Non-Traditional Players in Retail Banking: The Customer Opportunity
Datamonitor
December 23, 2009 SKU: DFMN2539576
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Introduction
The financial crisis has had a huge impact upon the banking world. Many established banks have been weakened, subject to tougher regulation, and suffering from diminished trust. This has created an opening for non-traditional providers to move in and take advantage of their stronger reputations. However, they also need to be aware of obstacles, such as customer inertia, that stand in their way.
Scope- Strengths that can provide non-traditional entrants with a competitive edge over established banks, such as expertise in customer analytics.
- Weaknesses that such providers need to deal with, such as high levels of customer inertia and the difficulties faced in selling advice-led products.
- Opportunities that will benefit these institutions, for example technological developments lowering the costs of entry.
- Threats that exist to the wellbeing of new, non-traditional providers, such as lack of expertise in the provision of financial services.
Highlights
Expertise in database management and customer analytics gives supermarkets and other retailers a competitive advantage over the banks when it comes to marketing products and services.
Non-traditional providers will find it extremely difficult to overcome the high degree of inertia in the current account market.
Not having launched operations in the immediate aftermath of the banking crisis means that prospective entrants may have missed their best window of opportunity to win over disaffected customers.
Reasons to Purchase- Presents case studies of providers who have already entered, or are in the process of entering, the financial services industry.
- Highlights the main strengths that new entrants to retail banking can exploit, as well as the weaknesses they need to contend with.
- Discusses the opportunities that exist in the market for non-traditional providers, and the threats to their prospects for success.
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- Overview
- Catalyst
- Summary
- Methodology
- Executive Summary
- Datamonitor concludes that new providers will have only a limited impact on the market
- Non-traditional players seeking to enter the banking market face mixed prospects
- The case for non-traditional players
- The case against non-traditional players
- Introduction
- The banking crisis has created an ideal climate for new entrants
- The Future Decoded
- Strengths
- Weaknesses
- Opportunities
- Threats
- APPENDIX
- Supplementary data
- Definitions
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- TABLE OF FIGURES
- Figure 1: Consumers with diminished trust in their main bank are willing to look elsewhere
- Figure 2: Sainsbury’s is using its Nectar loyalty scheme to entice customers
- Figure 3: Current account market share is concentrated in very few hands
- Figure 4: Only a minority claim they are willing to purchase financial products from supermarkets
- Figure 5: Consumers with diminished trust in their main bank are willing to look elsewhere
- Figure 6: There is a strong link between falling levels of trust in industry and likelihood to shop elsewhere
- Figure 7: Consumer trust in banks has been badly hit, especially in the US and northern Europe
- Figure 8: Tesco already offers a wide array of financial products and services
- Figure 9: As well as having an online presence, Tesco also offers in-store banking facilities
- Figure 10: Alior is the largest ever bank launch in Polish history
- Figure 11: The US fashion retailer Nordstrom offers full banking to its customers
- Figure 12: Through its Greenbee brand, John Lewis markets a wide range of insurance policies
- Figure 13: O2 has recently introduced two new payment cards
- Figure 14: Customer satisfaction with credit card providers is much higher for non-bank institutions
- Figure 15: Sainsbury’s is using its Nectar loyalty scheme to entice customers
- Figure 16: Tesco has effectively integrated its credit card into its wider loyalty program
- Figure 17: Is this an appropriate environment in which to sell mortgages and pensions?
- Figure 18: Current account market share is concentrated in very few hands
- Figure 19: Non-financial providers currently hold limited appeal for consumers
- Figure 20: Only a minority claim they are willing to purchase financial products from supermarkets
- Figure 21: Banks still enjoy levels of trust comparable to other organizations, in the UK and globally
- Figure 22: ING Direct: When saving doesn’t feel so good
- Figure 23: Tesco Compare has failed to make inroads into the price comparison market
- Figure 24: RBS could be forced to sell off its branches in England
- Figure 25: Across all markets, the current account drives cross-selling of other products
- Figure 26: There has been a severe contraction in the availability of secured and unsecured credit
- Figure 27: Deposits held at HBOS fell in 2008, along with consumer confidence
- Figure 28: Prudential sold Egg to Citi in 2007, having failed to make a success of the venture
- Figure 29: Marks & Spencer’s Lifestore concept failed to attract customers in sufficient numbers
- Figure 30: National Savings & Investments prominently emphasizes its 100% Treasury-backed guarantee
- Figure 31: Abbey is launching a fee-free bank account for its mortgage holders
- TABLE OF TABLES
- Table 1: New providers at a glance
- Table 2: Tesco outlets in the UK, as of November 2009
- Table 3: Impact of fall in trust with primary bank on likelihood to investigate other banks
- Table 4: Current account market share in the UK
- Table 5: Products consumers are willing to purchase from supermarkets
- Table 6: Impact of fall in trust with banking industry on likelihood to shop around for financial products
- Table 7: Extent of fall in trust in banking industry
- Table 8: Customer satisfaction with credit card providers
- Table 9: Popularity of non-financial providers for financial products
- Table 10: Extent of trust in financial institutions (rated on five-point scale)
- Table 11: ING Direct: savings rates and deposits
- Table 12: Extent of cross-selling
- Table 13: Change in availability of credit over time
- Table 14: Nationwide Consumer Confidence Index 2004-2009
- Table 15: HBOS: value of total deposits over 2004-2009
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