From: "Stephen Burke" 
Newsgroups: uk.finance
Subject: Re: ING Direct
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Date: Sun, 7 Mar 2004 14:49:12 -0000

Mark Carter  wrote:
> At an interest rate of 4.5%, one wonders how they do it. Let's hope
> the answer doesn't eventually turn out to be "they can't". I know
> their mantra is "we don't have high street branches, blah, blah,
> blah"; but I heard that most banks operate on wafer-thin margins. So
> if most banks can't give rates nearly as high, then how can ING?
> Anyone remember BCCI!?

I don't think there's any question of fraud, but in the long run the answer is
almost certainly "they can't", high rates from a new provider are a
loss-leader to buy market share - no different to the millions they're
spending on advertising. Since they start with a total balance of zero the
effective cost at the start is not that great; if they find themselves with a
million customers with an average balance of £20k I confidently predict that
the rate they offer will fall.

-- 
Stephen Burke