Currently, far more European consumers are investigating shares online than are actually trading via the Web — and one of the keys to converting these consumers into active traders is online banking, according to a recent report from Forrester Research B.V. (Nasdaq: FORR). Furthermore, Forrester’s Technographics. analysis of more than 6,000 online Europeans and their financial behavior and attitudes indicates that retail banks are best positioned to capture the mainstream retail investor’s online share dealing.
“In total, 36% of all Europe’s online consumers own investment products like shares or mutual funds,” commented Edwin Van Der Harst, analyst at Forrester Research B.V. “By examining their involvement with stockbroking and their online behavior, Forrester has identified four distinct groups of online share dealer — what we have termed Dynamic Dealers, Inquisitive Investors, Silent Shareholders, and Empty-handed Explorers. Each of these groups present opportunities for stockbroking companies, and while the Dynamic Dealers are the most active today, it is the Empty-handed Explorers and Silent Shareholders that will give incumbent banks the edge over new entrant pure plays,” he added.
Dynamic Dealers represent 10% of Europe’s online consumers and tend to be experienced Web surfers: bright, single affluent men owning more financial products than any other group, and technology optimists who have comparatively higher ownership of online-capable devices such as WAP phones. Dynamic Dealers present the best opportunity for pure plays: To capitalize on these consumers, Forrester advises that pure plays position themselves as the “online stockbroking experts”, offering a rich choice of top investment products.
“The other three groups represent a further 32% of Europe’s wired consumers who either already own shares or show an interest in trading shares online,” said Van Der Harst. “But it is the Empty-handed Explorers that will contribute most to the growth of online trading over time. While these relatively young consumers don’t yet own shares or many financial services, they are experienced Web users and will be the future of online trading, expanding online share dealing by 40%.”
Silent Shareholders represent 16% of Europe’s online consumers and are typically women. While they have become shareowners through, for instance employee benefit programs, they currently undertake no investment activities through the Internet at all, due mainly to concerns over security.
“So far, banks have won a majority of online trading customers despite — rather than because of — their strategies,” Van Der Harst continued. “As they develop and improve their offerings, pure-play brokers will feel the squeeze. We advise full-service banks to focus on Silent Shareholders, exploiting the trust within their client relationships to offer customers a compelling stockbroking proposition, while delivering more sophisticated offerings to their best customers before pure-play brokers do.
“The last group, Inquisitive Investors, comprise 10% of Europe’s online consumers. They tend to be married, wealthy men without children, and present the best opportunity to hybrids — the stockbroking spinoffs from full-service banks, positioned as separate online stockbroking firms,” he concludes.