Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Too much choice could have negative impact on UK saving habits – Moneyfacts data fuels key research

21.08.2006
Converted building societies provide excessive numbers of similar savings products, according to a new study by researchers at the University of East Anglia and the University of Surrey.

The research into the current UK retail deposit market shows that converted building societies have introduced and withdrawn deposit accounts with far greater regularity than other financial services firms.

By offering many similar deposit accounts, these financial services firms may confuse customers, discourage the use of deposit accounts and reduce the already low level of UK saving.

Due to be published in this month’s Journal of Financial Regulation and Compliance, the study examined data taken from the Moneyfacts datascreen system. It found that 1018 new deposit accounts were introduced in the UK between 1993 and 2004, and 769 accounts were withdrawn. This high level of deposit account turnover led to a 70 per cent rise in available deposit accounts, from 308 accounts in 1993 to 528 accounts in 2004.

"While customers relish more choice, picking between such a vast number of similar products is hard for many customers," said Dr John Ashton of Norwich Business School and the ESRC Centre for Competition Policy, both based at UEA.

"Introducing and withdrawing savings accounts with such regularity makes the UK savings market difficult to comprehend and use."

This high level of deposit account turnover is not common to all firms, he added. Most high street banks and mutual building societies launched only a modest eight to 12 new accounts between 1993 and 2004. However, other financial services companies such as converted building societies introduced an average of 24 new deposit accounts over this period, with some firms launching in excess of 40 new deposit accounts.

Why some UK firms have chosen to be so active in launching and withdrawing accounts was also addressed by the study and after interviewing 50 top financial executives, three main reasons were identified:

"It is rarely profitable for financial services firms to be truly innovative as competitors will copy their new products."

"Customers are often reluctant to use truly innovative products."

"The role of the firm is to provide profits and beat their competitors; the development of radical innovative products is not a strategic priority."

Dr Laura Costanzo, of the School of Management at the University of Surrey, said: "These causes are partly rooted in the way the financial services industry operates. Culturally, it is a risk-averse industry and managers are not prepared to adopt risky strategies with regard to new product development. The industry is mainly driven by maximisation of shareholder value."

As a consequence, most new products are far from pioneering and usually only slightly different to existing deposit accounts. Most financial services firms do not have any incentive to behave in any other way.

Dr Ashton added: "The huge growth in the number of similar savings products is driven by the profit motive. Firms which really need to make profits from customers’ savings have launched far more new products than other companies."

Stuart Miller | alfa
Further information:
http://www.surrey.ac.uk

More articles from Business and Finance:

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Giant Magnetic Fields in the Universe

Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.

The results will be published on March 22 in the journal „Astronomy & Astrophysics“.

Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...

Im Focus: Tracing down linear ubiquitination

Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.

Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...

Im Focus: Perovskite edges can be tuned for optoelectronic performance

Layered 2D material improves efficiency for solar cells and LEDs

In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...

Im Focus: Polymer-coated silicon nanosheets as alternative to graphene: A perfect team for nanoelectronics

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...

Im Focus: Researchers Imitate Molecular Crowding in Cells

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

International Land Use Symposium ILUS 2017: Call for Abstracts and Registration open

20.03.2017 | Event News

CONNECT 2017: International congress on connective tissue

14.03.2017 | Event News

ICTM Conference: Turbine Construction between Big Data and Additive Manufacturing

07.03.2017 | Event News

 
Latest News

NASA examines Peru's deadly rainfall

24.03.2017 | Earth Sciences

What does congenital Zika syndrome look like?

24.03.2017 | Health and Medicine

Steep rise of the Bernese Alps

24.03.2017 | Earth Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>