Banks Push to Diversify. Or Not.
An article in today's Philadelphia Inquirer ("Banks Push To Diversify", 10/7/07) details the double bind that banks find themselves in their attempt to expand. In connection with the recent TD Bank - Commerce Bank deal, the article quotes a TD executive as saying "We look forward to layering in as much new TD product as we possibly can to deepen our customer relationships and better serve their financial need."
Every bank has thought that it could leverage on its branch presence to sell other financial products, not just the usual savings, checking, and loans. "Expanding the array of products sold through bank branches to include investment services and other financial offerings is a major push in banking because it is cheaper to do more business with existing customers than to find new ones."
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But most attempts to act as stockbrokers, mutual fund managers, insurance agents, and the rest have failed. The most conspicuous example was Citigroup's purchase of Traveler's Insurance, much heralded in 1998 as a great sign of synergy. By 2004, it was clear that there was little synergy, and the insurance division was sold off to another insurance company, The St. Paul Companies.
There are lots of similar stories. American Express found that offering its credit cards and other services was incompatible with banking and financial services, and were more profitable to sell ff than to hold on to. Many banks have essentially sold off credit card operations, becoming fronts for specialist banks. Online banking, asset management, and mutual funds have ended up being abandoned by other banks.
TD Bank, as the article points out, has done better than most with upselling services, but mostly in Canada. There seems to be resistance to mixing financials services in most US consumers' minds. The thought is, are they cutting corners on basic services like checking and auto loans while pushing insurance and "wealth management"? In the end, the article quotes on skeptical business customer who states that he's prefer to work with an "independent guy who doesn't have agendas." In other words, apparent conflicts of interest outweigh synergy for many customers.
3:21:03 PM 
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