By Mohamed Ali Bernat Asset managers are worried about maintaining customer relations in the e-comme...
By Mohamed Ali Bernat
Asset managers are worried about maintaining customer relations in the e-commerce era yet insurance firms believe the internet will have little impact on their customer base.
Global consultants Arthur Andersen's report on business to business e-commerce in the financial services industry shows that investment houses are worried that their customers will become more difficult to retain. At the same time insurers feel the technical nature of their products will make consumers far less likely to change providers.
Business to business represents 84% of total global e-business revenue and the growth prospects are substantial, according to the report.
Revenues are predicted to be anywhere from $2.7 trillion to over $7 trillion within the next three years.
Russell Collins, head of UK financial services at Arthur Andersen, said the study found existing players rated themselves as tomorrow's winners, despite e-business empowering new entrants.
Even so, there was less confidence in preparedness to manage technology and the vulnerability of web transactions.
Some 54% of respondents were willing to outsource their performance risk activities and 46% their credit risk management activities.
He said: "As financial transaction costs and value added for the more vanilla services move down, the question is how to add the value that customers will demand.
"The more complex transactions are those that typically add the greatest value and are linked to complex and multifaceted relationships between banks and counterparties.
The challenge for groups is to provide clients with the greatest value by providing low cost, simple transactions that are processed straight through, thus freeing them to assure the proper focus is given to the more complex or higher value added elements of a deal."
The report also highlighted the continued debate over internet security, with respondents citing concerns over the creation of a safe and secure environment for business to business transactions a source of major concern.
More than 225 wholesale and commercial financial services organisations were surveyed to gauge whether the potential transformation of current business processes by e-business to business is leading to an actual or perceived need to adopt new business models, and to assess the growth of trends in the wholesale financial services marketplace.
Respondents see electronic business to business as having the greatest impact on distribution, marketing, the competitive landscape and customer relationships. Surprisingly, they are less concerned about areas such as procurement, settlements and payments - areas that have traditionally provided tangible, definable and easily executed advantage, Collins said.
Most respondents do not believe a new business model will be required but many companies doubt they have the right people, operations and marketing in place.
Financial services institutions are generally adopting one of three models to respond to the rise of e-commerce, Collins said. The first is to see the company's e-business platform as an extension of the existing brand without making significant changes to the underlying business.
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