Research house BMI-TechKnowledge says online financial services have failed to meet expectations in SA.
The finding is contained in the research house`s latest "SA e-Financial Services Market Report", which says the Internet has not resulted in promised cost savings or revenue growth in most instances.
Andreas Bertoldi, co-author of the report, points out that 2001 saw the first major casualties and continued consolidation in the local e-financial services market. Significant closures included MyLife.com and FundsNet, while other ventures such as Bluebean.com have undergone significant restructuring and refocusing.
On the online share trading front, 2001 saw the exit of e*Trade, and 2002 saw the proposed merger/acquisition of Tradek by PSG Internet Services and Appleton. The online unit trust industry fared little better than online share trading, says the report, with few private investors and even fewer regular transactions. The closure of Old Mutual`s FundsNet leaves Equinox.co.za as the only pure-play online unit trust "supermarket".
"By far the most contentious issues ruling the e-financial services space have been the creation of 20Twenty, the free Internet access offering from Absa, and the bidding war for Tradek," says Bertoldi. In 2001 online banking saw the successful launch of icanonline, signalling ISP M-Web`s entry into the financial services market, and 20Twenty, the first Internet pure-play bank in SA.
BMI believes 2002 could see the entry of newer non-traditional financial services players, such as retailers, into the online market.
Despite the online financial services casualties, the financial industry is still making significant investments in its online initiatives. Bertoldi says competitive pressures will continue to demand major investments in technology from financial services players.
"The key challenge in the near future will be back-end IT integration and consolidation with the aim of delivering a unified IT infrastructure that integrates the multiple channels," he says.
Bertoldi says it is important to note that the Internet channel is just part of a multi-channel approach that will include traditional branch structure, mobile and telephone banking and services and ATMs, as well as emerging hybrid branch-like Internet kiosks. BMI end-user research indicates that consumers are increasingly spreading their financial services activities across the channels, rather than consolidating on one or two channels.
BMI states that the overall growth of the e-financial services market is still healthy, growing at 35% in 2001, with an estimated 730 000 subscribers and 520 000 unique e-financial services users online at the end of 2001. The forecasted compound annual growth rate (CAGR) for the next five years is 20%. A total of R798 million in transaction fees was generated from electronic banking in 2001, which is estimated to grow at a CAGR of 19% to R1.9 billion by 2006.
"Key obstacles to continued growth from a B2C [business-to-consumer] perspective will be Internet user growth, the continued need by end-users for personal interaction, and security and privacy concerns.
"In the B2B [business-to-business] space, fears of non-intermediation will hamper the growth of niche areas (such as share trading and unit trusts), while overall slow e-business adoption will hamper the growth of newer services such as e-procurement," concludes Bertoldi.
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