Customer readiness and the small scale of the Irish market could seriously delay the rollout of comprehensive online financial services, according to a new study by Prospectus Strategy Consultants which was commissioned by financial solutions software company, Information Mosaic.
Entitled ‘A snapshot of the Irish online financial services market’ the report involved in-depth qualitative research with leading financial services companies in Ireland including AIB, Goodbody Stockbrokers and Marsh Financial Services.
The overriding impression from the report is that the Irish marketplace is too small and immature for competing innovative e-finance offerings to exist profitably, if they target the Irish market only.
The key obstacles to online financial services are the expense of developing an on-line strategy, the poor servicing of ISDN and the low Irish internet access.
‘If Ireland is to be a credible international e-commerce hub then online financial services must be part of the infrastructure’ said Katie Burke, Director of Financial Services, Prospectus, and co-author of the study.
‘It is a concern that we could fall behind other countries due to market scale, customer knowledge and the lack of affordable bandwidth’
She said that migration to online financial services would need to be more vigorously encouraged by the Irish government, main retail banks and larger communications providers. Otherwise Irish consumers will miss out on the current practice in ‘Euroland’ where increasing online competition has led to cheaper Internet financial products.
Ireland’s low level of internet users is problematic, ‘With less than a third of the Irish population accessing the Internet, Irish financial services organisations have a considerable challenge in generating revenue, never mind a profit from a low base of online users’.
Stockbroking is seen as the financial services sector most likely to benefit from e-finance. A number of participants state that the development of online trading will ‘take the mystique’ out of stockbroking, improve price transparency and encourage a more self directed, sophisticated user.
‘The move to online trading is being driven by more sophisticated, internet savvy customers and the activities of companies such as Schwab, E-Trade and Quicken.com’ said Mary Cryan, Director Technology, Prospectus. This puts pressure on Irish stockbrokers to establish an online presence.
Other financial sectors are not so adaptable. More complex products such as pensions and life insurance are not suitable to the online format. As one participant said, ‘People like the human touch at the end of the day’.
Most Irish financial services companies see the internet as a means to cost reduction and operational efficiency with only a secondary focus on customer acquisition. The internet is seen as a complementary channel to other delivery channels, not as a standalone channel.
‘The larger players are following a mainly defensive strategy without much conviction that the Internet will help them to grow new customer business on the B2C front’ said Burke. ‘This conventional thinking could be to the advantage of more aggressive players with targeted intentions.’ |
