CRM in intermediated financial services markets

CRM in intermediated financial services markets

INTRODUCTION

This paper examines the role of customer relationship management (CRM) within an intermediated business environment, ie where the relationship between supplier and consumer (‘customers’) is through intermediaries or third parties (‘partners’). In this case — a major UK insurance company (‘The Insurer’) — the partners are banks, building societies and major retailers. Their customers are supplied insurance services either on behalf of or in tandem with the partners. Figure 1 provides a simple picture of the arrangement.

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Electronic commerce and the marketing of Internet banking in the UK: INTERNET BANKING part 3

Electronic commerce and the marketing of Internet banking in the UK: INTERNET BANKING part 3

Alternatively, one can focus upon the ways financial providers have sought to market this delivery channel to consumers (see Table 2) to promote adoption. From this review it appears that the main factors that have been used by financial providers to promote their Internet offerings have been those of convenience, access, control and increased flexibility and choice.

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Electronic commerce and the marketing of Internet banking in the UK: INTERNET BANKING part 2

Despite these arguments one must acknowledge that direct acquisition will not appeal to all consumers for all financial products. In some cases consumers will still prefer and be willing to make the effort to fufil their financial needs through face-to- face contact with an individual. Furthermore, the diversity of financial products suggests that not all will be amenable to retailing through direct means, due to current levels of consumer knowledge and uncertainty. In this respect it is necessary to remember that financial services are not homogenous, rather they vary in terms of their perceived complexity from more straightforward ‘commodity’ type products such as basic insurance, to more complex choices such as investment products.

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Electronic commerce and the marketing of Internet banking in the UK: INTERNET BANKING

INTERNET BANKING AND CONSUMER BEHAVIOUR

Notwithstanding the current use of ATMs and the stance and views of the aforementioned bodies, this section examines how consumers’ perceive these (planned) changes in the provision of financial services. An ICL study (1998) revealed that 35 per cent of the respondents would be interested in using either a PC or the television for their financial needs (see Figure 3).

However, 50 per cent of the respondents agreed that security concerns would prevent them from using the Internet for their financial needs. In addition, many of the respondents (24 per cent in each case) would have preferred financial providers to increase the number of branches and ATMs (see Figure 4). This might suggest that either consumers simply want more choice with respect to available delivery channels, or that they are very reluctant to change their current behaviour.

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Electronic commerce and the marketing of Internet banking in the UK: THE GOVERNMENTAL POSITION

Electronic commerce and the marketing of Internet banking in the UK: THE GOVERNMENTAL POSITION

ELECTRONIC COMMERCE AND THE GOVERNMENTAL POSITION

The UK Government has been favourably disposed towards the development of electronic commerce. This has been outlined in a White Paper (1998), which as part of the government’s strategy for ‘modernising the economy’, established the principle that economic success would in future be achieved by creating a truly ‘knowledge driven entrepreneurial economy’. In a subsequent paper (1998) it was suggested that the development and use of electronic commerce represented an important ingredient in this strategy and that the government would act as a facilitator by establishing a legal and regulatory framework which would permit electronic commerce to ‘thrive’, by ensuring a ‘strong supply sector providing innovative solutions to customers demands’ and by encouraging demand from what they term knowledgeable users. With respect to the issue of building consumer demand the government has pinpointed the considerable impact that consumer trust will have:

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Electronic commerce and the marketing of Internet banking in the UK: THE IMPLICATIONS

THE IMPLICATIONS FOR FINANCIAL PROVIDERS OF ELECTRONIC COMMERCE

To understand the implications for financial providers of the developments in electronic commerce it is useful to appraise contributions by financial services’ consultants. Price Waterhouse (1998) found that the majority of Information Technology Directors (84 per cent) see ‘customer needs’ as a major factor driving the growth of electronic commerce. In addition, 75 per cent cite market pressures as a factor for growth, while 60 per cent suggested the ‘drive to reduce costs’. For financial providers arguably the main advantage of the Internet is that transaction processing costs are much lower via this channel than more traditional channels such as the branch. Booz, Allen and Hamilton (1996) have calculated that such costs are significantly less for the Internet (see Figure 1).

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Electronic commerce and the marketing of Internet banking in the UK: THE CHANGING MARKET

THE CHANGING MARKET FOR FINANCIAL SERVICES PROVISION

To assess the changing market for UK provision of financial services a review of the findings of market researchers in this area is a very worthwhile exercise.

Recent evidence points to the significant growth in the use of the Internet by consumers for their financial needs. A MORI study (1998) demonstrated that 13 per cent of UK current account holders, 4.3 million people, have access to the Internet. This is a significant increase from 1996, when only 5 per cent of the UK population had such access. In addition, 36 per cent (nearly 12 million people) expect to use the Internet to arrange their finances within ten years, although the current figure for those who actually do this is believed to be only 1 per cent. A more recent MORI study (1999) found that 26 per cent of people use the Internet for sourcing financial services’ information and 10 per cent use it for their personal banking.

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Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

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