Electronic commerce and the marketing of Internet banking in the UK: THE IMPLICATIONS


To understand the implications for financial providers of the developments in electronic commerce it is useful to appraise contributions by financial services’ consultants. Price Waterhouse (1998) found that the majority of Information Technology Directors (84 per cent) see ‘customer needs’ as a major factor driving the growth of electronic commerce. In addition, 75 per cent cite market pressures as a factor for growth, while 60 per cent suggested the ‘drive to reduce costs’. For financial providers arguably the main advantage of the Internet is that transaction processing costs are much lower via this channel than more traditional channels such as the branch. Booz, Allen and Hamilton (1996) have calculated that such costs are significantly less for the Internet (see Figure 1).

However, financial providers can readily be differentiated in terms of their strategy towards electronic commerce. Based upon survey data with the chief technology executives and chief financial officers of bank holding companies and a range of worldwide financial services companies, Ernst and Young (1998) were able to outline eight contrasting styles of electronic commerce strategies adopted by financial providers (see Figure 2).

Figure 1 Comparing the main delivery channels – costs

From Figure 2 it is evident that the majority (50 per cent) of companies perceived themselves as ‘formative/ exploiters’; whereas less than 5 per cent perceived themselves as ‘committed/ innovators’; and 20—30 per cent believed they were adopting a ‘holding/observer’ strategy. For the future, the study revealed that the majority of companies perceived that they would move from a holding/ observer position to one of committed/ innovators.

Ernst and Young (1998) further suggest a number of management imperatives for developing an electronic commerce strategy: first, they suggest that the greatest challenge faced by the financial services industry will be the ability to ‘integrate all varying channels [ie the branch, telephone, Internet etc] into a seamless delivery environment. Therefore the priority must be the relationship between channels, rather than the relationship of customer to channels. Secondly, they argue that financial providers should avoid proprietary investments, when they claim that they should not: ‘. . . be passive as supporting more channels with more features per channel will greatly increase costs. Finally, the report argues that financial providers should use ‘fee incentives, education, and other measures to match customer, interaction type, and channel.

Figure 2 E-commerce strategies

Deloitte and Touche’s report (1999) predicts that online delivery of financial services will be a major component in the delivery mix within five years. They believe the benefits to consumers of using the Internet will be that ‘with a few mouse clicks they will be able to compare products from multiple providers and then purchase on-line.. For the financial providers, they suggest that the task remains one of divising a ‘customer- centric’ approach:

With a fine-grained understanding of its customer base, the customer-centric firm will offer the right products to the right customers at the right time in their lives. And by anticipating their changing financial needs, it will retain customers from cradle to grave.

Prior to assessing the consumers’ perceptions of changing financial needs and behaviour it is necessary to examine the UK Government’s position; especially as their strategy appears particularly positive with respect to the promotion and development of electronic commerce.


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