A new Report from Forrester Research B.V. (Nasdaq: FORR) analyzes how Europe’s financial establishment is trailing behind rapidly growing upstarts in giving customers choice and advice. The established firms must therefore reorganize, separate distribution from manufacturing, and create partnerships with the newcomers in order to survive.
“Most of the financial institutions we interviewed are venturing into selling some third-party products,” explained Brian Gross, analyst for Forrester Research B.V.; “but these attempts are halfhearted. They don’t give consumers a choice of suppliers when that threatens their proprietary products. And the firms don’t see the threat that the upstart financial portals pose by giving consumers that choice.”
Forrester defines “Open Finance” as the new financial services environment created by the Net, where emerging affluent consumers enjoy best-of-breed financial services combined with the easy electronic movement of money.
For the Report “Open Finance Storms Europe,” Forrester interviewed executives from 40 banks, fund houses, insurance companies, and brokerage firms across Western Europe to determine if and when they will adopt the new market dynamics. Seventy-five percent of interviewees offer, or plan to offer, some third-party products within the next 12 months. Forty-six percent of respondents told Forrester that this is driven by customer demand for greater choice and better products. The executives believe that Open Finance will take hold by 2003 and that large established financial institutions will dominate the market.
But Forrester asserts that the incumbents’ Open Finance efforts are meager. “While established institutions overestimate their attempts at Open Finance, they equally underestimate newcomers’ threats. A flurry of pure-play online firms and financial portals is bringing Open Finance to Europe. European consumers want more, and upstarts are giving them more choices, greater control, and soon, better advice to manage their finances,” explained Gross.
Today’s Web gives but a glimpse into how new players and new technologies are moving in quickly to meet the growing demands of customers. By year-end, Forrester expects more innovation: Open Finance offered through dozens of Pan-European financial portals like the localized sites of GlobalNetFinancial that participate in a complex Web of relationships we call financial eBusiness networks. Forrester believes incumbents must clearly choose and separate roles they will play in financial eBusiness networks: Attracter, Transformer, or Match Maker.
Attracters focus on distribution, Transformers seek product excellence and distribute through others, and Match Makers help handle the complexity of the number of relationships. A handful of incumbents will win as Attracters, but suprisingly a number of upstarts with Pan-European scale, vision, and partnership skills do so as well. Top click-and-mortar players will be able to play the roles of Attracter and Transformer, but they must reorganize and separate the business units playing each role so that each can freely link up with best-of-breed partners in financial eBusiness networks.