Ankur

Mathur
Imperial College Business School

THE BRIEF FINANCIAL PRODUCTS AND SERVICES FOR

STUDNETS IN THE UK



The Market and Products Whats on Offer?

University students are a growing market for the financial products and services
(See Table 1). High living costs and tuition fee in the UK, has made UK students
the keenest borrowers in Europe with over US$31 billion in outstanding
balances (Euromonitor International, 2009).

Table 1: University Students in th United Kingdom (2009-14)

2009

2010

University Students - '000

1,806.9 1,909.9 1,957.8 2,010.0 2,033.9 2,060.5

International Students as
% of All Higher Education
Students - %

15.3

15.7

2011

16.8

2012

17.1

2013

17.6

2014

18.1

Source: Euromonitor International, 2014

While this segment itself may not represent a significantly large chunk in terms
of number of customers, it holds of great strategic importance for financial
companies. Mainstream financial product companies hope to leverage the high
Customer Lifetime Value (CLV) from student groups over the years. Focusing on
building loyalty in student segments, banks hope to reap the benefits in the later
stages when students graduate and start earning, make large deposits, apply for
credit cards, mortgages and re-pay loans. This makes student segments as some
of the Most Valued Customers (MVCs) for the industries.1 This aligns closely to
the Pareto Principle or the 80-20 rule, wherein 80% sales come from 20% of the
customers.

This growth coupled with students strong cross-selling potential, social clout and
high rates of technology adoption makes this segment even more attractive for
financial companies. Therefore, most financial companies are modifying their
offering to cater to this segment and build loyalty to lock-in customers over long
terms.

In addition to mainstream financial products and services like Loans, Bank
accounts, overdrafts, cards, et al. a plethora of new offerings targeting Gen Y
segments are emerging the ones gaining significant traction in the market are
shown in Figure 1.

1 http://www.brillio.com/insights/blog-posts/rethinking-analytics-
understanding-customer-lifetime-value

Ankur Mathur
Imperial College Business School

Social Media and

Student Offers
Websites &
Forums

Internet of Things
(IoT)

Net Banking and

Mobile Payments

Maistream
Financial Services
- loans, bank
accounts, cards

Crowd-funding &
Micro-einance

Financial
Products &
Services for
Students in UK

Apps and
Prodiucts for
Easier Banking

Figure 1: Financial Products and Services for Students - Whats on Offer?

New Age Products & Services What? Where? Who?

With the advent of technology and social media, a number of fin-tech start-ups
are offering a range of innovative products for the tech-savvy has hit the market.

Net Banking and Mobile Payments
With Net banking now becoming a thing of the past, mobile payments and
cash-free transactions are the future of banking. With Apple Pay set to hit
the UK soon, mobile payment apps from start-ups are heating the scene.
Take for instance, Yoyo, a app-based start-up offering hassle free mobile
payments and loyalty rewards, has gained significant traction amongst
the students at Imperial College, London and managed to raise $10
million to fund expansion to US markets2. Other emerging fintech start-up
is the London based, GoCardless operating in the cash-free transactions
domain.

Mobile based loyalty schemes and rewards are becoming exceedingly
popular in customer retail segments with large retailers like KFC also
building their in-house app (the Colonels Club App) to target students.

Products & Services in this category are the next big things with the
potential of large banks and deep-pocket financial institutions looking to
Leverages Buy-Outs.


2 http://startups.co.uk/mobile-wallet-yoyo-raises-10m-to-take-on-us/

Ankur Mathur
Imperial College Business School

Internet-of-Things
With IoT gaining popularity, financial services are hoping to leverage this
technology to get connected devices make banking easier. With
innovators working to iron out security and privacy concerns, the
potential of this technology is huge. Applications may include ATMs,
Kiosks and credit cards using sensing technology to take decisions on a
customers behalf3. A more innovative application can be using health
information to influence banking any sign of a deterioration of health or
accident could trigger automatic liquidation of funds, to anticipate for
future cash flows.

Studies from Accenture have created an entire ecosystem for the use of
IoT in Banking and Finance Sectors (Figure 2). Given the potential
applications and the high adoption rate of this technology amongst
students, this could very well be a potential cash cow for the future. More
importantly however, big data analytics from IoT can help banks in
building up better profiles and buying preferences of high-value
segments.

Figure 2: IoT and Banking Ecosystem. (Source: Accenture, The Bank of Things4)

3 http://www2.deloitte.com/us/en/pages/finance/articles/internet-of-things-
financial-services-industry.html
4 http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Bank-
of-Things.pdf

Ankur Mathur
Imperial College Business School

Crowd-funding, Micro-Finance & Peer-to-Peer funding
Crowd-funding platforms are increasingly used by Gen Y to fund
everything from holiday travels to education fee. With success stories of
students raising money for tuition fee through online crowd-funding
platforms like GoFundMe, Upstart and CrowdTilt, new players
specializing in peer-to-peer funding have emerged. This is predominant in
developing countries and most efforts are targeted towards international
students.

Some big names include, Qifang, which has lent over $1.3 million in higher
education loans to Chinese students, and Kiva, which has raised $160
million in microfinance for entrepreneurs in developing countries5.


Social Media and Student Specific Sites & Forums
One of the major drivers influencing students buying preferences are
word-of-mouth recommendations and referrals (Refer Figure 3).

Figure 3: Source of Financial Information (Source: Mintel, 20136)

Forums and websites like SavetheStudent, StudentMoneySaver, Unidays,
StudentBeans, et al have specifically targeted university students, providing a
platform for exclusive student offers, discounts, freebies and advice and
recommendations. These websites have huge student followings and is
potentially one of the best sources of product promotion and referrals.

5 http://www.economist.com/node/16996791
6 Mintel, October 2013. Consumers and Technology in Financial Services

Ankur Mathur
Imperial College Business School

Products and apps for easier banking
Students love convenience, and mobile apps that simplify banking for them
goes a long way in making an impact. Web apps and services like Simple.com,
CreditKarma.com and Manilla.com have done just that. With Simple offering a
hassle free banking experience, CreditKarma providing free of charge credit
monitoring and Manilla making it extremely simple to pay bills on the go,
these services are adopted quickly by students.

Students as Customers: The Young, Broke and Cynical!

With the number and specification of mainstream products offered by major
financial institution being more or less similar, Banks are differentiating
themselves based on customer satisfaction, service and brand image. In addition
to providing student incentives like student railcards, Amazon gift vouchers and
convenience of in-university branches, banks are spearheading campaigns to
position their brand to cater to Gen Y.

Leveraging Social Media
Social Media involvement of students is possibly the maximum compared to any
other customer segment. Leveraging this is of utmost importance for banks and
financial firms. Anecdotal experiences on Facebook, Referrals through posts and
likes, subscriptions on Twitter, all play an important role in positioning a brand
and building perception in students.

One such example of how powerful an anecdotal experience or student post can
be is when a student posted on the Imperial College Facebook Group about his
experience with HSBC customer service. He wrote about how his bank account
was opened after a long wait of 1 month even though he was promised it in 5
days. HSBC responded to this by offering him a compensatory cheque of 100 to
make up for the delay. This story went viral around the campus, with many
students beginning to change to HSBC soon after.

Another use of the social media platform can be to foster open innovation. The
classic example of Danske Bank can demonstrate this. With the focus to become
a better bank, Danske asked Facebook users about potential improvements in
their mobile banking, they received over 250 ideas and managed to treble their
fan base7. The key learning from this campaign is how Danske, unlike most
companies, used the power of social media to initiate an interaction between
users rather than traditional social media marketing.


Building the WOW Factor for Gen Y
Moving from an undifferentiated targeting strategy to a multi-segment targeting
is essential in marketing financial services to students. An example of this can be

7 McKinsey & Co, 2012. Banking on customer centricity - Transforming banks
into customer centric organizations

Ankur Mathur
Imperial College Business School
the success enjoyed by the Overseas Chinese Bank Corporation (OCBC) after
tailoring their marketing strategy for the student segments. Engaging in
extensive research, OCBC targeted students, hung out with them at malls, ate
dinner with them, went shopping and clubbing with them and spent a lot of time
looking in their wallets and talking about money. Consequently, after engaging
phychographic and behavioural segmenting, OCBC modified their retail banking
experience for students. By offering simple personalizations in credit and debit
cards, they increased their customer base.

The Barclays Customer Needs Case Study8, is another example of how the bank
modified its offering by learning more about student customer behaviour. Key
insights led to Barclays offering students an interest free overdraft facility,
technology based incentives and a better mobile banking facilities; resulting in
increasing student accounts by 25% in 2010.

Success Stories and Key Lessons Knowledge brokering from

other sectors

In addition to conventional marketing and targeting efforts like digital media
marketing, leveraging social media and multi-segmented targeting, knowledge
brokering from past success stories across various segments can be powerful for
new product introduction.

Building an Ecosystem around users
One of the key strategies for sustaining a competitive advantage in this sector is
to build an ecosystem around users and introduce switching costs. One of the
best examples is that of Apple. Apple has managed to lock in students with a
range of products iPhones, Macbooks, and iPads and in the process build high
switching costs. This is a huge deterrent for students to change to a competing
product or company.

Lessons from Fintech Startups
Students love technology, integrating financial services to make uni-life easier
for students is gaining traction. Levering this technological inertia can help in
quick market adoption of the product and service. YoYo and GoCardless have
demonstrated exceptional success in this.

Evolve. Constantly
Students are extremely fickle minded and the market is constantly changing at a
very fast pace. Keeping up with new trends and technology is essential to
maintain competitive advantage. Customer engagement is important in this case
and can be done through periodical primary research at Universities or online
student forums and websites. Incentives can be tailored to specific student
values and attitudes. Vodafone introduced its Pay as you Talk plan specifically
for students on a tight budget, winning them a huge chunk of the student market.


8 http://www.nepic.co.uk/BASME/docs/Barclays_case_study_Feb_2014.pdf