|
contents | business | |||||||
| Digital Marketplace Disruption in the Financial Services Vertical by Rachel E. Happe, IDC The digital marketplace is causing dramatic changes to service delivery in the financial industry. A sampling of recent news alone provides insights into some of the shifts: - TradeKing Chief Growth Officer to Discuss Power of Social Networking in Online Investing at Net.Finance 2008 Conference; - Dow Jones Market Watch Goes Social. The arrival of the Internet in the mid 1990s led some pundits to forecast the demise of the brick and mortar, or physical domain, for the financial services industry. While "brick and click" have coexisted for over 10 years, the digital world has now achieved wide exposure and very high usage levels in most developed markets. Many emerging markets are now moving quickly with their own form of digital infrastructure on mobile networks. The foundation for our perspective on the digital marketplace phenomena begins with IDC's definition of a online marketplace: a virtual marketplace where buyers and sellers meet. This definition encompasses the full range of buyer-seller models, including many-to-many, many-to-one, one-to-many, and one-to-one. IDC's Digital Marketplace Framework defines how users connect through gateways, hubs, and nodes [see The Landscape of the Digital Marketplace in 2007 (IDC #206726, May 2007)]: - Gateways. Examples of gateways that are tailored to the financial services marketplaces include Google Finance, Yahoo Finance, and MSN Money, which are also further refined to a country market (e.g., MSN Money in the UK is found at money.uk. msn.com). - Hubs. Examples of hubs in the financial services world include www.bankrate.com, www.lendingtree.com, www.dealertrack.com, www.routeone.com, www.insure.com, and www.esurance.com. And, new startups, like Mint and Geezeo, use a hub model while taking on established alternatives like Quicken and Money. - Nodes. Examples of nodes in financial services include credit bureaus (e.g., Experian, Equifax, and TransUnion) who offer credit scores and credit protection services to consumers as well as selling credit reporting data to financial institutions, market data providers (e.g., Bloomberg, Reuters), and insurance data providers. Banking Internet or online banking has become an established and increasingly essential channel for all large institutions and most other institutions. In fact, IDC projects that the percent of worldwide users accessing banking and financial information online will grow from 56% in 2007 to 59% in 2012, representing over 450 million new users worldwide in the coming years. Capital Markets There is no doubt that this industry segment is well ahead of banking and insurance in rapidly transforming its business into a portfolio of digital marketplaces. Online retail investing took off in the late 1990s and now accounts for over 80% of trades at firms like Charles Schwab, Fidelity Investments, E*Trade, and TD Ameritrade in the US. Insurance Online insurance is increasingly on the radar of carriers on a global basis. Predominant advantages of the digital insurance marketplace to insurers around the world include cost efficiencies afforded by Web-based technologies, wider penetration into previously unreachable segments, and heightened visibility for the carriers. The pace of change has been both rapid and dramatic for financial services industries which had been conditioned to slow, gradual changes in the delivery of services to customers and partners. Since 1995, the more rapidly changing technology environment coupled with efficient, affordable, high-bandwidth access to the Internet and mobile networks has created a demand side pull from customers. But major initiatives financial institutions should consider including adapting IDC's Digital Marketplace Application Infrastructure to the financial institution's business model; determining the country level drivers and issues addressing level of infrastructure, preferred methods for digital access by customers as well as the maturity of financial institutions ability to engage customers and prospects at each major stage of their business model; assessing the state of business workflow efficiencies and their adaptability to the demands of the digital marketplace across the institution; and assessing the company's digital marketplace readiness beyond getting leads and educating/informing customers. Among the options financial industry players need to consider are their business model and delivery approaches, their partnership and channel strategies, and opportunities to gain share in this disruptive market. A complete discussion of these recommendations can be found in "How Will Digital Marketplaces Change the Game in Financial Services", #FIN212162. write your comments about the article :: © 2008 Computing News :: home page |