

Intermediary / advisor

46% Italy

Friends or family

19% UK* Newspapers, websites or

other publications

*50% received no recommendation at all

Principal source of recommendation for a credit card

% receiving a recommendation

49% Germany Product provider

68% Italy Product provider

17% UK*

Friends or family

Product provider*57% received no recommendation at all

© 2012 TNS16 17Retail financial services in the EU

Complaints

The overwhelming majority (85%) say that

they have had no cause to complain about

a financial product or provider. But where

people do experience problems most of us

(73%) are prepared to complain. However

this is not uniform. In the original EU 15,

77% of consumers with a problem will

complain, compared to just 57% for the

12 new member states.

54%

27%

16%

7% 7%

4%

3%

1%

Did not complain

Complained to intermediary or adviser

Complained to consumer rights/

protection organisationComplained to friends/family

Complained to complaints handling body (e.g ombudsman)

Took legal action

OtherComplained to product provider

Action taken when encountering

problem with financial productHave not tried to switch in the last 5 years

The consumer’s easy-going attitude to

finance is evident in low levels of switching.

Switching is highest in Scandinavia and the

UK, but even here the figures do not suggest

a tuned-in customer taking advantage of a

competitive marketplace.

Genuine product satisfaction undoubtedly

plays a large part with 85% of respondents

saying they have never experienced any

problem with their financial products or

services. However, it is also indicative of a

marketplace ruled by mass inertia rather

than a switched-on consumer.

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents who have the product mentioned.

Switching

90% 88%

88% 86%

Personal loan Credit card

Current account Mortgage

Eurobarometer Retail Financial Services report, April 2012 / TNS Opinion & Social.Base: all respondents who have had a problem.

© 2012 TNS18 19Retail financial services in the EU

How TNS can help

As the world’s leading custom research company, TNS is trusted by major public and private sector organisations to carry out large-scale research projects, such as the Eurobarometer studies for the European Commission.

In a market with major regional differences,

financial service brands require partners who

can help them make sense of a complex

world. TNS has a deep understanding of the

financial sector, with sector expertise in over

50 countries. Which means that each year,

we conduct more financial sector research

than anyone else.

Our breadth and depth of resource around

the world means that TNS has the expertise

to help our clients develop precise growth

plans, irrespective of their challenge.

To discuss how TNS UK can help your brand

contact Jamie Willard,

New Business & Marketing Director

on +44 (0)20 7656 5303

jamie.willard@tnsglobal.com.

Eurobarometer research – the research was conducted by

TNS Opinion & Social across the 27 EU member states in

September 2011. 26,856 face-to-face at home interviews

were conducted.

TNS6 More London PlaceLondon SE1 2QYUnited Kingdom

t +44 (0)20 7656 5294www.tnsglobal.comTwitter: @tns_uk

About TNS UK

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About Eurobarometer

TNS Opinion & Social, conducts approximately eight Eurobarometer surveys a

year on behalf of the European Commission. These surveys cover the population

of the respective nationalities of the European Union Member States, resident in

each of the Member States and aged 15 years and over.

Certain waves of research also involve surveys conducted in the six candidate

countries (Croatia, Turkey, the Former Yugoslav Republic of Macedonia, Iceland,

Montenegro and Serbia), the Turkish Cypriot Community, and Norway.

A representative sample of 1000 people is interviewed in each country (1500

in Germany; 1300 in the UK; 500 in Luxembourg, the Republic of Cyprus, the

Turkish Cypriot Community, Iceland and Malta).

In this series:

nCyber crime

nFinancial services in the EU

nEnvironment & climate change