Friday, May 11, 2001

Internet Revolution in Banking Reaches FOREX

The ongoing revolution in the foreign exchange (forex) market further confirms the pervasive effect of Internet technology on banking, according to IDC. "2000 was a turning point for the foreign exchange market as it saw faster implementation of Internet technologies," said Daniele Bonfanti, senior research analyst with IDC's European Banking research program.

Efforts by banks to use the Internet to reach additional customers, automate back-office processes, increase system integration, and improve risk management are driving the revolution. The forex market has up to now been one of the most conservative areas of banking, with banks still trading with customers by phone or proprietary trading systems. The lack of a real-time competitive market has created inefficiency in the buy side of the business, resulting in higher costs for bank customers.

The launch of Currenex, an independent non-banking forex emarketplace offering multibank dealing systems to customers, has encouraged banks to create their own emarketplaces. FxAll and Atriax, two of the first forex emarketplaces created by banks, are expected to go live in 2001.

Despite the expected reduction in profits due to increased competition, IDC believes the overall impact of the Internet revolution on the forex market will be positive because banks will achieve benefits such as cost cutting, improved risk-management capabilities, and an increased customer base.

According to IDC, the evolution of the forex market shows how banks are moving toward new business models that offer lower costs and new services to customers. It also represents a huge opportunity for the IT industry because IT vendors can play an active role in promoting and supporting the process.

Partnerships Will Expand eLogistics Opportunities
eLogistics service providers and ecustomer care service providers may be able to glean several advantages by forming partnerships with each other. According to IDC, however, both types of service providers incorrectly believe they are competing with each other and will have to change their thinking before they pursue partnering opportunities.

The misconception stems from the fact that elogistics service providers have been expanding aggressively to offer integrated front-end capabilities, including customer care services. At the same time, ecustomer care companies have been busy developing capabilities in back-end fulfillment capabilities.

"Such integration and expansion of each group of service providers into the other's service offerings appears to be an overlap and duplication of efforts. However, the breadth and depth of these services show that service offerings that cross traditional boundaries are offered more in support of and bundled together with core services rather than as standalone services," said Brian Bingham, senior analyst for IDC's eCustomer Care Services research program. "This means that elogistics and ecustomer care service providers are not really competing for the same group of customers and significant opportunity exists for players that develop extensive competencies in each discipline."

IDC believes one way for service providers to get the skills in each discipline is through the formation of partnerships. Additionally, IDC thinks these partnerships will create advantages and open opportunities for each type of service provider. The advantages include access to more robust and scalable skills as well as access to a new customer base. The opportunities will arise from improved alignment with customer demands.

"Companies with ebusiness practices want integrated operational platforms. They want to work with one service provider who can bring together and offer an integrated solution that spans several segments of the ebusiness life cycle rather than work with several different providers," said Romala Ravi, senior analyst for IDC's eLogistics research program. "By forming partnerships with each other, elogistics and ecustomer care service providers will have the skills needed to meet customer expectations and will improve their long-term competitive positioning."