UK software firm Misys has announced the closure of its consumer websites.
Misys Interactive Trading, the Internet service arm of Misys plc, made an estimated loss of GBP23 million in the year ending March 2001, an increase of GBP12 million from 2000. The consumer financial services business accounted for GBP19 million of this loss. These substantial losses are the result of considerable investment in technology, marketing, and development of theformula. Misys suffered as it failed to find a suitable partner to share these development costs.
Nonetheless, the decision to withdraw from the consumer segment of the market is a surprise. Sceentrade.com was launched in November 1997 and was the first general insurance broker to go online. It developed a foothold in the market and in June 2000, Screentrade was processing 40,000 comparative quotes per month. During the whole of 2000 Screentrade increased its sales by 25% month-on-month. However, these figures hide the poor number of consumers actually purchasing insurance products through Screentrade.com.
Consumer reluctance to purchase financial services products online is still high. Consumers are increasingly searching for information about products online but still resort to the telephone or mail to purchase. Conversion ratios from site traffic to actual purchases are typically 1-7% in financial services – this is the reason for Screentrade’s demise. The low number of purchases actually made cannot cover the massive development and marketing costs required for Internet sites. These costs spiraled when Misys chose to develop its new site theformula.com.
The message for Internet financial services sites? Nobody can force people to purchase online. The Internet will become a significant distribution channel for financial services but this will be in the medium to long-term. Until consumers readily purchase products, online providers will have to count the costs or exit.
