articles by xbridgers
Business Money, September 2004
Recent research has created a stir amongst UK commercial lenders by highlighting a potentially enormous channel shift for new customer acquisition. The Financial Times summarised the Xbridge-conducted survey by reporting last month that "the march of the internet into territory once occupied by high street banks is continuing apace."
The survey is alarming news to some in the commercial finance sector - particularly to those that have relied on their brand dominance and extensive physical presence to maintain market share. These advantages many not protect them against more technologically savvy competitors.
The survey asked online business customers: a) where they currently, and b) where they expect in five years to find new financial services and funding for their business. The shift from the branches to the online channel is summarised below by lender exclusively for Business Money:
| Branches | Online Channel | |||||
| Now | 5 Years | % Change | Now | 5 Years | % Change | |
| Abbey | 18% | 14% | -25% | 50% | 73% | 45% |
| BoS | 43% | 36% | -17% | 21% | 43% | 100% |
| Barclays | 47% | 37% | -21% | 41% | 73% | 76% |
| HSBC | 56% | 33% | -42% | 42% | 62% | 48% |
| Lloyds TSB | 61% | 34% | -43% | 32% | 58% | 83% |
| NatWest | 58% | 56% | -3% | 44% | 60% | 36% |
| RBS | 50% | 22% | -56% | 56% | 72% | 30% |
| All | 49% | 34% | -31% | 45% | 65% | 44% |
The survey results demonstrate clearly that over time businesses expect to use the internet more than the branch for securing new financial services and financing. Business owners increasingly find the internet a more convenient way to research and select a new lending product. To date the biggest beneficiaries from this shift have been intermediaries and niche lenders. No high street lender has yet put in place an effective online strategy that spans across each of the major commercial product ranges.
The stakes are extremely high. The survey of business banking websites reported in the January issue of Business Money demonstrated that few high street lenders are currently grasping the online opportunity effectively. Most are far too focussed on providing online content - much of it in non-core areas -- that is not valued by their business customers. Instead they should focus on providing the interactive online experience that their customers want and expect. If a customer's needs cannot be met on one website the tendency is to go to the first competitor's site that will.
Lenders who meet the online challenge effectively have the opportunity to significantly increase market share. Some high street lenders already report double digit percentage share for specific commercial products via the online channel. Additionally some smaller, niche lenders are generating over one-third of their new customers online. These figures will grow steadily over time as a new generation of web-savvy entrepreneurs and small business owners choose to find financial services for their business online the same way they found personal financial services.
Lenders who are investing heavily in the branches should reconsider their commitment to the online channel. The issue is not spending more in the online channel, but investing more effectively. Savvy lenders will move quickly to protect and to grow market share.