|
 Financial
companies and banking giants in the US are capitalising on the economies
of scale provided by Web-based systems. This could be just the beginning
of the e-finance era, predicts Mohan Babu
From
the early days of Internet and e-commerce, I have been a keen observer
of the trends and happenings. Like most of my peers from the IT
sector in the US, I had an opportunity to get an excellent ringside
view of the upswing and downturn of the dotcom era. It has been
over a year since the major shakeouts are over, the dust has all
but settled in the dotcom world and a surprising few winners who
have survived the downturn are poised to leverage their strength
moving forward. Amazon.com and Ebay are case studies unto themselves.
So are a few other smaller players in the marketplace. After going
through a phase of rapid development, the novelty of the Web is
giving way to a mature and measured growth. Of all the business
models that had promised to make the Web a better place, use of
the Internet to handle one’s personal finances holds most promise.
People
are becoming comfortable using the Web to do myriad things, including
booking airline tickets, planning holidays, trading stocks, reading
the day’s headlines, chatting with friends, sending e-mails,
etc. Many in the US are also quite comfortable taking care of their
finances on the Web. Personally, I for one prefer taking care of
most of my banking transactions over the Web. I pay most of my bills
and other regular payments like credit card bills using my online
account. Of course, I also verify the deposit of my bi-monthly paychecks
online. The online service provided by my bank also allows me to
schedule payments, shift from one account to the other, etc, and
best of all, there is no charge towards the use of the Internet
account. Apparently I am not the only one using online services.
Business Week in a recent article titled “Online finance hits
its stride”, talks about a number of areas where online systems
have been making great strides:
Mortgages:
About $160 billion in mortgages were processed online last year
alone. Web-lender IndyMac charges rates as much as 0.375 percent
below market rate because processing costs are low, saving customers
about $50 per month on a $200,000 30-year mortgage.
Billing:
Fifteen million people paid bills on the Net last year, up 60 percent
from 2000. Growth took off when credit card companies started promoting
monthly online billing.
Banking:
16 million US households used online access to checking or savings
accounts last year. Customers like having no lines and 24-hour access.
Other
big financial applications include online stock trading and tax
preparation systems.
The
recent growth in movement of financial systems to the Web is different
from the one we saw during the dotcom boom for one primary reason—the
push is coming from financial companies and banking giants who want
to capitalise on the economies of scale provided by Web-based systems.
Earlier,
the push was coming from online companies wishing to enter the financial
sector without regard to a real demand from either financial institutions
or for that matter the customers. As the
Web
matures and encryption technology becomes more sophisticated, customers
are becoming more comfortable with providing their personal information
on the Web, especially to trusted sources.
Banks
and credit card companies realise that paper-based billing that
costs five to ten dollars per transaction can be reduced to about
fifty cents per transaction online. This move to online billing
would save a big bank or financial institution millions of dollars.
Similarly, processing transactions purely on the Web avoids the
cost of having customers drive up to a teller or a physical location.
For example, ING Direct, a large financial house has modeled its
bank into a purely Web-based system. Entirely bypassing the need
to have physical branches, the bank encourages customers to complete
all their transactions (including deposits, money transfer and withdrawal).
Customers have the option of calling a toll-free number and talking
to a representative or transacting on the Web, with most people
taking the latter route. Similarly, Web-only mortgage companies,
online trading sites and other financial companies are poised to
reap the rewards of a speedier, efficient and cheap system. Most
regular big banks and financial houses in the US too provide online
interfaces to their customers.
Does
the success of personal financial applications hold any lessons
for Indians? You bet! The market for online banking along with a
pent-up dissatisfaction with the existing archaic banking and financial
systems is huge. This is especially true for the over million Non
Resident Indians (NRIs) who would like nothing better than the convenience
of banking and transferring money from their desktops sitting in
New York, Colorado or London. Many NRIs find the rate of returns
on Indian accounts attractive, but balk at depositing with Indian
banks because of the archaic systems and paperwork required. Online
banking would not only alleviate the process (of dealing with Indian
bankers), but also help attract and retain new customers. Added
to this is the convenience of banking from anywhere in the world.
There are a number of other financial applications including stock-trading
systems and processing of loans that are still at a nascent stage
in India. These could take off in a big way if the marketers can
visualise a demand for it and create user-friendly systems.
(Mohan
Babu is a software consultant based in Colorado Springs, USA. E-mail:mohan@indusdemographics.com)
|
PEOPLE
