NZ firms at serious risk of being left behind
Financial services companies told to wake-up and start using the Internet.
Monday, May 15th 2000, 12:00AM
Suddenly, thanks to the explosive potential of the Internet, it's happening.
The strong message from KPMG's latest annual survey of financial institutions, released last week, is that New Zealand firms are at serious risk of being left behind. For a start, people could increasingly care less who they get financial products and services from and, because of the 'Net, it's dead easy to get those products and services from offshore.
Andrew Dinsdale, Chairman of KPMG's Banking and Finance Group, points out that global firms such as Charles Schwab, E*Trade and Quicken have already announced plans to set up in New Zealand.
"A bank, an insurance company or a sharebroker are becoming less relevant concepts as we witness the development of strategic partnerships and alliances between both online and traditional organisations; all in the name of adding value to the customer relationship."
Dinsdale says that one of the problems banks have always had is not being able to understand their customers. However, using online services, "they're starting to build a relationship which you're not getting at the branches - the bank can start to interact".
For the first time this year, the KPMG survey includes figures on Internet banking (click here for more details). There's also some advice in there about watching out for companies that haven't been your traditional competitors.
For a start, don't think in terms of the old vertically integrated structures such as the bank/ branch network. Accordingly to KPMG, vertical is now becoming virtual, leading to what they term a "value web" model.
In this value web, a host of providers such as financial advisers, brokers, banks and insurance companies are linked with customers through financial portals, which provide navigation services to the best-of-breed products and services.
"Such a model doesn't recognise brand loyalty," says KPMG. "Instead, it assumes that consumers are willing to purchase the best products and services regardless of the provider."
"Traditional financial service players with vested interests in branches, call centres and other traditional channels must learn to cannibalise their own channels or lose market share to wiser competitors."
KPMG says there's a real risk that New Zealand financial institutions will underestimate the significance of the Internet. Already, more than half the population has access to the 'Net (apparently, that puts us in the top four countries worldwide) and 34 per cent use it on a regular basis.
"Consumers are getting impatient for organisations to offer localised and tailored products and services online, and it is this demand that is fuelling the emerging competition from non-traditional and global players."
KPMG says its research and surveys show that New Zealand's online financial services marketplace is two to three years behind its international counterparts. Where companies have embraced the Internet, it says they typically offer only commodity products and services, adopting a "product push" rather than a customer-focused strategy.
For example, local banks have only recently rolled out online banking (except for ASB Bank, which has - so far - been seen to have a technological edge). However, internationally, financial institutions are offering a whole swag of value-added products and services.
How they're developing customer loyalty is by using financial portals: all-encompassing interfaces that allow customers to manage their accounts, buy and sell from financial portfolios, get financial advice and shop for a wide array of goods and services.
A key component of these offerings is that they're backed up by personalisation software, so that people can customise the web-site to suit their own requirements.
So far, New Zealand financial institutions haven't been in a big hurry to go online. KPMG says that "an elite few" such as ASB Bank, BankDirect and AMP General Insurance have enjoyed the limelight for the last couple of years with minimal competition.
However, that's set to change as global organisations realise the general complacency of the local market.
For the first time this year, banks supplied their customer numbers for Internet banking (a number only rolled out their services in late 1999, in any case). Figures quoted in the KPMG survey, as at March 31, were:
ANZ Bank 26,985
ASB Bank 52,000
Bank of New Zealand 17,500
National Bank 22,500
Total 118,985
WestpacTrust launched its own online service in late April and was reported to have between 5,000 and 10,000 customers pre-enrolled.
KPMG's Leone Purvis, speaking at the survey's release, said she expected customers would switch to Internet banking from telephone banking "rather than bleeding out of the branches".
"The majority of banks' strategies for going on the Internet so far has been defensive.
"Their next step is to think beyond the PC, to mobile phones and TV... It's all about who's going to be brave enough to exploit them."
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