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The five pillars of e-wisdom

There is a definite gap between e-commerce expectation and reality. But

the reality is closer than you might think. The next five years promise the

most significant revolution in retail finance distribution strategy.

Change will be driven by the explosion in competition and the expectation

of ever increasing levels of customer service, forcing retail financial

services institutions to accelerate the trend towards aligning the

distribution of their products with the lifestyle of consumers.

The need to diversify has created a trend towards cross-fertilisation in

the financialservices industry – banks and insurance companies are

increasingly intruding into each other&#39s traditional domains.

Most banks have now moved into the bancassurance arena by offering their

own insurance policies. Life insurance companies are now beginning to make

the transitionthe other way, Egg being the most visible and arguably

successful example.

The importance of brand and its power to transcend different markets must

not be underestimated. Virgin&#39s success in taking market share from

traditional fund managers and mortgage providers isa case in point. You

need only look at the lead story in a recent Money Marketing for an example

of further newcomers entering the market. The EasyJet model, whose brand

champions the consumer through easy access and good value, is now set to

enter the market with an online virtual IFA -e-commerce in its purest


If this venture is anything as successful as the airline and internet

cafes, then a considerable client base will be drawn by the perceived value

of EasyLife products. After all, perception is all it takes to make your

clients click on toa competitor&#39s website.

However, the recent CMG pan-European eCom Index of 250 companies has

highlighted concerns across the commercial sector that e-commerce is

failing to deliver tangible business benefits in the form of profitable


One can argue strongly that the gap between e-commerce expectations and

realities is growing wider. The index, which tracks the percentage of

companies recording more than 1 per cent of revenues through e-commerce,

shows the figure for insurance companies stuck at nine (although up from

eight last November).

What this means is that insurance companies are now ahead of the retail

sector but still trail the banking, logistics, utilities and telecoms


But there is a key finding which must not be neglected – 90 per cent of

the insurance companies interviewed across Europe expect to see strong

growth in e-commerce over the next 12 months.

Since we launched the eCom index last year, we have seen the arrival of

electronic, mobile, optic and television commerce. Doubtless, many more

variants will follow. The important fact is that e-commerce is here to

stay, although it is still in its infancy. This has heralded the recent bad

press and the commercial world&#39s belief that the gap between expectation

and reality is indeed cavernous.

With this research and media bluster in mind, we can draw out the five

pillars ofe-wisdom. The first states the new economy rewrites rec-eived

wisdom about customer behaviour -loyalty is farharder to earn when

switching is easier and automated.

The second states brands need to sustain high-value propositions across

all channels to market – some cannibalisation is inevitable.

The third suggests brand awareness and trust are even more important in

the e-world .

Fourth, what goes up quickly can come down equally quickly – today&#39s new

idea is tomorrow&#39s me-too concept. Re-evaluation and repositioning become

an almost daily challenge.

The fifth pillar could be more important than the others. It states that

the likelihood of the previous four pillars being the same a year from now

is small. E-commerce may be the great opportunity but stand still and you

are history.

So does this gap between expectation and reality mean consumers will

neglect the internet as a method of transacting financial business? By

looking at other statistics, one realises this channel is not about to


According to market research analyst Datamonitor,the number of

internet-enabled households is set to rise from 9.9 million at the end of

1999 to 11.8 million at the end of 2001. When one considers the projected

take-up of interactive TV – predicted to be around7.4 million households

by2004 – a medium much more disposed to carrying out convenient financial

transactions, it is clear that e-commerce is a channel not to be dismissed


The key is understanding your customer is to ensure your business strategy

is aligned to their present and future spending patterns.

This means analysing their lifestyle and spending habits and preferences

for financial transactions, whether it isPC-based or not.

Analysis in the US reveals consumer use of the internet is growing

rapidly. The trading of financial products is increasing even faster.

The bad news for IFAs and life offices is it is the top 20 per cent of the

population in socio-economic terms that are driving this trend and these

are often prime target customers.

The issue for providers of financial products is not should we participate

but how to participate in a customer-driven manner.


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