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Consumer confidence in banks, credit card providers and investments remain stable as demand supercharges digital finance – new Toluna research reveals

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Consumer confidence in banks, credit card providers and investments remain stable as demand supercharges digital finance - new Toluna research reveals 1

COVID -19 shines spotlight on the importance of savings – 22% of those aged 35-54 don’t have a financial safety net

WHAT: The Toluna Financial Services Sentiment Indicator is a quarterly study exploring key financial services issues in the UK and the consumers they serve. The latest research surveyed 1,137 respondents in August 2020.

KEY FINDINGS:

Confidence in the financial services sector remains stable despite the UK entering its worst recession on record

  • 68% of respondents have stated that their confidence in financial services providers, such as banks, insurance companies, credit card businesses and investment firms, has remained the same since pre-COVID-19

Savers’ ethical concerns create the big wins for investors with a focus on sustainable business models that can withstand market shocks fuelling investment growth

  • COVID-19 has accelerated already existing interest in sustainable investments as those aged between 18 and 34 demand more responsible and ethical products and services from organisations.
  • 69% of 18 – 34-year olds are interested in the environmental and societal impact of any investments they have or might have in the future, demonstrating just how important environmental and sustainability issues are to them.
  • 47% of those aged over 55 are also keen to understand the environmental and societal impact of their investments.

The pandemic has supercharged a huge shift in financial services firms becoming truly digital following demand from 18-34-year olds to manage their finances virtually but older people may need more support in transitioning to digital.

  • More people are choosing virtual methods of banking with 75% using online banking, 44% mobile apps, 13% virtual payment cards and 8% video chats with financial services companies.
  • 18-34-year olds are significantly more likely than both the 35-54 and 55+ groups to use digital financial services. For example, 65% of those aged 18-34 are using mobile apps compared to 23% of those aged 55 and over. When it comes to in person banking, 61% of those aged over 55 are still visiting their local branch compared to 46% of 18-34-year olds.
  • When asked about their future banking preferences, it’s perhaps no surprise that the youngest age bracket (18-34 year olds) are significantly more likely than both the 35-54 and 55+ groups to prefer non-traditional banking methods (mobile apps, virtual payment cards, cryptocurrency and video chat). For example, 58% of those aged 18-34 said they would prefer to use mobile apps when dealing with financial services providers as opposed to just 21% of those aged 55 and over. Nearly a quarter of those aged between 18 and 34 years old would like to use video chat in future when communicating with their bank, credit card provider or investment firm.
  •  Those aged 55 and over are significantly more likely to prefer ‘in person at a branch’ with 58% stating that this is their preferred way to bank, compared to 39% of 18-34-year olds.

While people in the UK believe financial services companies support sustainable communities, they also think that banks, investment firms and other providers need to change their offering to help meet consumer financial needs

  • Over half of 18-34 year olds (55%) believe banks, investment firms and credit card companies are helping to drive growth in sustainable communities.
  • This percentage is over 20% lower among the 55 and over age bracket (32%).

In terms of current financial products and services available:

  • 1 in 4 (25%) of those aged 55+ currently state that their savings do not meet their current needs at all.
  • Over half (54%) of females claim to have no investments at all.

COVID-19 has shone a spotlight on the importance of savings and having a financial safety net with those aged 35-54 the least likely group to have one in place:

  • Over half of those surveyed said they save regularly (56%)
  • 63% of people in the UK have a financial safety net
  • Those aged 35-54 are the most likely to feel that they do not have a safety net, with 22% agreeing that they don’t have an adequate financial safety net in place.
  • Other groups who are lacking a safety net include those who say their ‘confidence in the financial sector in the past 12 months has decreased’ (21% with no safety net) vs. those whose confidence level has increased in the last 12 months (5% with no safety net).
  • Unsurprisingly, those who have failed to pay a bill or loan/credit card repayment in 3 of the last 6 months are also the most likely to claim they have no safety net.

 Michael Worledge, Finance Sector Head, Toluna said:

“Unlike in the aftermath of the financial crisis of 2008, the financial services industry currently has much higher levels of confidence from the public and is therefore in a better position to provide support.

“Lockdown left many people with more money to put into savings that they would otherwise have spent on commuting, going out and retail. However, many consumers are now financially worse off, with no safety net to fall back on, and have been increasingly telling us they are looking to save more for a rainy day. Financial services companies continue to provide support and flexibility but should consider how they can leverage the relatively high levels of confidence to help consumers put in place their financial safety net, understanding and actioning changing customer sentiment.

“The public has had a massive nudge towards digital channels over the past few months. It’s not a surprise that older groups still prefer more traditional ways of dealing with financial services, and it does highlight a continued important role for branches. However, the pandemic has had the effect of enabling many people to be more comfortable managing at least parts of their finances digitally, and many want to do more than they can currently. Providers will need to understand where and through which channels customers want to do more, accelerate their digital strategies, and ensure excellent customer journeys.”

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 2

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices fell from recent highs for a second day on Friday as Texas energy firms began to prepare for restarting oil and gas fields shuttered by freezing weather.

Brent crude futures were down $1.16, or 1.8%, to $62.77 per barrel, by 1150 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell $1.42, or 2.4%, to $59.10 a barrel.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude oil production and 21 billion cubic feet of natural gas, according to analysts.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

However, firms in the region on Friday were expected to prepare for production restarts as electric power and water services slowly resume, sources said.

“The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger,” said Vandana Hari, energy analyst at Vanda Insights.

Oil fell despite a surprise fall in U.S. crude stockpiles in the week to Feb. 12, before the freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.

While the thawing relations could raise the prospect of reversing sanctions imposed by the previous U.S. administration, analysts did not expect Iranian oil sanctions to be lifted anytime soon.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” StoneX analyst Kevin Solomon said.

(Additional reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by Jason Neely)

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies

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Analysis: Carmakers wake up to new pecking order as chip crunch intensifies 3

By Douglas Busvine and Christoph Steitz

BERLIN (Reuters) – The semiconductor crunch that has battered the auto sector leaves carmakers with a stark choice: pay up, stock up or risk getting stuck on the sidelines as chipmakers focus on more lucrative business elsewhere.

Car manufacturers including Volkswagen, Ford and General Motors have cut output as the chip market was swept clean by makers of consumer electronics such as smartphones – the chip industry’s preferred customers because they buy more advanced, higher-margin chips.

The semiconductor shortage – over $800 worth of silicon is packed into a modern electric vehicle – has exposed the disconnect between an auto industry spoilt by decades of just-in-time deliveries and an electronics industry supply chain it can no longer bend to its will.

“The car sector has been used to the fact that the whole supply chain is centred around cars,” said McKinsey partner Ondrej Burkacky. “What has been overlooked is that semiconductor makers actually do have an alternative.”

Automakers are responding to the shortage by lobbying governments to subsidize the construction of more chip-making capacity.

In Germany, Volkswagen has pointed the finger at suppliers, saying it gave them timely warning last April – when much global car production was idled due to the coronavirus pandemic – that it expected demand to recover strongly in the second half of the year.

That complaint by the world’s No.2 volume carmaker cuts little ice with chipmakers, who say the auto industry is both quick to cancel orders in a slump and to demand investment in new production in a recovery.

“Last year we had to furlough staff and bear the cost of carrying idle capacity,” said a source at one European semiconductor maker, who spoke on condition of anonymity.

“If the carmakers are asking us to invest in new capacity, can they please tell us who will pay for that idle capacity in the next downturn?”

LOW-TECH CUSTOMER

The auto industry spends around $40 billion a year on chips – about a tenth of the global market. By comparison, Apple spends more on chips just to make its iPhones, Mirabaud tech analyst Neil Campling reckons.

Moreover, the chips used in cars tend to be basic products such as micro controllers made under contract at older foundries – hardly the leading-edge production technology in which chipmakers would be willing to invest.

“The suppliers are saying: ‘If we continue to produce this stuff there is nowhere else for it to go. Sony isn’t going to use it for a Playstation 5 or Apple for its next iPhone’,” said Asif Anwar at Strategy Analytics.

Chipmakers were surprised by the panicked reaction of the German car industry, which persuaded Economy Minister Peter Altmaier to write a letter in January to his counterpart in Taiwan to ask its semiconductor makers to supply more chips.

No extra supplies were forthcoming, with one German industry source joking that the Americans stood a better chance of getting more chips from Taiwan because they could at least park an aircraft carrier off the coast – referring to the ability of the United States to project power in Asia.

Closer to home, a source at another European chipmaker expressed disbelief at the poor understanding at one carmaker of how it operates.

“We got a call from one auto maker that was desperate for supply. They said: Why don’t you run a night shift to increase production?” this person said.

“What they didn’t understand is that we have been running a night shift since the beginning.”

NO QUICK FIX

While Infineon, the leading supplier of chips to the global auto industry, and Robert Bosch, the top ‘Tier 1’ parts supplier, both plan to commission new chip plants this year, there is little chance of supply shortages easing soon.

Specialist chipmakers like Infineon outsource some production of automotive chips to contract manufacturers led by Taiwan Semiconductor Manufacturing Co Ltd (TSMC), but the Asian foundries are currently prioritising high-end electronics makers as they come up against capacity constraints.

Over the longer term, the relationship between chip makers and the car industry will become closer as electric vehicles are more widely adopted and features such as assisted and autonomous driving develop, requiring more advanced chips.

But, in the short term, there is no quick fix for the lack of chip supply: IHS Markit estimates that the time it takes to deliver a microcontroller has doubled to 26 weeks and shortages will only bottom out in March.

That puts the production of 1 million light vehicles at risk in the first quarter, says IHS Markit. European chip industry executives and analysts agree that supply will not catch up with demand until later in the year.

Chip shortages are having a “snowball effect” as auto makers idle some capacity to prioritize building profitable models, said Anwar at Strategy Analytics, who forecasts a drop in car production in Europe and North America of 5%-10% in 2021.

The head of Franco-Italian chipmaker STMicroelectronics, Jean-Marc Chery, forecasts capacity constraints will affect carmakers until mid-year.

“Up to the end of the second quarter, the industry will have to manage at the lean inventory level,” Chery told a recent Goldman Sachs conference.

(Douglas Busvine from Berlin and Christoph Steitz from Frankfurt; Additional reporting by Mathieu Rosemain and Gilles Gillaume in Paris; Editing by Susan Fenton)

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Aussie and sterling hit multi-year highs on recovery bets

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Aussie and sterling hit multi-year highs on recovery bets 4

By Tommy Wilkes

LONDON (Reuters) – The Australian dollar rose to near a three-year high and the British pound scaled $1.40 for the first time since 2018 on optimism about economic rebounds in the two countries and after the U.S. dollar was knocked by disappointing jobs data.

The U.S. currency had been rising in recent days as a jump in Treasury yields on the back of the so-called reflation trade drew investors. But an unexpected increase in U.S. weekly jobless claims soured the economic outlook and sent the dollar lower overnight.

On Friday it traded down 0.3% against a basket of currencies, with the dollar index at 90.309.

The Aussie rose 0.8% to $0.784, its highest since March 2018. The currency, which is closely linked to commodity prices and the outlook for global growth, has been helped by a recent rally in commodity prices.

The New Zealand dollar also gained, and was not far off a more than two-year high, while the Canadian dollar rose too.

Sterling rose to $1.4009 on Friday, an almost three-year high amid Britain’s aggressive vaccination programme.

Given the size of Britain’s vital services sector, analysts say the faster it can reopen the economy, the better for the currency. Sterling was also helped by better-than-expected purchasing managers index flash survey data for February.

The U.S. dollar has been weighed down by a string of soft labour data, even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

Despite the recent rise in U.S. yields, many analysts think they won’t climb too much higher, limiting the benefit for the dollar.

“Our view remains that the Fed will hold the line and remain very cautious about tapering asset purchases. We think it will keep communicating that tightening is very far off, which should dampen pro-dollar sentiment,” said UBS Global Wealth Management strategist Gaétan Peroux and analyst Tilmann Kolb.

ING analysts said “the rise in rates will be self-regulating, meaning the dollar need not correct too much higher”.

They see the greenback index trading down to the 90.10 to 91.05 range.

U.S. dollar

Aussie and sterling hit multi-year highs on recovery bets 5

The euro rose 0.4% to $1.2134. The single currency showed little reaction to purchasing manager index data, which showed a slowdown in business activity in February. However, factories had their busiest month in three years, buoying sentiment.

The dollar bought 105.39 yen, down 0.3% and a continued retreat from the five-month high of 106.225 reached Wednesday.

(Editing by Hugh Lawson and Pravin Char)

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