The gap between the cost of mortgages, savings accounts and insurance policies provided by telephone-based services and those offered by branch- based organisations is certain to accelerate the shift in distribution methods that has revolutionised the financial services industry.
The pressures on old-style banking and insurance groups were underscored yesterday by Sainsbury's Bank, which increased the interest rate it will pay on deposits from 5.75 per cent to 6.15 per cent, less than half a per cent lower than the current base rate. Sainsbury's has signed up 250,000 account holders since it launched the bank in January.
The trend away from branch networks is expected to result in a sharp fall in the numbers of people employed in banking and insurance. According to Business Strategies, the economic consultancy which conducted the research on behalf of telephone insurer Direct Line, up to 100,000 jobs are likely to be cut over the next 10 years.
Richard Holt, a director of Business Strategies, said: "We suspect the changes that have taken place so far are just the beginning and the traditional branch and agent-based distribution networks in financial services are under threat."
The expected fall in employment is despite continuing rapid growth in the financial services industry, the output of which is estimated to have grown from pounds 22bn to pounds 34bn over the past 10 years and which is forecast to increase to pounds 44bn over the next decade.
Despite waves of redundancies, numbers employed in financial services have actually grown in the past 10 years.
According to Business Strategies, the area of greatest overpayment is in the pounds 200bn market for instant access savings accounts.
The research estimates that if all the money tied up in traditional accounts was shifted to the higher-yielding accounts offered by direct suppliers, savers would receive pounds 3.8bn more in interest.
The other area in which consumers are needlessly paying a premium rate is mortgages. Even assuming a pounds 600m cost of switching out of home loans that carry early redemption penalties, the total saving has been estimated at pounds 1.9bn.
Insurance also offers considerable savings, with many consumers tying themselves into expensive household policies offered as part of a mortgage package and paying commissions of as much as 70 per cent of premiums in the uncompetitive travel insurance market.Reuse content