According to several historians, the Information Revolution is the third revolution in the history of the world after agricultural and industrial revolutions. Information age is the time, which brought fundamental changes in intellectual, social, philosophical and cultural aspects of the world.
Some historians are of the opinion that actually information revolution was the first revolution ever occurred and the agricultural and industrial revolutions were caused due to information revolution. To prove their claim they said that when civilization started, travelers and traders traveled from one place to another, as they have access to many cultures and traditions, they shared information and this information was actually the beginning of civilization as well as led the humanity towards the agricultural and industrial revolutions.
The Information Society can be determined as the large group of people within a country or a region wherein most workers generate or depend upon information for performance of their jobs. Today information is the largest export of most News services, banks, insurance companies, television stations etc. these all organizations collect data, process it into information, distribute it, and store it as a major part of their business.
Business-to-consumer transaction can best be described as transaction between a singular business and the multiple buyers. It is essentially that a single-parent organization chart with many children, the single parent being the primary “business” and the many children denoting the very many “Consumers”, thus the business-to-Consumer reference. The basic Business-to-consumer model being the “etailer” model, have an approach where the consumer names the price for what he or she wants to buy. It is called the “priceline.com model”. The number of models that are being introduced in the business-to-consumer arena is growing rapidly. A model is essentially the “characteristic” of the business-idea of the financial idea. Its success is directly related to the success of the business idea. It is not necessary that all Web transactions are termed Business-to-consumer. Credit card transactions are also business-to-consumer as the transaction is electronic. The ATM cash withdrawal is also business-to-consumer. Just because the latter two examples do not use the browser as the front-end doesn’t justify disqualification from this group.
Setting up an E-Commerce platform is more than just finding the right technology solution, implementing it and then marketing new e-ventures; it is first and foremost, about developing a strategic plan. This means that the organization needs to address the issues like industry’s market and where the organization fits in, evaluating the financials, integration with the business systems and most importantly developing a direction to move towards it.
Choosing the right e-business model is essential, but not an easy task. E-Commerce is business as usually but using a different medium i.e. Internet. So the e-business should follow the same basic paradigms of established business models. There are five business models:
- One –to-Many (Sell-side Sites)
- Some-to-Many (Distribution Portals)
- Many-to-Many (Vertical Exchanges)
- Many-to Some (Procurement Portals)
· Many-to-One (Buy-Side Sites)
Reasons for using Internet:
The world has become a global village now. It is necessary for anyone and everyone to think global in doing business in this global village. Diversity and globalization in the new economy and the present business situation has produced a work force made up of people all around the world. They have different life experiences, perspectives, preferences, values and style. This diversity of work force is reshaping and rewriting the way of doing business.
Following are some of the reasons for an organization for being global:
· According to David Aaron, the former commerce under secretary for International Trade, “if there is to be a recession in America, the only place to look for any potential dynamism is going to be Europe” (Rossant). The plan for going global for any company helps the company to capture the markets of Europe and Asia and hence helped for the betterment of the economy of the country
· CNN has reported “ Less than a year ago, the Skepticism of European business towards electronic business was much criticized. Now, with the dot-com crash in the U.S., Europeans will be able to benefit from their conservatism, according to market researcher Gartner Group Inc. ‘Europe is not suffering from the U.S. dot-com hangover. U.S. companies have gone down the wrong road and need to back out. This will take them nine months to a year,’ said Alexander Drobik, vice president at Gartner. European companies put a lot of thought into their electronic business strategies and learning about the Net, while their U.S. counterparts rushed to launch dot-coms, said Drobik” (Evers, 2001).
- One of the most important reasons for going online is competition. Every company wants to start its own online business before its competitor would do that
- It has been estimated that the process of sending employees to other countries, i.e. the expatriation process costs almost two and a half times more to the companies than to hire the local employees for the company. It has also been said that this process could cost $ 250,000 in some cases (Line). Due to the financial issues, the lack of knowledge of the employees, culture differences, isolation of employees to their families, language barrier etc. the expatriation process has a high failure rate. E-Commerce helps the company to become global without sending their employees to other countries and hence saved their millions of dollars
· Such companies which have already implemented their E-Commerce business have much higher value than the local companies
Effect of Internet on Financial Services:
The advent of Internet, like all other things, affected financial market also. Internet is capable of performing financial transactions where money is (usually) exchanged electronically for goods or services bought and sold (Elderbrock, 1996). But it is not easy to find good companies to invest in here; it is even difficult to identify superior and sustainable technology or products. Hence, about all the investors have to fall back on is trying to identify good management.
With the Internet growing so quickly, companies found it impossible to develop market share and presence fast enough themselves, so strategic alliances became the order of the day. By the passage of time, the pace of these new alliances becomes particularly frenetic.
Although E-Commerce and Internet have affected the whole world, but it is also true that there is no standardized infrastructure of ICT for the whole world. Some of the countries, especially the developing and the under developed countries do not have a proper infrastructure of computers and their communication through telecommunication.
Most of the financial websites are based on United States of America and thus grab a lot of foreign exchange in the form of revenue for their country. According to Mady Jalinous, Chairman of a web-based import-export firm,
“A company can improve its revenues just as much, and often more quickly, by finding and organizing its supply chain around the best partners and products as by opening up new markets. Access to the world's vendors brings an opportunity to do that” (Hapgood, 1997).
According to the characteristics of wonderful business, given by different Economists and financial experts:
· They have a good return on capital
· They are understandable
· They see their profits in cash
· Their earnings are predictable
It is probably safe to assume that there are few Internet stocks lurking in this portfolio.
This illustrates the difference between what might be called company investors and stock investors. The company investors analyze a company in depth, take a long-term view, and are relatively unperturbed by short-term share price fluctuation. On the other hand, stock investors play the market, and try to judge what the share price will do. One of the commonest causes for confusion is when somebody thinks they are a company investor, but acts like a stock investor.
It is unlikely that company investors would find anything interesting in the Internet. For the stock Investors, the Internet offers challenging volatility, and ample scope for discussion on support / resistance levels and notions of stock value.
As Internet provides a global access and opportunity to do business on it, it is much more efficient, and easy to use for international investors. Internet provides the opportunity to access global markets while working in the comfort of your home, that is why more and more investors start shifting their interest towards online investments.
Steve Putnam, President of Robert Thomas, an online Brokers company, said,
“With an Internet solution our nationwide network of independent Financial Advisors save hundreds of dollars in communications costs per month and are enjoying new mobility, Quotron over the Internet from Reuters allows us to offer the technical flexibility and openness we require, combining the reliable real-time data with Reuters global news services in a way that satisfies our Financial Advisors” (Robert Thomas Brokers, 1997).
Vice President of Strategic Marketing for Reuter America Inc. John Bunyan said,
“Our Robert Thomas initiative clearly demonstrates Reuters commitment and ability to work with clients to develop creative data solutions that meet their requirements. This is more than another 'limited' Internet service. We are delivering our full, professional level Quotron services, including dynamic update. This is another example of Reuters continuing development of information solutions that exploit Internet technology”.
Bureau of Public Debt of United States always encourage financial institutions to use Internet technology for selling saving bonds. It will help United States government to enhance their sale of Saving Bonds. Commissioner of Public Debt, Richard, L. Gregg said,
“We want to make it easier for customers to purchase U.S. savings bonds, and it seemed natural to sell them through home banking channels” (Bureau of Public Debt, 1997).
Given the extra volatility of Internet Stocks, and the frequently esoteric nature of the underlying business, investors may prefer to invest in a fund. This may also open up the opportunity to invest in venture capital projects.
Due to the problems of identifying good Internet related stocks with sustainable earnings and the volatility in the sector, it may be more interesting to look at arbitrage opportunities that may occur.
One could study the behaviors of the indices and analyze how often they are updated. The world is changing so quickly that the differences in updating between two indices could offer an opportunity.
Barriers for Using Internet for marketing of financial services:
Although we are living in an information society but it is equally true that only a part of the world has access to all its facilities. For example Internet is the best source of sharing information but there were digital, cultural and content gap between different parts of the world. Hence to use Internet for either E-Commerce or for marketing of financial services, following barriers have to be overcome.
The digital gap is most evident at the phase of connectivity; the lack of affordable access to PCs, Internet devices, modems, telephone lines, and Internet Connections. Steps to reduce this gap include devising cheaper access devices, creating Internet community access centers and bringing down access prices by creating a favorable climate of competition among Internet Service Providers.
It has been estimated that there are more phones in the New York alone than the whole rural area of Africa and almost 80% of the world population has never made a phone call (World Bank 1998). It has also estimated that there are more Internet Connections in London alone than the whole Africa
The developed countries, whose population comprises only 15% of world population, has almost 88% of Internet users (United Nations, 1997)
It has also been estimated that only 1% of the Internet users live in Africa and, if we exclude South Africa then the number of Internet users is less than 100,000 in whole Africa, which is only .02% of the global Internet content (Africa)
Developing countries share of Internet users is less than 5% etc. The reason for such low usage of Information and Communication Technology in developing countries is the cost of Internet. In Africa, the average cost of using Internet for 5 hours only is approximately $50 per month. Most of the developing countries have not enough per capita income to cover the expenses of the usage of Information and Communication Technology and that is the main reason why the growth of Internet users is so slow in developing countries (World Bank, 1998).
There is a huge content gap between developed and developing countries. According to the International Telecommunication Union, there were more Internet hosts in Finland than in all of Latin America and the Caribbean in 1999, there were more hosts in New York than in all of Africa, and more than 80% of web pages were in English (InternetWeek, 1998).
Culture represents probably the biggest challenge in closing the digital gap. It involves overcoming cultural inhibitions and insecurities about developing competence for surveying the breakneck speed of the Internet age. Closing the Internet gap includes getting governments in developing countries to stop treating their telecom monopolies like cash cow and instead, getting government telecom players to invest in areas like research and development on Internet telephony, so that the technology is seen as a market opportunity on a global scale and not a threat on a local scale. It also includes getting career-track diplomats, bureaucrats, academics and public sector employees to take up Internet training and harness the opportunities as well as the plentiful challenges that accompany Internet diffusion. Closing the cultural gap entails the creation of a risk taking culture, in which accepting some initial failures should not be treated as sign of weakness or a loss of face.
Security is one of the most important concerns of using Internet for marketing of financial services. If an organization want to make its website secure, it has to provide the following securities:
· Physical Security
· Authentication and non repudiation
· Software security (Kary, 2002).
The physical security is actually the safeguarding of organization’s computers from hackers and viruses. For viruses the company can use anti-virus software and for hackers Firewall will be the answer.
The authentication and non-repudiation are actually the security checks for the integrity and privacy of the user. To ensure the privacy and authenticity the technologies of encryption and digital signature are used.
A major threat to the security of the software is to make it difficult to access the desired software. Software, especially the operating systems are easy to delete. It is also possible to infect the software in such a manner that it becomes useless for the users, or to modify it so it behaves in a peculiar manner.
Password protection is also one of the major techniques to provide the defense against intruders. Passwords help to determine the authenticity of the user logging into the system.
In the conclusion, it can be said that marketing on Internet for financial services has many benefits; it provides the opportunity of being global to the organization. It also helps the organization to reach such markets, which it has never thought of reaching before. It helps the organization to run its business 24 hours a day and 7 days a week without any extra cost of employees etc.
Although Internet marketing have many benefits but it has some barriers also. The most important for an E-Commerce website is to maintain the privacy of their customers and the security of their data and transaction. There are many techniques available to secure the website but still the customers are hesitant to shop online.
Apart from security breaches there are huge digital, cultural and content gaps between developed and undeveloped nations of the world. But still we are hopeful that Internet marketing has such enormous benefits that these barriers can be overcome.