Traditional financial services players like Banc Ones Wingspan project, Bank of America online and hosts of others (more coming soon) including non-traditional companies such as Quicken, E-Mortgage, LendingTree etc. are all joining the race for financial e-share.

The big question becomes; What are they accomplishing and who has, or what is, the right formula?

So far most of the players seem to be in a very fast race to the bottom. The bottom defined as very little differentiation which translates into low price competition, which further translates into low cost efficient players with scale and scope leaving the rest with no profits and an unsustainable business plan.

The "new" non-financial players are building systems that act as interchanges between customers and capital markets. True market efficiency if executed as advertised (which I haven't seen yet), but further removing the brand from the market as they attempt to be a clearing house for these market participants.

Imagine if you will your "Brand" listed on a web page with 50 other competitor logos hawked as the "Lenders behind our system". You'd better have a great color scheme!

So companies hear from the press things like "this is good for the customer and for the market", " It's all part of the new Information Age there's nothing we can do about it", "if ##$%$ does it then we'd better be doing it too."

If the leaders of the industry think that's how they should participate in this exciting new era then let them have at it. For those in the industry who think there is something beyond "PCing over the process" (putting paper on a pc screen) perhaps some experimentation is in order.

Perhaps a financial services company with hundreds of thousands of customers should give customers free Internet access through their own branded portal. Through this portal customers could be introduced to products and services whose purchase or use can be facilitated by the financial services products that company owns.

Perhaps they could find out how much their home equity loan payment would change if they made their purchase using the credit line. Perhaps they could be shown options that allow them to get what they want, when they want, using your products.

Maybe, your financial services products, (the whole array for the companies with progressive risk management structures), can be viewed as facilitating other buying occasions rather than saying "we have a lower rate than the other 50 lenders on the system so please take our loan now".

Hundreds of e-commerce companies in this virtual market are falling all over themselves to pay your company for "click throughs"; Links from your pages to theirs, to sell their products.

That sounds like revenue.

Maybe your brand doesn't matter (a perfectly good strategy) and maybe you should be the engine behind someone else's brand. Maybe in the virtual market space your introduction of the customer to the company with a product or service creates value the customer will pay for and the customer and/or the selling company will pay you for that value.

Maybe your brand does matter and you want as much banner space as you can muster. However don’t count on your brand to get the "click through". Internet savvy customers want to see something in that banner advertisement that fills a need. How does that translate to brand? It doesn't!

Another scenario is a construct that has zero focus on bank product profitability other than break even or loss to operate for marketing purposes, with the full intention of developing revenue from advertising and product sales that have nothing to do with financial services at all.

Maybe you could get enough interest, provide enough value and join Internet market rather than the financial services market and perhaps you can be the next Amazon financial services.com and develop a brand.
 
 

Perhaps.

Tony Pallante
10/4/1999
Performance Capital,  http://www.performancecapital.com/