Market research firm Datamonitor predicts a $70bn new revenue opportunity for banks offering online wealth management and B2B services for small to medium enterprises.
A Datamonitor white paper, 'The Quest for Value in eFinancial Services', identifies the key factors that are creating these and other lucrative 'sweet spots' for financial service institutions.
"Globally, the functionality offered by the Internet is opening up new revenue opportunities," says Andrew Nuttney, director of research at Datamonitor. "These `sweet spots' will concentrate in areas where transparency and aggregation of data can add value to the service user, like retail asset management, brokerage and the provision of services to small- and medium-sized enterprises."
For most firms, however, the greatest revenue opportunities will emerge in wealth management, especially as the underlying growth in the number of high net worth (HNW) individuals across the globe continues to increase.
In the US alone, the number of HNW individuals - defined as those with more than $1m in liquid assets - is set to grow from 2.5m in 1999 to 3.75m in 2003. Banks have been rolling out integrated wealth management portals to fill the gap between higher-end retail banking services and traditional private banking for affluent customers. These portal services are set to become a key source of non-interest, fee-based income says Datamonitor.
Another key sweet spot identified by Datamonitor involves B2B services to SMEs. Datamonitor values this revenue opportunity at more than $50bn.
The research predicts that bank spending on e-business technology will grow to $38 billion by 2005. This investment will be essential, says Datamonitor, because few banks have the skills, infrastructure or resources to survive in the evolving e-world.
Datamonitor's Nuttney says banks aspiring for leadership in online business will need to invest 15% of overall IT costs on e-commerce-related activity, compared to the current average IT spend of under five per cent.