The Future of E-Finance

Financial Institutions embrace an enormous B2B opportunity

Financial Institutions embrace an enormous B2B opportunity

After years of very visible emphasis on retail Business-to-Consumer (B2C) opportunities, Financial Institutions (FIs) of all kinds are waking up to the fact that core groups of profitable business customers now want and need financial products delivered electronically, supporting their own and their trading partners' e-business activities. Rather than allow fast-moving technology upstarts to usurp their traditional role, FIs are zealously embracing new products, developing others, and covering their bets with investments in competing products and firms so they won't be left at the starting gate.

At stake is their piece - commissions, fees, and point spreads - of overall B2B spending. And FIs aren't being shy about grabbing for as much as they can get. It's too early to declare any winners. But the next 12 to 24 months are critical in determining which FIs, applications, and technology providers will lead.

FIs say, "Have it your way"
It starts with knowing the customers well - not just their relationship and activity with the FI, but thoroughly understanding their business and processes well. Traditionally, FIs manage their customers' needs for cash, credit, and other products through a strong relationship with the corporate treasurer. With B2B, the model is rapidly expanding to include deal support for individual transactions - buy-side and sell-side. FIs that adapt the delivery of products and services to the context of their target customers' business processes, such as financing the supply chain, will find a very receptive audience.

New products mean new revenue sources
When it comes to online B2B financial services, the top five buyer preferences relate to the extended payment and cash receipt processes of every company, which are part and parcel of every company's Accounts Payable (AP) and Accounts Receivable (AR) applications. FIs will begin to offer these value-added services this year to enhance their existing cash management business, and will find a growing acceptance among corporates to consider outsourcing these labour-intensive functions.

Delivery model will be the Private Trading Exchange
A lot of emphasis has been placed on delivering financial products through public markets and exchanges. But there is also direct delivery of services between customer and FI, as well as interaction amongst FIs in a financing network. In fact, some FIs have organized their firms to separate exchange-based products from non-exchange-based products. But AMR Research believes that, regardless of the source of transaction activity, financial products and services will be delivered in a common technical architecture and platform that addresses the needs of each possibly constituency. That model is the Private Trading Exchange (PTX).

Recommendations
We are at the early stages of the B2B e-finance wave, and those firms that choose to wait until a more complete product suite is available will be left behind. FIs should consider the following points:

  • Understand what their customers are looking for. Determine what functions they value, what the relative priority of these products is, and, most importantly, what they are willing to pay for.
  • Take small, measured steps in bringing e-finance products to market. Work with a few customers closely to implement the chosen products, and develop supporting functions and strategies to fill the gaps. Plan the rollout carefully, and make sure you don't outstrip your capabilities to support your early customers. On paper, many products look great. But if you can't make your customers successful through using your products, it's all for naught.
  • Avoid being the copycat, at least as you start off. If you field new products and services just because your competitor is doing it, you run the risk of de-focusing your efforts and doing a lot of marginal activity. That can sink your reputation as B2B e-finance blossoms.
  • Keep your eye on the larger market for longer-term e-finance strategies. AMR Research expects that by the end of 2001, e-finance suites will have emerged, and extendable platforms - specifically PTX technologies - will gel.


AMR provides strategic advice, research, and data on e-business applications and infrastructure technologies to help customers develop technology strategies that support business goals.

www.amrresearch.com

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