1. Executive Summary
Online banks dig for continued quantitative growth in account number, transaction, and value of transaction since these factors are essential for valuation of the company at the stock exchange.
The market for online financial services, or “eFinance”, is growing in Europe and the US. The German market is the biggest but not the fastest growing market within Europe. Financial institutions have to consider trends in the market in order to survive and prosper in this very dynamic and competitive environment. Simple products like current account, saving accounts and brokerage, incl. mutual funds, as well as personal loans will be sold more on the Internet. However, customers are using the Internet as an information tool but close the contact often at physical branches. In order to avoid this miss match, online financial institutions will be forced to obtain core competence in:
• Customer relationship management
The ability to capture, manipulate, and utilise customer data will be one of the principal keys in the competition for market share.
• Multi-channel banking
Customers increasingly demand being served any time, any place, anywhere. Meanwhile, employees and suppliers alike are more likely to be connected to the financial institution’s architecture. This addi-tional complexity will require innovative solutions by financial institu-tions, and most likely, a real-time online platform.
• Customer satisfaction
Technology problems such as poor system performances or poor execution of orders are a source of much frustration for customers. A dissatisfied customer with a greater number of options in the Internet is less likely to remain loyal for long.
• Competitive differentiation
Technology supports new product and feature development, as well as customisation, which allows online financial institutions to differentiate their offer from their competitors. Branding requires a sophisticated differentiation strategy.
The online financial institution faces a number of challenges: a heavy transaction load, fast moving shifts in channel usage and a requirement to sew all the channels together. There are many requirements for the success of this business environment: security, data management, degree of customisation, and range of products and features.
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Table of Contents
1. Executive Summary
2. Company Overview
3. Problem Definition
4. History of Retail Banking
5. Technical Standards for Online Financial Services
5.1. Impact for Online Financial Institutions
6. Competition
6.1. Implication for Financial Institutions
7. Opportunities
7.1. Market Trends
7.1.2. Implication for Financial Institutions
7.2. Clients
7.2.1. Implication for Financial Institutions
7.3. Price
7.3.1. Implication for Financial Institutions
7.4. Products
7.4.1. Implication for Financial Institutions
7.5. Distribution
7.5.1. Implication for Financial Institutions
8. Threats
8.1. Implication for Financial Institutions
9. Strategic Alliances
9.1. Implication for Financial Institutions
10. Innovations and Visions
10.1. Implication for Financial Institutions
11. The US Market
12. Implication for XXL Internet AG
Objectives and Topics
This thesis examines the current landscape of electronic commerce within the financial sectors of Germany and the United States. The primary objective is to evaluate market advancements, technical standards, and consumer demands to provide strategic recommendations for XXL Internet AG regarding their consulting and web solution services for financial institutions.
- Comparison of technical standards (HBCI vs. OFX) for online financial services.
- Analysis of competitive dynamics, including non-traditional entrants and account aggregation.
- Evaluation of digital distribution channels and their impact on customer acquisition.
- Assessment of innovative consulting tools for virtual financial service providers.
- Strategic implications for the future role of technology partners in the banking industry.
Excerpt from the Book
7.4.1. Implication for Financial Institutions
The task to differentiate through content and delivery will be the key for success in a fragmented and competitive market. The multi-channel strategy might be here the most preferable (access any time, any place, anywhere, from any access device). The multi-channel strategy combines physical presence with online presence. It shall not be underestimated the opportunity to cross-sell new product categories using the Internet technology, and enter new segments and markets.
Value propositions of online services are:
1. Cost: Cost savings are one of the major drivers of financial decisions. The greatest opportunities for cost savings are in transactional accounts such as banking, savings and brokerage accounts, assuming the business is operating at scale.
2. Convenience: Probably the next most important driver for using online finance is convenience, particularly the ability to research or transact outside business hours.
3. Control: Consumers feel empowered when they make their financial decisions with the information and tools provided online.
4. Complexity: The simpler or more frequently purchased a product is, the more likely that consumer will exhibit self-directed behavior in buying that product.
5. Choice: Through aggregators and proximity of competition (just a click away), the Internet has reduced consumers’ search costs, providing far greater choice for the amount of time spend.
Summary of Chapters
1. Executive Summary: Outlines the necessity for financial institutions to adopt core competencies like customer relationship management and multi-channel banking to survive in a competitive e-Finance market.
2. Company Overview: Presents the structure and strategic business units of XXL Internet AG, highlighting its position as a market leader in web solutions.
3. Problem Definition: Identifies the need to evaluate market trends and digital advancement differences between Germany and the US for the benefit of XXL Internet AG.
4. History of Retail Banking: Reviews the evolution of retail banking functions and the industry shift caused by new technological and regulatory pressures.
5. Technical Standards for Online Financial Services: Analyzes various standards such as HBCI, OFX, and IFX, comparing them based on security, acceptance, and flexibility.
6. Competition: Explores the rise of new competitors like portals and account aggregators and their impact on traditional banking business models.
7. Opportunities: Details market trends, customer behavior, and distribution strategies, emphasizing the move toward multi-channel and personalized online services.
8. Threats: Examines challenges such as margin erosion, IT implementation costs, and human resistance to organizational change.
9. Strategic Alliances: Discusses the necessity of forming partnerships to exploit external knowledge and provide comprehensive customer advice.
10. Innovations and Visions: Looks at future trends, including iTV, mobile banking, and the dynamic integration of new communication technologies.
11. The US Market: Provides an overview of the US financial landscape, highlighting the growth of online brokerage and lessons from pure online banks.
12. Implication for XXL Internet AG: Synthesizes findings to recommend future-oriented strategies for XXL Internet AG as a key IT service provider in the evolving financial market.
Keywords
Electronic Commerce, eFinance, Online Banking, HBCI, OFX, Multi-channel Banking, Customer Relationship Management, XXL Internet AG, Financial Institutions, Digital Signatures, Market Trends, Retail Banking, IT Strategy, Mobile Banking, Strategic Alliances.
Frequently Asked Questions
What is the core focus of this thesis?
The thesis focuses on the advancement and integration of electronic commerce within the financial sectors of Germany and the United States, specifically tailored to provide strategic insights for XXL Internet AG.
Which central topics are addressed?
Central topics include technical standards for home banking, competitive market forces (e.g., portals and aggregators), digital distribution strategies, and the role of innovation in product delivery.
What is the primary goal of the author?
The primary goal is to evaluate current market trends and technologies to help financial institutions and their technology partner, XXL Internet AG, optimize their offerings and successfully navigate the digital transition.
Which methodology is used?
The research relies on an analysis of current technical standards, industry surveys from institutions like PricewaterhouseCoopers, and an evaluation of existing e-banking models in both Europe and the US.
What are the key points of the main part?
The main part covers the technical comparison of standards, the impact of competition on business models, strategies for customer retention through multi-channel banking, and the adoption of innovative consulting tools.
What key terms characterize the work?
The work is characterized by terms such as eFinance, Online Banking, Multi-channel Banking, HBCI, OFX, and CRM, reflecting the fusion of banking and Internet technology.
How do German and US banking standards differ according to the text?
The text highlights that German banks prioritize the standardized HBCI approach with emphasis on chip card security, while US banks have largely adopted the flexible, software-pushed OFX standard.
What specific opportunity does the author identify for XXL Internet AG?
The author identifies an opportunity for XXL Internet AG to act as a long-term IT partner, helping financial institutions navigate complex digital integrations, outsourcing needs, and the transition toward personalized, multi-channel service platforms.
- Quote paper
- Klaus Schmidt (Author), 2001, eCommerce for Financial Institutions in Germany and the USA, Munich, GRIN Verlag, https://www.grin.com/document/166
