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 e-marketplace offering multibank dealing systems to customers, has encouraged banks to create their own emarketplaces. FxAll and Atriax, two of the first forex e-marketplaces 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.
The Impact of Internet Technologies on the Forex Market (IDC #MB22H) shows how banks` activities in the forex market are changing as a result of the adoption of Internet technologies. The bulletin also highlights other opportunities offered by e-business in the financial sector and is available for purchase from your local IDC office.
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