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.

The Centre for the Study of Financial Innovation (CSFI, 1997), sought to analyse the suitability of retailing different financial products over the Internet and developed what they termed the ‘financial services spectrum’ (see Figure 5).

Figure 5 The CSFI’s spectrum of financial services

The spectrum demonstrates the idea that less profitable services, such as information distribution and commodity products may be the most amenable to the Internet channel, whereas more complex and ultimately more profitable services, such as mortgages and pensions, may require a more personalised method of delivery.

This conclusion also appears to be prevalent in the development of current UK Internet provision. An examination of services currently being offered by a range

of UK financial providers reveals that the majority have simply sought to use their websites to offer consumers information on the products and services that they offer rather than to provide consumers with the opportunity of purchasing all financial services online (see Table 1).

Table 1 Services offered on Internet sites of selected UK financial providers (as at 19th September, 1999)

Provider

Information on products

Shopping mall

Account services*

Call-back facility

Apply for products online

Feedback form for further details

Internet provider

Barclays

H

H

A B C E

X

Online banking

H

H

HSBC

H

X

A B C D**

X

X

X

X

Lloyds

H

X

A B C D E

X

X

X

X

Natwest

H

X

X

H

X

H

X

Egg

H

X

A B

X

Loans

HH

Mortgages

Savings

Insurance

First Direct

H

X

A B C E

X

X

H

X

Standard Life

H

X

X

X

X

X

X

Tesco

H

H

X

X

X

X

H

Virgin

H

H

X

H

ISAs

H

X

Deposit Acc

Halifax

H

X

A B C D**

H

Loans

H

X

Mortgages

Northern Rock

H

X

X

H

Loans

H

X

Woolwich

H

X

X

H

Loans

H

X

Mortgages

Insurance

Nationwide

H

H

A B C D E

X

Loans

H

H

Mortgages

Savings

Credit cards

Current Acc

Table 1 also demonstrates the large amount of diversity in the Internet strategies of UK financial providers. A number of financial providers have simply used their websites as ‘brochures’ for their products (eg Tesco), whereas others have apparently embraced this new technology, offering consumers the option to purchase services online (eg Nationwide, Egg) and online account services such as the ability to transfer funds, pay bills, set up standing orders and direct debits and check outstanding balances (eg Lloyds, Nationwide). However, the study found that the online services tended to be for the more straightforward products (eg loans, savings such as at Virgin and Northern Rock) rather than the more complex products such as pensions. In this way it can be suggested that financial providers appear to be operating a system of offering those products that they perceive consumers will be most likely or willing to purchase online. A good example is Virgin, which offers consumers the opportunity to purchase ISAs and a deposit account online, but for pensions and the One Account, consumers are encouraged to telephone for advice. Likewise, Halifax offers loans online but consumers are being encouraged to acquire savings (ISAs and Monthly Saver) either via the telephone or by a visit to the branch.

These findings are corroborated by the Ernst and Young study (1998). In their survey of UK financial providers’ uses of the Internet they found that the majority (72 per cent) used the channel for the distribution of information to consumers, with only 45 per cent suggesting that they exploited the sales/promotion potential of the channel. However, in terms of companies’ planned uses of the Internet, the study found that 77 per cent planned to offer consumers the ability to set up accounts, and to make ‘administrative changes’, ie change of name, address etc over the Internet.

An examination of current UK financial providers’ websites highlights the very different approaches currently being employed to encourage consumers to adopt Internet banking. For example, one tactic is to offer consumers incentives such as the chance to take part in competitions (HSBC) or offers on computer goods (eg Egg and Lloyds with offers on PCs). Another tactic embraced by a number of financial providers is to establish themselves as Internet providers (eg Tesco, Egg, Barclays) for their customers. One apparent outcome of this approach is to ensure that more of a consumer’s online time will be spent viewing their pages, because the consumer’s ‘homepage’ or access is channelled through the financial provider. A number of financial providers have sought to extend this principle by establishing their websites as marketing channels for the retailing of products and services other than financial products. This is the case with Nationwide, Tesco and Virgin , but perhaps the best example of such a strategy is Barclays, which offers consumers an online shopping experience at its ‘Barclaysquare’ : ‘. . .the best shops direct to your home. All the products you could ever want are but a click away.’

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.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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