More competition on the horizon?

According to the FT, 30 companies are in talks about gaining UK banking licences, mainly because they see deposit taking as a potential source of cheap finance. Although they haven't filed applications yet,  it seems that they may be more likely to do so in a year's time.

This means that competition for savings deposits may be about to hot up - at a time when fewer people are saving less (the FSA has seen a reduction in the number of people saving, particularly since 1997 and the savings ratio is reducing).

It is likely that these new entrants will look to win investors by offering high initial savings deposit rates, as ING, ICICI etc all did. Yet yesterday we saw that most savings ads in this weekend's Sunday Times Money section are selling on the basis of headline interest rate.

We marketers need to be developing strategies to create sustainable competitive advantages for our institutions now, or we might find the new entrants will have things all their own way.