The research into the current UK retail deposit market shows that converted building societies have introduced and withdrawn deposit accounts with far greater regularity than other financial services firms.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 It found that 1018 new deposit accounts were introduced in the UK between 1993 and 2004, and 769 accounts were withdrawn.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
Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport
Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...
The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.
The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...
Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...
Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".
Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...
13.02.2017 | Event News
10.02.2017 | Event News
09.02.2017 | Event News
17.02.2017 | Medical Engineering
17.02.2017 | Medical Engineering
17.02.2017 | Health and Medicine