Banks must adapt or lose more ground

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 (MW last week). Mergers and acquisitions have transformed the high street and the 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 and churn, but also in a high cost of new customer recruitment.

The competitive landscape is changing fast. Supermarkets such as Tesco now offer, among many other things, a mortgage and, like their retail competitors, have 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 wholesalers, with no direct customer contact.

The ease with which new entrants such as the supermarkets are attacking financial services’ core customer base should be causing significant concern to the mainstream providers.

These new entrants have an extremely low cost of customer recruitment – about a quarter of that experienced by traditional financial institutions – and are exploiting the recent corporate strategies within the financial services 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. Tesco, Sainsbury’s and the others 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, which will bring new challenges and competition. Isn’t it time these companies started to really utilise the

information at their fingertips to provide relevant financial services?

Clive Humby

Chairman

dunnhumby

London W5