E-banking boosts IT's status

E-banking: Investment in online financial services has paid dividends for the sector's big players as consumer confidence in...

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."

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