Stockholm, Jan 2: Infuriated by deteriorating service and rising charges, many Swedes have grown tired of big banks and are taking their business to financial start-ups, some on the Internet, others at the grocery store.

Having dominated the sector for decades, the big four —Nordea, Handelsbanken, SEB and Swedbank — must now compete for a new breed of customers less loyal than older generations, for whom, as the saying goes, it is easier to divorce than to change banks.

The Internet-based banking arms of two insurance companies have emerged as respectable players and today’s fierce competition will heat up further when two big grocery chains launch bank services at supermarkets this year. In the past decade niche banks have grown their share of household lending to 16.5 from 3.6 per cent, and of deposits to 14.3 from 2.1 per cent, official data show.

Banking analysts said the inroads made by small players pose no major threat to the big four’s earnings. Consolidation in the sector is likely to continue, keeping the number of upstarts in check, they said.

With nearly three million people, or one third of the population, accustomed to web-based bank services, “Sweden leads the world in the use of online banking facilities,” said the Swedish Bankers’ Association. Internet banking is by no means unique to Sweden but the tech-savvy Scandinavian country’s high web-penetration, above 60 per cent of households, means its banks have been among the first to try to come to grips with changes in customer preferences.

“Banks are seeing traditional relationship banking gradually being ousted by transaction banking focusing on terms advantages,” Deutsche Bank said in a report. In Sweden such advantages, trumpeted aggressively by some niche players in big advertising campaigns, include low or no charges for giro transfers and cash withdrawals — services that cost far more when performed by the leading quartet.

SkandiaBanken, an arm of insurance and mutual funds group Skandia, was recently rated Sweden’s overwhelmingly best Internet bank by readers of Privata Affarer, a magazine targeting private investors.
SkandiaBanken’s pool of Internet customers grew 103 per cent in January-September 2001 to 2,90,000 to make up half of its total client base, which has grown on average by 39 per cent annually over the past five years.

— Reuters