When it comes to financial products, new credit card firms are the most successful online. Emily Gorton, staff writer for Choose, looks at why traditional banks are reluctant to take risks promoting their products online, and why they are losing out as a result…
The performance of new credit card providers was a ray of light in the, otherwise pretty gloomy, recent Independent Commission on Banking (ICB) report.
The ICB showed that the 34 new credit card providers since 2000 now have an 11% share in the market. Other new financial product providers have only snared a 2% to just under 4% market share.
A recent study by banking software group Temenous found that 30% of banking executives were concerned about the threat of new entrants to the market.
“Banks are worried about losing their best customers to competitors who can serve them better and their remaining customers to competitors who can service them more cheaply,” the company’s Director of Strategic Planning, Ben Robinson said.
It’s no coincidence that no financial product has been better promoted online in the past few years than credit cards or that new credit card providers have been far quicker than most to take advantage of new technology.
Customers now expect their providers to be in tune with the latest digital innovations, demanding to be able to access services in a variety of new ways, such as social networking, mobile applications and malleable, multi-functional websites.
But some of these devices require a personal touch at odds with the corporate image that a lot of businesses prefer to project, particularly financial organisations.
That’s a situation that clearly favours smaller operators ready to make their offerings personalised to customers online through a variety of channels.
The credit card providers winning out in the market now perceive that innovations in technology would not only make regulation easier but would also provide cheaper and better services which would keep customers from the jaws of competitors.
In the notoriously low customer turnover world of personal finance, digital has clearly given new credit card providers the edge.
This is a guest post from Choose. The site covers rights issues, research and debate into the consumer credit card and more broadly personal finance markets.