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This white paper is intended to inform the current wave of new market entrants as they consider retail financial services, and to help them avoid making similar mistakes to previous entrants. The paper will consider how incumbents are likely to respond to the new wave of entrants and just what success will look like, both for new entrants and incumbents.
Recent economic turbulence has disrupted markets. Governments and electorates have joined in the criticism that traditional financial services providers have received. The result is the expectation of “a fresh approach”. In response, we have seen the launch of a number of new players, including Metro Bank in the UK, and Fidor in Germany, among others. There are also entrants and ambitious growth projected from beyond the industry “pure play”. Among those announcing plans to expand their retail financial services offering is Tesco, via Tesco Bank, in the UK. Yet the fact remains that the market is mature, not to say crowded. Even the more recent engines of growth, e.g. consumer credit, are now at maturity.
Market maturity is compounded by the fact that customers can be “sticky”, i.e. reluctant to change service provider. Whether because of loyalty or inertia, encouraging migration to new providers can prove difficult.
Yet in spite of the obstacles, there continues to be growing interest from new entrants. To gain an insight into the rigors of new market entry, we have reviewed the past performance of some 30 new entrants (across Banking, Insurance, Wealth and Payments). Our timescale covers the last twenty The analysis points to a number of key factors that characterize the winners; i.e. those who have succeeded against original expectations. These factors include parent brand strength and / or strong customer affinity with the provider; innovative propositions; technology innovation; and sustained strategic focus from parent organizations.
As a result of our analysis, we conclude that new entrants wishing to improve their likelihood of success should approach the market in a structured fashion. To do so, they need to address the following key questions: