A host of Internet intermediaries are likely to emerge in the financial services sector as traditional banks struggle to offer customers integrated products, new research has found.
The Internet has spurred the convergence of banking with sub-industries such as insurance, and existing players would find themselves unable to offer a full range of services, according to a study into the retail banking sector carried out by The Economist Intelligence Unit and Pricewaterhousecoopers.
"As products get more packaged and integrated it will be difficult for banks to package and sell them," head of Pricewaterhousecoopers' global retail financial services consultancy business, Tom Jenkins, said.
More complex products would require salespeople or organisations with specialist knowledge and Internet startups were likely to step into the breech, Jenkins said.
"There will be opportunities for smaller organisations to take pieces of this," Jenkins said.
"They will focus on the more complex products and play brokerage type roles."
Loss of customer relationships to new intermediaries was a threat which banks would have to address in the next five years, Jenkins said.
"It's a major challenge for banks, how they structure themselves. They need to rethink how they manage themselves, how to organise sales and distribution of access."
Some banks would attempt to develop dozens of sub-brands, such as Prudential's Egg offering, while others might exit the delivery channel in favour of becoming wholesalers whose products could be distributed by middlemen, Jenkins said.
"People could badge and sell their products as appropriate."
Most of the change was likely to be felt in the consumer and small business markets, Jenkins said.
Larger corporate banking arrangements tended to be more complex and would continue to rely on personal relationships, Jenkins predicted.
"The Internet may become an effective support mechanism for these people."
Internet banking was likely to become the norm when digital television became universal, Jenkins added.
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