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Financial Services (FS) are mass market - most people have bank accounts, nearly all have a need for risk insurance on life and possession, most need a loan for their home or car; all need to make provision for old age and for a rainy day.
Digital TV is going to be a mass audience with a predicted 10m subscribers (50% of homes) by 2003. Additionally a large proportion of the population will also have internet access (the UK user base is now 8m), and most will have a mobile phone (15m to-date) and/or a personal data assistant (PDA). For others there will be kiosk for public access in libraries, shopping malls and town halls.
New providers will continue to enter this arena in the same way as both US credit card companies have entered the UK and retailers have moved into financial services. Many are using telephone based distribution and they will extend this to the Internet and Digital TV. The names are a roll call for the FT100: Marks and Spencers FS, Safeway Bank, Tesco FS, Sainsburys FS, Dixons, Prudential Bank, Standard Life Bank, Legal & General Bank, Woolwich Bank etc..
Two of the three major Digital TV distribution channels (satellite and terrestrial) now provide interactive services. The third, cable, will soon follow. Many of these intend to offer banking services. Some may set up their own bank - if British Airways can do it so can other leading brands.
Then there are the financial software companies: Sage (with a partnership with IBM to target Sage's 2m small business companies), Quicken (which already has a well respected internet site), and Microsoft (remember Bill Gates famous remark about banks being dinosaurs?).
Quicken's Insurance page with its instant quotes and banner ads (click to enlarge).
In the US, it is expected that a third of all bills will be soon delivered and paid for online, and twice as many by 2002. Further, just as many consumers want the bills to be handled by the provider of their personal financial software package as want the service to come from the banks. Remember many of the bills will come from the utilities - already British Gas has launched its Goldfish credit card. More recently the Halifax is literally pushing bill paying by telephone by charging a £5 fee for over the counter bill payments.
US banks are already fighting back. BankBoston, a pioneer back in 1995 with online banking, now has 21% of its 1.8m customer accounts engaged in online banking, and its growth rate is 50% p.a.. BankAmerica Corp. has teamed up with cable company TCI (also active in the UK) and home shopping channel @Home to capture many of the US 70m cable subscribers. An IDC report estimates that 7,200 US banks and credit unions will purchase Internet banking applications this year, while Jupiter predicts that 18 million US households will bank online by 2002.
In the UK, in a 1998 First Direct / Mori survey of British bank account holders, 6% said they carry out all their banking by telephone alone, with another 13%, representing 4.3 million, having Internet accounts. The study concluded that account holders are anticipating the advent of PC/TV convergence.
A 1998 US study by Killen & Associates suggest that in five years time 30% of those seeking loans for mortgages and 40% of those seeking loans to buy automobiles, will look to the Internet to find the best deal. This compares to the 90% of loans today that are taken out in physical locations.
Also in the US, huge numbers of people are now investing on-line. The number of online trades executed in the first quarter of 1999 is expected to reach an average of 425,000 per day, an increase of 25 percent on the fourth quarter of 1998, according to CS First Boston. A 1998 Anderson Consulting study showed that twice as many people went to the online brokerages as went to online banks. Worse for the banks, the visitors to the online brokerages tended to be better educated (56% cf 30% had third level education), had managerial/professional roles (37% cf 28%), and had higher income ($54,400 cf $48,600). Dixons believes that the UK will follow the trend and in May 1999 invested £9m in the US GlobalNet Financial.com, an online trader. Dixons of course has quickly signed up over 1m subscribers to it's FreeServe internet service.
Whilst pure insurance sites have yet to become popular (though Eagle Star in the UK is a well known site), often insurance is provided as an add-on to other related sites. In the US, new and used car sites are very popular (Autopoint and Microsoft's CarPoint - did you know that Microsoft was into selling cars?!) and travel sites are immensely popular, with DataMonitor predicting that the travel industry would account for 35% of all online sales by 2002.
Microsoft's CarPoint - Note the Insurance advert. in the bottom right corner (click to enlarge).
With the huge increase in free internet access, the UK will see a sudden and dramatic shift to electronic communications, adding to the recent surge in telephone sales and servicing. A second quantum leap when Digital TV consumers come on-line could see many an organisation being crippled in their handling of electronic communications.
How many UK organisations are ready for Digital TV? How many capable of handling telephone, email, web queries, interactive-TV calls, internet telephone, postal and face-to-face communications in an integrated way? Of those few (if any), how many are then capturing customer knowledge as a way of enhancing relationships and providing memorable experience? But it doesn't stop there! How many are really effectively using that information for developing new products, services, and experiences and in doing so, bonding their customers' relationships for life?
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