Financial Services Industry Missing E-Commerce Boat
According to a report released today by consulting firm Arthur Andersen, fewer than 25 percent of senior management executives at global financial services companies rate e-commerce high on their priority lists.
The report, titled "Thriving in the new economy: perception vs. reality," found that few companies are making e-commerce an integral part of their strategic plans, even as they herald the Internet as the growth tool of the future.
"Companies are using e-business as an informational tool or an additional distribution channel only, rather than as a solution to their strategic concerns," said Cary Serif, lead partner of financial services e-business practice for Arthur Andersen.
He Who Hesitates Is Lost on the Internet
The report notes that the failure of traditional financial institutions to move aggressively to the Internet is providing an opening for small companies to service the needs of young consumers.
"This widespread hesitation is creating significant opportunities for more nimble competitors to embrace the Internet and stake out a leadership position," said Serif.
Forrester has noted similar sluggishness with financial institutions, reporting last month that financial services companies that do not move quickly will lose their ability to establish a customer base online. "Firms that dip their toes into Internet waters are doomed, because the Net crowns winners more quickly than the offline world," said Jaime Punishill, an analyst in Online Financial Services Research at Forrester.
Today's report also shows that new Internet companies are already making progress in establishing financial services online. "Obviously, the Internet has allowed new entrants to grow at a remarkable rate," said Serif. "Right now, many financial services firms are waiting for e-business to happen on a grand scale around them before diving in."
The study goes on to suggest that established financial services companies that miss the boat on delivering services online will be forced to enter the Internet through the acquisition of smaller companies that have created online footholds.
Forrester expects such institutions to ultimately partner with venture capital firms as an affordable way to gain positions with companies that have Internet expertise.
Young Consumers Want Financial E-Commerce
The research also indicates that a new breed of Internet consumers do not value the traditional service provided by established financial firms. "Today's younger consumers are better informed, more self-sufficient and want to take an active role in their investing and insurance decisions," said Punishill. "The Net generation has internalized the new rules of the Internet, where building trust doesn't require face-to-face interaction."
Hesitation Blamed on Caution
Respondents at financial services companies gave three reasons for their hesitation in launching strong e-commerce programs. The top reason was concerns about consumers' negative view of Internet security. Second was the potential cost associated with making the wrong decision. The third was the lack of sufficient existing human resources to support Internet initiatives.
Executives did not express concern about small Internet firms dominating the Internet market for financial services. Only 13 percent of respondents believe that current e-commerce firms will be the leaders in five years.