Egg and Microsoft are to join forces in a European strategic alliance that plans to exploit the new market for fund supermarkets in Europe. Egg, the U.K.- based provider of online financial services, says it has taken its first step in establishing an international presence through the distribution of its services through Microsoft's MSN. The pair has signed a commercial agreement which, they say, will combine the strengths of both brands to provide customers with online financial products.
The first stage of the alliance is to provide a fund supermarket in the United Kingdom. "A funds supermarket is a place where customers can buy, sell, switch and manage all their unit trusts," says Richard Duvall, chief operating officer, international, at Egg.
The bank has about 15 different fund providers, each with a range of funds. The supermarket offers well over 200 unit trusts. "Someone can go into the supermarket and buy their own funds, or they can be packaged for them so it is easy to buy a balanced range of investments. It is easy to buy and sell, and easy to top up the funds," Duvall explains. "A customer has the whole market in one place, with great systems behind them. It is all automated for straight through processing, which takes a lot of the cost out of the process."
Detailed plans to extend the relationship from funds into other financial products and services, and from the United Kingdom into the rest of Europe, are being developed "vigorously," he says. Duvall was unable to comment on the terms and duration of the alliance, but says that "we will work together to provide a funds supermarket to Microsoft customers in the United Kingdom which will be extended to providing funds in Europe, and to other products in the U.K. and the rest of Europe." The alliance will be targeting the major European markets such as France and Germany, and Duvall foresees little delay in these developments.
The fund supermarket will be via MSN, the United Kingdom's leading Web site, on its Money Central Channel. The service is due to launch in the U.K., subject to the appropriate regulatory arrangements, early next year, following a series of pilot tests this autumn.
The deal, according to the partners, marries Egg's financial services expertise and transactional capabilities with MSN's market leadership and digital distribution capability. "Microsoft has a large number of customers and visitors to their properties in the U.K. and Europe," says Duvall. "It has 11 million unique users per month in the U.K., 41.5 million unique users per month across Europe, and between 240 and 250 million world-wide. And in each country, about one million unique visitors visit their money site. A lot of people are interested in financial services through Microsoft. But Microsoft doesn't have a transaction engine in Europe that will allow people to buy and sell and shift funds.
As a result of the deal, says Duvall, Egg will gain access to these unique users and Microsoft gains the transactional capabilities it lacks. "We have already invested in that capability and done that for them."
Alessandro Giacobbe, director of international products, finance product group at Microsoft, commented: "Our personal finance service is a central part of the MSN European consumer Internet business. The Internet is truly suited to personal finance because of the range and detail of financial products and the ability to track portfolios and accounts online. We are very excited about the partnership with Egg because it is part of our long term vision to build an integrated offering of leading financial products and services."
A new market
Teaming up with Microsoft in this way gives Egg the chance to muscle in on a market considered by many to be still in its infancy in Europe. Forecasts predict that by 2005, fund supermarkets will hold 27 billion euros in assets across Europe, and could account for 25% of all net inflow, the U.K. company says.
"It is an early market and we are hoping to get market share early on. We were the first online fund supermarket in the U.K. and we now have a significant market share in the U.K. The U.S. now has a significant proportion of mutual funds bought through funds supermarkets. Europe will catch up with the U.S. levels."
Egg was the first company to offer a fund supermarket in the United Kingdom and has since grown to become the market leader in online direct fund supermarket sales. It has 1.72 million total customers in the UK. Some 32,000 of them are investment customers. Egg had 2% of the equity ISA (individual savings account) market in the five weeks before the end of the last tax year and 10% of the direct market.
Explaining the potential for growth in the European market, Duvall believes that funds supermarkets present "a superior offer. Most people still buy from a single provider. It is difficult to sell and charges are high. Here everything is in one place and as it is automatic, is a potentially better value."
There will be some competition for the duo in Europe, especially from Germany, where funds supermarkets were established on the back of the boom in online broking a couple of years ago. However, Egg is still confident it can get in while the market is still young, "at the bottom floor," as Duvall puts it.
The offering through MSN will be based on the same funds supermarket as Egg's, but it might be adapted to the specific needs of MSN customers. It will be co-branded Egg and MSN. Egg is unable to say how many new customers it hopes to gain from the alliance.
MSN launched its personal finance channel Money Central in the United Kingdom in November 2000. It features independent financial information and calculator tools to help users understand and review financial products. MSN is the leading consumer Web destination in Europe, available in 16 markets and 11 languages. It currently has 41.5 million users per month throughout Europe.
Egg provides banking, insurance, investments, mortgages and a shopping portal through its Internet site. In the six months to June 2001, 370,000 new Net customers joined Egg, bringing the total customer base to 1.72 million, a 19% increase vs. the year-earlier period.
Paul Gratton, chief executive of Egg says that "the creation of an international presence remains clearly in view and a first step in this direction has been made" through the alliance with Microsoft.