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An article relating to this blog post on Finextra:

NAB launches direct bank

National Australia Bank (NAB) has launched a new direct banking business, called UBank, which is focused on savings products.


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Why create a new brand?

What processes and decisions lead a company to create an offshoot of their main brand?  I get the direct bank concept and the attraction; however it appears that the common theme is to basically make the direct bank a separate entity entirely with the hopes that cross sell with the main brand will eventually occur. How successful are these separate direct banks and does active cross sell actually occur and boost revenue / client loyalty?  Don’t you just dilute the efforts of acquiring new clients away from the main bank? Aren’t you in essence just creating a two headed monster?  I can see the business case in the ING Direct model since they are not a brick / mortar bank and the fact that they kept the name of the bank within the new brand.

My assumptions:

·         As mentioned they are targeting a separate demographic that would not normally be attracted to the main bank

·         They are going after the quick deposit money – but have to shell out more in high yield  interest so it is better to keep separate ledgers

·         Branching out will afford them the opportunity to test and build out new technology on the new entity without hurting the main banks operations or pocket book

·         Age old marketing ploy - customers will always buy new version of an old product

The startup costs and duplication of efforts must be worth it or we would not see so many of these popping up in the marketplace.

I would be interested in hearing more from those that may have contemplated this or actually implemented and drove a direct bank concept to market.

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Comments: (1)

A Finextra member
A Finextra member 02 October, 2008, 22:58Be the first to give this comment the thumbs up 0 likes

Hedging?

An cyber bank funded by higher interest deposits might be more resilient in difficult times. I don't have the numbers on ING's deposit rate of late but there may be some attractiveness in a non-bricks and mortar bank in times where bricks and mortar turns to dust.

An online-only bank might make a good little nest egg to sell-off in times of difficulty without harming the main brand. 

They aren't exactly the bank with the most progressive image and there is no doubt that the main brand could not attract the customers that a purely on-line bank is targeting.

Chris Barry

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V2 Innovations

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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