Money: E-Banking Threat to Traditional Industry; RESEARCH: Internet-Only Banks Have Caused Biggest Shake-Up in Services since 17th Century
INTERNET banking has caused the biggest shake up in the UK financial services industry since the 17th Century, according to new research.
New entrants to the industry are posing a major threat to traditional banks and building societies by adapting to the needs of the 21st-century customer who wants banking `anytime, anywhere, anyplace', the report claimed. The new companies are also offering cheaper prices, better choices and often targeting the most profitable customers.
Feng Li, professor of e-business at the University of Newcastle upon Tyne, said he thought the introduction of the internet had had a more radical effect on the industry than anything else in its history, including the 1980s deregulation.
He said the internet had changed the approach to banking, and warned that established banks and building societies must radically overhaul their business strategies to maintain their competitive position.
He added, ``Until recently the monopolisation of distribution channels has provided the basis for banks to build strong relationships with their customers. ``The internet, as a new distribution channel for financial services, has lowered barriers to entry in the banking system, allowing new players, often equipped with new technologies and business models, to enter the market.
``My research has revealed that these new players are posing a serious threat to existing banks by changing the rules of the competition and raising the general expectation of customers for services from all financial companies. …