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Retailers could take over distribution, says survey

Financial services companies need to keep their finger on the pulse or risk losing ground to new entrants to the sector, according to a report from market analyst Datamonitor.

In the report, New Entrants in European Financial Services 2002, Datamonitor says the greatest threat comes from traditional retailers with big customer bases which enter into relationships with financial product providers looking to take advantage of their distribution capabilities.

It says companies from the retailing, utilities and automotive sectors have already entered financial services throughout Europe. It points to the situation in the UK, where Sainsbury, Tesco, Marks & Spencer and Centrica have a presence.

Datamonitor says financial services offer a way for lateral entrants to increase customer loyalty and bring about brand extension and reinvention. It claims that financial providers generally lag behind utilities and supermarkets in terms of levels of service they provide to customers.

But the report suggests these new distribution channels can be a positive opportunity for forward-looking financial services providers.

Financial services technology analyst Alex Boorman says: “These findings suggest great opportunities for lateral entrants in financial services if they can convince customers that they are able to offer the same levels of service despite the movement out of their core markets. Conversely, the findings suggest grave danger to financial services companies unless they pull their socks up.

“Considering the relative strengths of retailers and financial services companies, a future where retailers assume responsibility for the distribution of products while financial services companies assume responsibility for product manufacture may not be too unrealistic and may be beneficial for all concerned.”

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