Brands step into financial arena
Once upon a time Charles and Maurice Saatchi tried to buy Hill Samuels; they had a go at Midland Bank too. Nearly everyone thought they were mad. The City reacted accordingly, and castrated their share price.
But were they really so deluded? Leading brands are now falling over themselves to move into UK financial services. Marks & Spencer has been a long-term player. More recently we’ve witnessed the arrival of General Motors, Virgin and Cellnet. Eagerly poised are Tesco, The Telegraph, British Gas and Volkswagen – to name but a few. Why now? On one level, the answer is simple. Opportunities exist which were not available even in the recent past. Technology has reduced the barriers to entry and exposed the charmed circle of financial composites to some chilly winds of competition. The decay of the welfare state, collapse of the housing market and the uncertainty of portfolio careers has given financial products a new imperative. Add to this the lacklustre brand differentiation of most financial services companies, plus a crop of pension scandals, and the sector looks ripe for plunder.
But is it? The UK market, already very competitive and over-supplied, could easily prove a treacherous snare. The most successful challenge to traditional retail financial services has, to date, come from within the industry, not without. A robust, trusted brand name is not enough and grievous damage may result if it is stretched too far.
Of the would-be contenders, Volkswagen seems the best equipped to launch a full portfolio of financial products. It has the resources, the experience, the banking licence – and a genuinely European customer base, which is useful now that retail financial services are adopting a more international complexion. Interestingly, Volkswagen is cautious about the timing of its entry into the UK market: Italy and the Czech Republic are preferred targets.
Others contenders are more modest in their ambitions. Commonly, brand partnership with an experienced sector operator offers a neat compromise. Potentially, it hedges the possibility of embarrassing scandal resulting from inexperience, enables the brand marketer to gather valuable extra data on their customers at limited cost and provides a platform for limited forays into financial products. The collaboration between Cellnet and Barclaycard is a good case in point. It’s carefully tailored to suit both parties, gives added value to customers and – if it fails – can be quietly written off as a promotion.
Somewhere between these two extremes – Volkswagen and Cellnet – lies a black hole for the financially unsophisticated.
Cover story, page 30
