Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Internet banking causes biggest industry shake-up in 400 years

09.09.2002


Internet banking is causing the biggest shake up in the financial services industry since the 17th Century, according to new research to be presented at a conference in London today, Monday September 9 2002.



A Newcastle University expert has surveyed 26 banks and building societies offering services via the Internet and found that new companies are posing a major threat to the traditional banking industry by cleverly adapting to the 21st Century `Martini` customer, who demands banking `anytime, anywhere, anyplace`.

The companies – often with entirely new business models and strategies - are also offering cheaper prices, better choices and often targeting the most profitable customers with the most lucrative products.


Feng Li, Professor of E-Business at the University of Newcastle, who will present his research findings at the British Academy of Management Conference in London today will also warn that new `e-banks` clamouring for a substantial slice of the lucrative financial market pose a serious, long-term threat to traditional banks and building societies.

He says that the recent dot com crash has not changed the fundamentals of Internet banking and that the established banks and building societies must radically overhaul the strategies and business models which brought them success in the past to maintain their competitive position – and soon.

Professor Li, of Newcastle University Business School, said: "Until recently the monopolisation of distribution channels has provided the basis for banks to build strong relationships with their customers.

"The Internet, as a new distribution channel for financial services, has lowered barriers to entry in the banking system, allowing new players, often equipped with new technologies and business models, to enter the market.

"My research has revealed that these new players are posing a serious threat to existing banks by changing the rules of the competition and raising the general expectation of customers for services from all financial companies."

Internet banking is use of the Internet as a delivery channel for the provision of financial services. So far most transactions are conducted from the client`s personal computers but other devices such as mobile phones, Personal Digital Assistances (PDA`s) and Digital TV are being used.

The UK`s financial services industry has the highest level of new entrants in Europe. Around 35 per cent of the companies who offer Internet banking services have recently entered the market.

Investing in Internet banking is strategically important to most financial companies, bringing a variety of benefits which include cost savings, new revenue generation, and the ability to provide non-traditional banking services such as insurance and stock brokerage.

Although many banks have started to offer Internet banking in varying levels of sophistication, they are most at risk from the Internet-only banks which do not have the burden of traditional overheads associated with banking, such as maintenance of high street branches. These Internet-only banks included the `baby e-banks`, Internet banks born out of existing financial companies - such as Intelligent Finance by Halifax. The main advantage of this model is that the baby e-bank can exploit entirely new opportunities and customer bases.

Another challenge is posed by the supermarket banks, which provide Internet banking services through a partnership with an existing bank but exploits the strong brand presence the supermarket already has and taps into its existing, well-established customer base. An example of this is Sainsbury`s Bank - a joint venture between Sainsbury`s supermarket chain and the Bank of Scotland.

Another threat comes from non-banks which already have a strong brand image, which expand into banking through the Internet with cheaper products in a limited product range, such as savings, to cherry pick the best customers in the market. These players range from car manufacturers to utility companies, airliners and retail chains.

Professor Li said: "The loyalty and trust of customers to established banks means the new entrants have so far failed to stage an equal competition. As a result it has been very hard for the new entrants to successfully compete with the established players.

"However, the low price proposition of new entrants has led customers of established banks to demand similar benefits, putting enormous pressure on existing banks to reduce prices and provide more innovative products and greater choice."

The research showed that the established banks and building societies were aware of the future challenges from the new Internet banks and were starting to make changes as a result. Most banks saw Internet banking as a necessity but many saw it as part of a `multi-channel` distribution strategy and planned to continue maintaining branches and call centres in addition to the electronic banking services.

Professor Li added: "For most banks their future success depends on maintaining a proper balance between the traditional brick and mortar structure and electronic channels."

Claire Jordan | alfa

More articles from Business and Finance:

nachricht Paper or plastic?
08.07.2016 | University of Toronto

nachricht Gearing up for the future: Digital Business Innovation
05.07.2016 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: OLED microdisplays in data glasses for improved human-machine interaction

The Fraunhofer Institute for Organic Electronics, Electron Beam and Plasma Technology FEP has been developing various applications for OLED microdisplays based on organic semiconductors. By integrating the capabilities of an image sensor directly into the microdisplay, eye movements can be recorded by the smart glasses and utilized for guidance and control functions, as one example. The new design will be debuted at Augmented World Expo Europe (AWE) in Berlin at Booth B25, October 18th – 19th.

“Augmented-reality” and “wearables” have become terms we encounter almost daily. Both can make daily life a little simpler and provide valuable assistance for...

Im Focus: Artificial Intelligence Helps in the Discovery of New Materials

With the help of artificial intelligence, chemists from the University of Basel in Switzerland have computed the characteristics of about two million crystals made up of four chemical elements. The researchers were able to identify 90 previously unknown thermodynamically stable crystals that can be regarded as new materials. They report on their findings in the scientific journal Physical Review Letters.

Elpasolite is a glassy, transparent, shiny and soft mineral with a cubic crystal structure. First discovered in El Paso County (Colorado, USA), it can also be...

Im Focus: Complex hardmetal tools out of the 3D printer

For the first time, Fraunhofer IKTS shows additively manufactured hardmetal tools at WorldPM 2016 in Hamburg. Mechanical, chemical as well as a high heat resistance and extreme hardness are required from tools that are used in mechanical and automotive engineering or in plastics and building materials industry. Researchers at the Fraunhofer Institute for Ceramic Technologies and Systems IKTS in Dresden managed the production of complex hardmetal tools via 3D printing in a quality that are in no way inferior to conventionally produced high-performance tools.

Fraunhofer IKTS counts decades of proven expertise in the development of hardmetals. To date, reliable cutting, drilling, pressing and stamping tools made of...

Im Focus: Launch of New Industry Working Group for Process Control in Laser Material Processing

At AKL’16, the International Laser Technology Congress held in May this year, interest in the topic of process control was greater than expected. Appropriately, the event was also used to launch the Industry Working Group for Process Control in Laser Material Processing. The group provides a forum for representatives from industry and research to initiate pre-competitive projects and discuss issues such as standards, potential cost savings and feasibility.

In the age of industry 4.0, laser technology is firmly established within manufacturing. A wide variety of laser techniques – from USP ablation and additive...

Im Focus: New laser joining technologies at ‘K 2016’ trade fair

Every three years, the plastics industry gathers at K, the international trade fair for plastics and rubber in Düsseldorf. The Fraunhofer Institute for Laser Technology ILT will also be attending again and presenting many innovative technologies, such as for joining plastics and metals using ultrashort pulse lasers. From October 19 to 26, you can find the Fraunhofer ILT at the joint Fraunhofer booth SC01 in Hall 7.

K is the world’s largest trade fair for the plastics and rubber industry. As in previous years, the organizers are expecting 3,000 exhibitors and more than...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Experts from industry and academia discuss the future mobile telecommunications standard 5G

23.09.2016 | Event News

ICPE in Graz for the seventh time

20.09.2016 | Event News

Using mathematical models to understand our brain

16.09.2016 | Event News

 
Latest News

Stronger turbine blades with molybdenum silicides

26.09.2016 | Materials Sciences

Scientists Find Twisting 3-D Raceway for Electrons in Nanoscale Crystal Slices

26.09.2016 | Materials Sciences

Lowering the Heat Makes New Materials Possible While Saving Energy

26.09.2016 | Materials Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>