Business to Business Banks Simon Yan Gao Anand Kadekuzhi Raghu Kakumanu Dinesh Kini Jason Knight.
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Presentation on theme: "Business to Business Banks Simon Yan Gao Anand Kadekuzhi Raghu Kakumanu Dinesh Kini Jason Knight."— Presentation transcript:
Business to Business Banks Simon Yan Gao Anand Kadekuzhi Raghu Kakumanu Dinesh Kini Jason Knight
Industry Overview – B2B Market Source : Keenan Vision YearB2B TransactionsTotal Web Sales 199830 billion50 billion 199960 billion80 billion 2000100 billion190 billion 2001220 billion330 billion 2002420 billion590 billion "The first thing is character... before money or anything else. A man I do not trust could not get money from me on all the bonds in Christendom.“ - J.P. Morgan “B2B E-commerce sales are projected to rise to $7.4 trillion by the year 2004.” - Gartner Group
Industry Overview YearNumber% of Market 199812006 1999840042 20001200061.3 200115,84575 Number of Banks and Credit Unions Offering Online Services Of ~100,000 banks in the US, under 10 per cent presently provide online services
Major Players Established Banks providing personal and business services –Wells Fargo –Citicorp –Chase –Bank of America –Bank One Pure Online Banks (no physical presence) –B2Banc.com
Established Bank vs Online Bank Personal Small Business Corporate Services Limited Services
Customers Small Business Banking –For businesses with sales up to $10 million –Business Checking, Business Savings and CDs –Credit Services –Internet Services Commercial Banking –For businesses with sales of $10 - $50 million –No special services offered over the Web Corporate Banking –For businesses with sales of $500 million or more Source: Bank of AmericaBank of America
Established Banks -Attracting Customers Small businesses –Existing relationships –Brand name –Online access to information about banking services –Financial incentives Large businesses –Existing relationships and brand name
New Online Banks -Attracting Customers Small businesses –Television advertising –Partnerships with portals such as Yahoo to sponsor services –Agreements with computer manufacturers to offer direct links to bank sites –Free internet access for becoming a bank member Large businesses –Difficult without established brand name and existing relationships Small BusinessesLarge Businesses Established BanksHigh potentialVery high potential New Online BanksPotential existsVery low potential
Value added services Established Banks –Investment Banking –Cash Management and Treasury Services –Trust Services –Online credit history on customer’s clients –Online loan advisor –Bank websites mainly offer information about services Hard to say if these services are offered online as customers need to login to access these services It appears with most banks that customers need to contact banks offline to avail the above services Online-only Banks –Online checking accounts, payroll service, and other banking services –Corporate affinity programs – online services for employees of businesses
Chase – Corporate Services Special Services Partnerships Value Added Services
Strategies for the future Detailed credit information on customer’s debtors –Prior payment history –Detailed info on each debtor Catering to Emerging technologies –Open Buying on the Internet (OBI) Online payroll payment services and tax payment systems Online auctions for financial items, e.g CDs Partnerships with other B2B websites (e.g Chase Bank with Tradeout.com for excess inventory)
Sample of an online CD (Certificate of Deposit) auction Online Business Marketplace
OBI Purchasing Process Requisitioner Buying Organization Selling Organization Payment Authority Profile Information, OBI Order Completion Catalog Browse, Buy, Order Status Query Invoice Payment, Validation OBI Order Requests, OBI Orders Banks 1 äRequisitioner äAn individual with a need for a product or äservice, who browses the Selling Organization ä catalogs, generates order requests, and äqueries order status äBuying Organization äOrganizations that have infrastructure to manage ä the acquisition of goods and services including ä the creation and approval of purchase orders 2 äSelling Organization äHas an electronic product and services catalog and some form of electronic äordering capability 3 äPayment Authority äAn entity that authorizes payment transactions, äissues invoices and receives payment 4 Payment Authorization, Clearance
More Strategies for the Future Keep things simple: –In a recent survey, 88% of respondents stated that they aborted online banking because of the complexities involved – PSI Global Offer links and partnerships with other financial sites for stock quotes, etc. Help small and mid-sized banks open stores on the Internet at low cost –Banks have great experience with secure transactions –Integrate bank financial systems for online payment and deposits early on.
Points to Ponder Can a new player enter the online banking arena as a B2B Bank without having a physical presence? Should the new online only banks offer services in the B2B domain? How can a new online player compete with existing banks for large businesses without pre-existing relationships and brand names?
Policy Concerns for the Future Banking in the US is highly regulated –Despite recent deregulation, banks still have difficulty in doing business in more than one state –Foreign banks face restrictions in entering US market Liability for security breakdowns is extremely high for banks –Assuming such a risk may be uneconomical A high degree of trust and reliability must be replicated online for a bank to succeed