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Financial Services (FS) are mass market - mostpeople have bank accounts, nearly all have a need for risk insurance on lifeand possession, most need a loan for their home or car; all need to makeprovision for old age and for a rainy day.
Digital TV is going to be a mass audience with a predicted10m subscribers (50% of homes) by 2003. Additionally a large proportionof the population will also have internet access (the UK user base is now8m), and most will have a mobile phone (15m to-date) and/or a personal dataassistant (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 UScredit card companies have entered the UK and retailers have moved into financialservices. Many are using telephone based distribution and they will extendthis to the Internet and Digital TV. The names are a roll call for the FT100:Marks andSpencers FS, Safeway Bank,TescoFS, Sainsburys FS,Dixons,Prudential Bank,Standard Life Bank,Legal & GeneralBank, WoolwichBank etc..
Two of the three major Digital TV distribution channels (satellite andterrestrial) now provide interactive services. The third, cable, will soonfollow. Many of these intend to offer banking services. Some may set up theirown bank - if British Airwayscan do it so can other leading brands.
Then there are the financial software companies:Sage (with a partnership withIBM to target Sage's 2m small businesscompanies), Quicken (which alreadyhas a well respected internet site), andMicrosoft (remember Bill Gates famousremark about banks being dinosaurs?).
In the US, it is expected that a third of all bills will be soon deliveredand paid for online, and twice as many by 2002. Further, just as many consumerswant the bills to be handled by the provider of their personal financialsoftware package as want the service to come from the banks. Remember manyof the bills will come from the utilities - alreadyBritish Gas has launched itsGoldfish credit card. More recentlythe Halifax is literally pushingbill paying by telephone by charging a £5 fee for over the counter billpayments.
US banks are already fighting back.BankBoston, a pioneer back in 1995with online banking, now has 21% of its 1.8m customer accounts engaged inonline banking, and its growth rate is 50% p.a..BankAmerica Corp. has teamed upwith cable company TCI (also active in theUK) and home shopping channel @Home to capture many of the US 70m cablesubscribers. An IDC report estimates that7,200 US banks and credit unions will purchase Internet banking applicationsthis year, while Jupiter predicts that 18million US households will bank online by 2002.
In the UK, in a 1998 First Direct/ Mori survey of British bank accountholders, 6% said they carry out all their banking by telephone alone, withanother 13%, representing 4.3 million, having Internet accounts. The studyconcluded that account holders are anticipating the advent of PC/TV convergence.
A 1998 US study by Killen & Associates suggest that in five years time30% of those seeking loans for mortgages and 40% of those seeking loans tobuy automobiles, will look to the Internet to find the best deal. This comparesto 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. Thenumber of online trades executed in the first quarterof 1999 is expected to reach an average of 425,000 perday, an increase of 25 percent on the fourth quarter of 1998,according to CS First Boston. A 1998Anderson Consulting study showed that twiceas many people went to the online brokerages as went to online banks. Worsefor the banks, the visitors to the online brokerages tended to be bettereducated (56% cf 30% had third level education), had managerial/professionalroles (37% cf 28%), and had higher income ($54,400 cf $48,600).Dixons believes that the UK will followthe trend and in May 1999 invested £9m in the USGlobalNet Financial.com, an onlinetrader. Dixons of course has quickly signed up over 1m subscribers to it'sFreeServe internet service.
Whilst pure insurance sites have yet to become popular (thoughEagle Star in the UK is awell known site), often insurance is provided as an add-on to other relatedsites. In the US, new and used car sites are very popular(Autopoint and Microsoft'sCarPoint - did you know thatMicrosoft was into selling cars?!) and travel sites are immensely popular,with DataMonitor predicting thatthe travel industry would account for 35% of all online sales by 2002.
With the huge increase in free internet access, the UK will see a suddenand dramatic shift to electronic communications, adding to the recent surgein telephone sales and servicing. A second quantum leap when Digital TV consumerscome on-line could see many an organisation being crippled in their handlingof electronic communications.
How many UK organisations are ready for Digital TV? Howmany capable of handling telephone, email, web queries, interactive-TV calls,internet telephone, postal and face-to-face communications in an integratedway? Of those few (if any), how many are then capturing customer knowledgeas a way of enhancing relationships and providing memorable experience? Butit doesn't stop there! How many are really effectively using that informationfor developing new products, services, and experiences and in doing so, bondingtheir customers' relationships for life?
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