UK online and telephone bank Intelligent Finance has said it expects to break even by 2003.
UK online and telephone bank IF, a subsidiary of HBoS, has attracted 327,000 accounts and 242,000 individual customers during its year in business. Total balances have reached GBP8.9 billion, and its share of the UK net new mortgage market has increased to 9%. 90% of IF’s business is from customers new to the HBoS group.
Considering the cloud hanging over Internet banking (only last month Bank of Ireland folded its F Sharp eBank back into its mainstream operations), IF’s figures certainly make impressive reading. How come?
Having a big, protective parent with deep pockets is perhaps the most important factor. All four remaining standalone Internet banks in the UK have such a parent (Cahoot is owned by Abbey National, Smile is owned by the Co-operative Bank and Egg is owned by Prudential). HBoS will not reveal the level of IF’s losses until it releases its own final results next year, but as the other standalone Internet banks have shown, they are likely to be sizable.
An attractive product offering is also important. IF has developed a strong integrated banking operation where customers can offset their savings and current account balances against their mortgage and other debts. IF-commissioned research found 55% of mortgage holders would consider moving their mortgage to a bank offering such a service. Indeed, Datamonitor’s IMPACT 2001 survey found that 61% of UK consumers agree or strongly agree with the statement ‘the benefit of a single point of contact makes it worthwhile to group my purchases together’.
The third factor counting in IF’s favour is Nationwide Building Society’s almost complete withdrawal from the new mortgage market. Nationwide has traditionally been the UK’s number two lender. In its absence IF has been able to increase its market share more easily than otherwise.
What is in store for IF beyond 2003 is anybody’s guess. However, Datamonitor predicts that by 2005 13.4 million UK consumers will be banking online. IF seems ideally positioned to take advantage of this growth.
