The full benefit of e-business investments will not reach the bottom lines of many large financial institutions for at least another year, until more strategic initiatives begin to contribute to improved results, according to financial services executives surveyed by Toronto-based A.T. Kearney, the management consulting subsidiary of global services leader EDS.
Based on detailed conversations with the heads of e-business for 40 North American financial services companies, the research reveals an early focus by financial institutions on areas such as transaction processing, procurement and distribution, where quick wins were easier to achieve. However, these same executives admitted investments in areas expected to have the largest bottom-line impact — such as marketing/selling, customer relationship management and process efficiencies — are not as far along.
Rates of completion for e-business initiatives aimed at areas executives cited as having a high impact on the business are relatively low: customer management (20 percent completion within the next year), marketing/selling (25 percent) and process efficiencies (14 percent). Executives reportedly stressed that few initiatives in these areas will be completed within the next year. However, initiatives directed at areas they expect to have a lower impact on the business are more likely to be completed within the next year: transaction processing (80 percent completion within the next year), procurement (71 percent) and distribution (60 percent).
“Most financial services companies are still climbing the steep e-business learning curve, with some struggling with under performing initiatives, some searching to see how their disparate initiatives fit together and some failing even to get their initiatives off the ground,” Rembert deVilla, the A.T. Kearney vice-president who led the study commented in a June press release. “Most companies don’t need more e-business initiatives at the moment, they need to focus on the right ones and give them the attention they deserve.”
The study found three factors key to success in e-engineering financial institutions as:
- focus to manage trade-offs between different e-business opportunities and available resources;innovation to improve the efficiency and effectiveness of business processes and to create novel products and services; anda results-orientation to ensure that e-business conforms to the same ROI hurdles as any other use of capital.
Executives report that standard customer protections are actually preventing financial services companies and their customers from realizing the benefits of the Internet. According to the executives, such regulatory requirements as placing lengthy legal documents on sites selling financial services drives off customers. They add that regulatory differences from state to state and country to country make it practically impossible to leverage the Internet’s ability to offer similar products in multiple marketplaces.
This flies in the face of the top e-business goal of financial institutions which 75 percent of surveyed executives said is to improve customer service. Other key goals are to transition more activities to the Internet (42 percent), build on corporate growth (33 percent) and to become more cost effective (29 percent).