E-banking: Investment in online financial services has paid
dividends for the sector's big players as consumer confidence in
Internet banking soars, giving IT's reputation a boost along the
way.
Last week's news that one in four Internet users is using the Web
to manage their finances brought some welcome relief to the
financial services industry, which has invested heavily in IT to
make this possible. As a result, IT's role in the business has been
transformed.
Figures published last week in a survey by pollster Mori for
Internet bank Egg, revealed that 27% of Internet users use online
banking. And of the 22 million people using interactive
technologies, 34% have either bought or applied for a financial
product online.
This change in consumer attitudes has only been made possible as
the result of significant investment in the back-end technology and
processes used by players in the financial services sector.
According to Robin Bloor, chief executive of analyst group Bloor
Research, this has been achieved only because the banks were able
to enter a new paradigm in their use of IT.
"What you are buying from a bank is not a product, it is the
ability to do transactions over the Internet. It's all about
manipulating information," he said.
But first, players in the financial services sector had to make
long-standing technology investments available to Internet users.
"With the move to browser-based computing, companies have had to
change the way in which they build applications in order to adapt
to what consumers want," said Bloor.
Some believe this difficult transformation has played into the
hands of smaller companies, levelling the playing field in
financial services. For larger players in the financial sector,
much of the problem has been making their mainframe systems
Web-compatible to open them up to e-commerce.
Ken Pilkington, e-commerce manager at Cheshire Building Society,
said, "It is mainly the back-end systems that need adapting, which
is where the larger players have got major integration issues, but
that is where many small- to medium-sized companies like us have
got the edge."
It has also meant that traditional back-end systems and processes
had to be Web-enabled and move more towards the front of the
organisation, he added.
Pilkington said the explosion in business-to-consumer e-commerce
has forced Cheshire Building Society to rethink the way it works.
"It has extended our reach from being a regional building society
to being a national player with a branch on people's desktop, and
we have had to build and invest in systems to make that possible."
Although Mori's statistics may encourage those offering interactive
services, it should sound a warning to players lagging behind, said
Bloor. "These figures show that online banking has really taken
off, but for the banks with a poor showing, this should be a
wake-up call."
The dangers of not keeping pace could mean companies lose business,
said Keith Burgess, Woolwich's e-commerce enhancement manager.
"Customers don't mind moving to get a better service so if you
don't keep the service fresh and new, they will move. Many
customers who use interactive services tend to be higher earners
and they are customers you really want to keep," he said.
The correlation between a strong technology strategy and market
opportunities has promoted the status of IT within many financial
services firms, according to those in the sector. But, as Burgess
pointed out, the IT department has not just been elevated as a
standalone function, it has been amalgamated into the rest of the
business.
"These changes have dispersed IT throughout the organisation and
brought it into day-to-day contact with the business. People want
instant responses, so IT and the business have to work much more
closely together. Every normal business department now has IT
people associated with it," he said.
Pilkington agrees that the demands of running a 24x7 operation have
forced IT and the business closer. "IT now works so much more
closely with the business because we have to specify what the
business needs for the back-end and what the customer needs through
our e-commerce channels," he said.
"These days, we talk every day about the platform. There is a
synergy between the business and IT that was not there previously.
Before it was 'them and us', but slowly that is breaking down."