It’s clear that financial services companies must maintain high levels of awareness in order to remain competitive within their own markets (Factfile, MW August 28). However, this sector now faces significant threats from previously unrecognised challengers.
The financial services market has evolved beyond recognition since the days of regular trips to the local branch and a Christmas card from the bank manager. Merger and acquisition has transformed the high street and a persistence in mistakenly trying to sell to the “average customer” has seriously undermined brand value. Selling to “the common denominator” is a policy that results not only in high levels of customer dissatisfaction, but also in an extremely high cost of new customer recruitment.
The competitive landscape is changing fast. Supermarkets such as Tesco now offer, among other things, a mortgage and, like its retail competitors, has an extensive network to deliver the complete banking service. As these organisations take an increasing slice of the banking market through first-class use of customer information, traditional providers may find themselves relegated to the role of wholesaler, with no direct customer contact.
The ease with which new entrants, such as the supermarket retailers, are attacking the financial services’ core customer base should be causing significant concern to the mainstream providers. The cost of customer recruitment for these new entrants is extremely low – about a quarter of that experienced by traditional financial institutions. They are also exploiting the recent corporate strategies within the sector that have led to a mistrustful and disloyal customer base. Yet only a decade ago, most individuals would pledge firm allegiance to their financial provider.
The UK financial services market would be naive to continue to downplay the potential impact of the new style competition. The likes of Tesco and Sainsbury’s are not just offering a few basic financial products to some low value customers. With their branch networks, huge loyalty and joined-up product offerings they are threatening to revolutionise the market and attain enormous market share. Nor is the wholesale market a sure thing, with entry into the Euro on the horizon bringing new challenges and competition. Isn’t it time thes
e companies started to really utilise the information at their fingertips to provide relevant financial services?