Financial selling embraces new world
THE INVESTMENT COLUMN
The enabling technology, the telephone, allied with enormously powerful computers, looks like rendering the traditional branch-based networks of the banks and, especially, the building societies, largely obsolete. What has surprised observers most about the transition from face-to-face financial services provision to phone transactions is the speed with which the public has taken to the new order. We want cheap, efficient services and couldn't really care less who provides them.
Association of British Insurers statistics suggest that, in 1994, 21 per cent of all personal insurance lines were transacted on a direct basis. Nikko Europe, a broker that recently issued a study of the direct financial services market, believes that figure could double by 2000. Providers of retail financial services will plainly be hugely disadvantaged if they don't exploit the direct market to good effect.
Products will need to be standardised to simplify the task of advertising in the media (the main route to attracting new business), and service will have to be exemplary to hold on to clients in a market where transferring from one supplier to another is as simple as picking up the telephone. Economies of scale will matter, but size will not be everything - more important will be the creation of brands, such as Direct Line, fast becoming the Hoover of financial services.
So who are the winners and losers likely to be in this brave new world?
Royal Bank of Scotland has an enormous head start through its ownership of Direct Line. Its commanding lead in motor insurance means that most people phoning around for a quote will give Direct Line a try first. The bank itself also has less to lose than some of its peers from the intensification of competition in financial markets as its staff and branch networks are relatively small.
TSB is likely to be another beneficiary, thanks to its heavier exposure to the lower socio-economic groups, which bring it more into competition with the building societies - they are much less further down the direct road than the banks. HSBC, through its ownership of First Direct, also has a good toehold in telephone banking, which should act as a blueprint for expanding the service around its global network. Prospects are excellent.
At the other end of the scale, Lloyds' originally good idea of selling Lloyds Abbey Life insurance through its branches, so-called bancassurance, seems to be suffering from fewer people visiting their branches. Cheap distribution is not working as well as expected and is becoming more expensive now that the regulatory regime is getting tougher.
Commercial Union also looks at risk because of its currently highly profitable exposure to UK personal line insurance - 15 per cent of premiums and a useful pounds 80m of underwriting profit in the first nine months of the year. The fast growth in direct sales elsewhere puts this income stream at risk.
The final doubtful stock is Barclays, which enjoys 30 per cent of the money transmission market and a similar slice of the personal loans segment. Given that exposure, it might have been expected that the bank would have moved into direct sales with a vengeance, but it has, in fact, only just entered the fray. Barclays faces the prospect of a significant loss of business to First Direct and others.
Exclusive: World’s most pristine waters are polluted by US Navy human waste
Missing Malaysia Airlines Flight MH370: Any terrorist seizure of the plane ‘would have required one hell of a piece of planning’
Croatia's second city to close 'worst zoo in the world' after reports of 'nightmare' conditions and 'depressed' animals
Missing Malaysia Airlines Flight MH370: Hijackers, pirates or suicide – the theories surrounding the mystery
Missing Malaysia Airlines Flight MH370 Q&A by Simon Calder: How far could it have travelled? Who was responsible and what would their plans be? And how can a plane just vanish?
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Grace Dent: Who cares if she spells it Barraco Barner? Gemma Worrall is more employable than some bookish arts graduate
The rise of Ukip: Study warns Labour that Eurosceptic party's electoral base now 'more working class than any of the main parties'
Tony Benn was entirely ineffectual - and usually wrong
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
- 1 Is your name now 'banned' in Saudi Arabia?
- 2 Exclusive: World’s most pristine waters are polluted by US Navy human waste
- 3 Gender-specific books demean all our children. So the Independent on Sunday will no longer review anything marketed to exclude either sex
- 4 Missing Malaysia Airlines Flight MH370: Jet ‘hijacking’ began soon after take-off
- 5 'Missing Malaysia Airlines Flight MH370 plane found in Bermuda Triangle!' Viral Facebook links are profiting hackers
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...