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NOVEMBER 2001 Contents
Page 3 of 6
Security and Trust in Internet Banking
INTERNET age appears 1995 –2000:
The Internet offers the Banking industry a global inexpensive delivery mechanism for both the Retail /Consumer market as well as the Corporate market.
There are two major technologies for the Retail and the Corporate that are emerging as industry standard . Wireless banking and Internet banking are both based on Public Key Infrastructure technology architecture to solve the very important problem of Security .
The target Internet market is according to IDG " the Industry Standard" :in millions
2001 2002 2003 2004
Western Europe 28 38 48 58
United States 15 17 20 22
Japan 6 12 19 21
Asia –Pacific 4 6 9 13
Rest 2 3 5 6
Total 55 76 101 120
2001: European Joint Ventures of Telecoms & Banks :
After the Boom cycle of the 1990-2000, the leading global economies have entered a period of consolidation. One common feature is the merger and acquisition phase as big business starts to consolidate. Travellers Insurance merges with Citicorp Bank, Hewlett Packard merges with Compaq , Daimler Benz with Chrysler, etc.
Telecoms & Banking : An arranged Marriage or Love at First Sight .
Telecoms and Banking present an interesting fit of business processes. Customer relationship in telecoms are similar to customer relations in banking
1. Telecom customers bill payment at the end of the month , which translates into essentially Banking credit management.
Similarly Telecom Prepaid phone services are equivalent to a Bank savings accounts.
2. Banks provide the ready-made billing systems accounting that Telecoms require. Thus this is a natural business fit between Telecoms & Banking .
3. Telecom companies provide ready made networks and especially wireless networks, Wireless networks provide the cell phone which is becoming an item that is part of a person when going out in the city or countryside . The cell phone is the ideal medium to carry out consumer transactions and may replace the credit card.
4. The nature of the Telecom expensive infrastructure build out cost & high cost of Air Frequency Licenses paid to the Governments is leading to the merger & joint ventures between Banks & Telecoms Network companies.
See the examples below for Telecoms & Banks Joint Ventures.
Country : Bank & Telecom Company Venture
USA : Capital One & Sprint PCS .
Germany Deutsche Bank & Mannessman Subsidiary
MobilCom & LBBW 50/50%
Commerz Bank & Deutsche Telecom 50/50%
Nederland Royal KPN & ABN Amro.
Italy Banco di Roma & Telecom Italia [ Mobile ] 85/15 %
Norway Der Norske Bank & Telenor Alliance
Finland Sonera & Various Banks 50/50%
Spain Banco Bilboa Vizcaya [ BBVA] & Telefonica Moviles 50/50%
Japan Sanwa Bank & NTT DoCoMo [ mobile] 5% share
Love at First Sight : an example :
In Spain Movilpago expects to acquire 100 million customers and 5 million merchants in 30 countries in three years, a penetration that took the credit card associations and American Express decades to achieve.
The Potential & Motivation for Wireless and Internet Banking
-- Micro Payments [ Car wash , Gas Pump & vending machine purchases ]
-- Bill Payments [ electricity , phone , etc ]
Motivation - Cost Reduction, Profit , Market Share
The basic idea is to Push out to the customer, the In-House Banking Processing Costs.
Example – Preparing Letters of Credit, Letters of Guarantee, Drafts, Money Transfers.
Example : Cost of Circulating & Processing one single Hard Copy Expense Report is $ 36 .
Cost drops to $ 4 with use of electronic signatures.
Consider ATMs as a forerunner application.
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