Personal Finance Correspondent
LONDON (Reuters) - Turn on the television, open a newspaper or surf the Internet nowadays and chances are a new financial price comparison site will pop up.
These so-called aggregator sites attract millions of consumers with the promise of searching the market to find them the cheapest deals on everything from car insurance and credit cards to gas and electricity — all with little effort and no cost.
Adverts portray them as consumer champions bringing clarity to confusing markets and the best prices to consumers.
But just how independent and impartial are they?
Scratch beneath the surface of these sites that profess to have consumers’ best interests at heart, and it is clear other forces are often at work.
The marketing conceals strong commercial motivation: these are profit-making businesses, raking in billions of pounds in commission and advertising from product providers.
“It’s a sad reflection on how the financial services industry can’t seem to help itself when given a basic choice,” one industry source told Reuters.
“It could be genuinely open, transparent and empower consumers — and make a good profit by being so.
“But, instead, it’s the classic financial services ploy of smoke and mirrors to make things sound and look better than they are to try to get rich quick.”
As the number of sites proliferates — almost indistinguishable names like MoneyExpert.com and MoneySavingExpert.co.uk; SimplySwitch.com and uSwitch.com; Gocompare.com and ComparetheMarket.com; MoneyExtra.com and MoneyExpert.com — evidence of their profitability mounts.
A glut of aggregators have recently floated or been sold at values that cement the industry’s coming of age.
U.S. media business EW Scripps bought uSwitch.com in March 2006 for 210 million pounds. Five months later SimplySwitch.com was sold to Britain’s Associated Northcliffe Digital, part of Daily Mail and General Trust, for 22 million pounds.
And Moneysupermarket.com — which has a 55 percent share of the market in terms of visitor numbers, according to online competitive intelligence service Hitwise — last month went public in Britain’s biggest-ever share offer for an Internet-based company.
The initial public offering — the biggest Internet company flotation worldwide since Google Inc in 2004 — valued the firm at 764 million pounds, making the seven-strong board millionaires in the process.
Aggregators themselves say they offer an invaluable public service, giving consumers free, impartial product comparisons, and helping to bring transparency and competitive pricing to financial services markets.
Karen Darby, co-founder of SimplySwitch.com, says: “There are many confusing messages out there, with each supplier and provider claiming to offer the best service or value.
“The only way of being certain you are getting the best deal is to check with an independent price comparison service.”
While these free-to-use services hold clear advantages for time-poor consumers, examine who these sites are owned by, how much of the market they compare and how they make their revenue, and varying shades of grey emerge.
Take two examples: Confused.com is owned by insurer Admiral; Gocompare.com was founded by a team involved in setting up Confused.com and does not list Admiral (among others) on its “best buy” tables.
Few price comparison sites are truly independent, largely owing to commercial considerations. Most charge product providers levels of commission that vary, creating commercial interest in promoting certain products over others.
Sometimes sites levy commission for “click-throughs” — when consumers simply click through to a provider’s own Web site. At other times they receive commission when consumers apply or receive a quote for a product or go ahead and buy a product.
Some aggregators have further vested interests in the form of advertisers and sponsors.
“Top” deals on Fool.co.uk, for example, feature products from “advertising partners and single sponsors”, although the site also contains search options in most product areas allowing consumers to “scour the entire market”, a spokeswoman says.
The all-inclusiveness of “best buys” is another moot point.
Fool.co.uk has a panel of 10 insurers for life insurance, 15 for home insurance and 32 for medical insurance.
Others — MoneyExpert.com and uSwitch.com — are unwilling to disclose how much of the market they cover, saying the information is commercially sensitive.
None, however, can survey the entire market because some financial services providers refuse to co-operate with them.
Royal Bank of Scotland (RBS) brands — most notably Direct Line, but also Churchill, NIG, Privilege, Green Flag and Tesco Personal Finance — are the most glaring omission from tables.
Direct Line launched a salvo against aggregators this summer, with a high-profile advertising campaign labelling them commission-hungry “middlemen”.
Norwich Union Direct, CIS, Zopa and Kent Reliance Building Society are among those excluded in certain comparisons.
The latter is in dispute with Moneyfacts. It only lists banks and building societies that subscribe to its Datascreen product — used by product providers and independent financial advisers to monitor competitors’ rates — and pay an annual licence fee of almost 12,000 pounds.
This data is also sold to other aggregators, including uSwitch.com and MoneyExtra.com.
Mike Lazenby, chief executive of the Kent, says it refuses to pay the licence fee “on the principle of the thing”.
He adds: “If it’s a ‘best buy’ table it should include all best buys and if it doesn’t, it should carry a health warning.”
Zopa, a social lending exchange for people to lend and borrow money, has also encountered problems being listed.
The firm says it has offered “some of the very best and most consistent interest rates for more than two years now”. But its products recently “dropped off” Moneysupermarket.com when its marketing budget dictated it stop paying the site commission, according to a Zopa spokesman.
Moneyfacts, he adds, does not compare Zopa’s products “because we’re too new or something”.
He suspects ulterior motives are at force: “Most of their (Moneyfacts’) revenue comes from the traditional industry — banks, building societies, big old insurance companies and long in the tooth fund managers: the business is influenced by this old guard’s preferences.”
The aggregators have a different story to tell.
Andrew Hagger, head of news and press at Moneyfacts.co.uk, says it has never charged providers directly to be included, but says there is “no guarantee” it will list “every new personal finance company formed”. He cites fluctuations in Zopa’s interest rates as a barrier to inclusion.
A Moneysupermarket.com spokesman said Zopa was tried on its main tables, but removed as “acceptance rates were quite low as it is a niche supplier”.
Direct Line, they all say, refuses to be listed because it is uncompetitive and would fare badly in league tables.
But while product providers have their own war to wage to get to the top of the “best buy” tables, there is another battle going on in the industry itself.
Moneysupermarket.com has started to dominate the supply of price comparison tables to the national press — once the domain of Moneyfacts.co.uk.
Rivalry between the two is deep-seated: Reuters revealed last month that Moneysupermarket.com paid Moneyfacts.co.uk 3.9 million pounds to settle a dispute over intellectual property.
The compensation, paid in 2004, came after Moneyfacts.co.uk found Moneysupermarket.com had used its data without permission for around 18 months after the latter migrated to the Internet in 1999, according to sources.
Now, Moneysupermarket.com has started paying advertising rates to put its “best buy” tables in the press, knocking Moneyfacts.co.uk, which does not pay, off publications including The Times, Sunday Times, Daily Telegraph, Sunday Telegraph and Independent.
The Moneysupermarket.com spokesman says it is a “commercial relationship to mutual benefit”, and that its tables “remain credible and transparent”.
The market is poised for further shake-up.
Tesco Personal Finance, part of RBS, is poised to launch its own comparison site, Tescocompare.com, which is expected to include quotes from RBS brands other than Direct Line.
“Tesco is very much looking to undermine other aggregators by offering better value to suppliers,” an industry source told Reuters. It is expected to charge “on the lower side” of standard commission rates of 25 to 50 pounds per acquisition.
As competition intensifies, aggregators are striving to set themselves apart.
Confused.com says it is one of few sites to give fully underwritten guaranteed quotes; Fool.co.uk prides itself on its content and peer-to-peer advice community; Moneyfacts.co.uk has recently launched league tables for consistent savings rates and ethical financial products.
So-called “third generation” comparison sites allow consumers to compare products on more than just price: Gocompare.com ranks insurance policies on the range of cover provided, whether the provider has UK-only call centres, a 24-hour claims helpline, free courtesy car as standard or free European driving certificates.
MoneyExpert.com, meanwhile, allows consumers to compare products on features and customer service, as well as price.
Martin Lewis, founder of “free to use, free of ads, UK consumer revenge site” MoneySavingExpert.com, says such innovations are welcome — as comparing products on price alone is fundamentally flawed.
Take savings accounts.
Alliance & Leicester (A&L) recently bounded to the top of the league tables with its high interest instant access account, knocking ICICI Bank and Icesave off the top spots. But customers who withdraw money will not earn any interest on the entire balance in that month.
“Marketing companies are very clever; they constantly come up with new and innovative ways to make things look good,” says Lewis. “Comparison sites are too blunt an instrument to deal with that.
“(They) are, in many ways, part of the financial services industry: their prime aim is to sell you a product. But we’re not: we’re a consumer champion.”
Lewis — a personal finance journalist who established his site four years ago with 100 pounds — is making money too: the site receives commission when consumers click through to 70 affiliated providers.
Payment, he says, never sways his editorial judgement. But many of these links take consumers to the very price comparison sites that Lewis says are flawed.
With server costs of 100,000 pounds per year, Lewis says he cannot afford to run the site without generating revenue — and that by forging links with aggregators there is no opportunity for product providers to “try to exert any pressure”.
But, like the founders of countless consumer financial sites before him, Lewis stands to make a pretty penny out of playing the consumer champion.
“I do hope one day it will make me a billion,” he said. “There’s nothing wrong with that, provided I haven’t compromised my ethics.”