e-Business banking ventures to spend $200bn - FT

e-Business banking ventures to spend $200bn - FT

A study conducted by Mercer Management Consulting reports financial services companies are expected to spend close to $200bn on their e-business ventures over the next three years, but for many, it will be a case of good money after bad.

According to the Financial Times, the study found that while US consumers have embraced online trading, they are less comfortable with other Web-based financial transactions. From 1999 to 2000, only 3 per cent arranged loans or mortgages online, while 5 per cent bought insurance. Two-thirds of respondents in the survey said they were not interested in buying financial products online.

This is bad news for banks, brokerages, and mortgage and insurance companies, which logged more than $60bn in IT spending over the last two years - buoyed by predictions of exponential growth for the e-finance market. Online insurance sales, for example, were expected to hit $9bn by 2003, according to Forrester Research, a technology-focused research company.

Mr Riley, Mercer Management Consulting, believes dotcoms such as InsWeb and E-loan are unlikely to see substantial returns on their Web site investments because their products are too complex to buy online. "People are using the web sites as quote engines then buying through traditional channels," he says. Online banking is another tough sell; only 3 per cent of US households currently manage their accounts online.

He predicts that retail banks would have better luck remaking their web sites into internet portals, where customers could access information about all their investments and accounts - even those held at other institutions - as well as financial news. Meanwhile, "old economy" brokerages such as Charles Schwab could parlay their e commerce investments into profits because they offered a brand name, as well as a variety of products, and trading was easily adaptable to the online environment, says Riley.

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