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September 7, 2000

MoneyeXtra: extra cash or quit?

The hype has died down; now it's a battle for clicks and cash. In a crowded market MoneyeXtra has a radical strategy to compete. A partial sale would allow for acquisitions, but could jeopardise the launch of its Fondex fund supermarket in the UK. Therefore, as consolidation is inevitable, perhaps the best option is to take the money extra quick.

By CBR Staff Writer

MoneyeXtra may put some or all of itself for sale.

MoneyeXtra’s problems stem from its original focus on a somewhat ‘non-dynamic’ financial market: pensions. It is a risky market given that it is highly driven by regulation. Although MoneyeXtra has expanded to include general insurance products (travel insurance) and mortgages, survival in the online retail financial services industry requires a dynamic and innovative strategy.

MoneyeXtra recently acquired Fondex, the Swedish fund supermarket that offers customers in Sweden over 800 mutual funds. MoneyeXtra plans to launch Fondex in the UK, highlighting its intentions to become a more complete financial portal. But this is an equally competitive market. Heavyweights like Fidelity and Egg Investments already offer successful supermarkets. This competition will only intensify during the next one to two years, with the number of online third-party product distributors forecast to increase significantly during this period. Retail banks building financial portals will largely drive this competition.

To remain competitive MoneyeXtra must somehow increase its market share and can only do this through strategic acquisitions. To raise the cash it could sell some of its non-core assets. Although investors currently have little faith in financial services portals, it is likely that competitors would pay over the odds for any divestitures. Indeed, given the concentration in the market and the need for consolidation, it could do well from putting the whole company up for sale.

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