24). Some of the more salient issues affecting the financial services industry today are described further in Table ____ below. Table ____.

Examples of utilization of information technology in order to enhance efficiency and productivity by the financial services industry.

Area Impacted

Description of Impact

Credit card institutions store, retrieve, and analyze vast amounts of demographic customer information enabling them to more accurately target potential markets for new products and also identify less-attractive, credit-risk customers.

This allows them to reduce the amount of wasted resources in launching ineffective product campaigns and improperly estimated credit terms for high-risk customers.

Commercial and savings banks have continually promoted electronic banking services (paying bills online) and full-service automated teller machines, seeking to reduce the amount of fixed capital (size and number of branch buildings) and labor (less need for tellers) while expanding the scope of their banking operations.

Data warehouses with vast amounts of customer profile information along with data mining applications enable these institutions to devise new products that better accommodate the target market and, once again, identify and adjust for the presence of higher risk clients.

Investment banks have been able to take advantage of the global economy by expanding into emerging markets through the use of state-of-the-art information systems that more quickly and accurately clear security transactions.

These investment institutions then use data warehouses, query and report-writing software, and analytical information systems (IS) tools to more efficiently store global portfolios of securities, which allows them to estimate risk measures and, once again, identify higher risk counterparties in securities markets.

Brokerage firms have utilized it extensively by offering online trading and analytical tools for the customer, while booking systems enables them to facilitate a higher volume of market transactions.

Information technology has greatly transformed the brokerage business as automated trading systems have displaced labor. Automated trading has been prevalent on European futures exchanges for some time and has more recently proliferated into U.S. equities and foreign exchange markets.

Source: Diwan et al., 2002, p. 25.

According to these authors, "The trend in banking and finance has been the consolidation of organizations through merger and acquisition, forming such organizations as CitTravelers, JP Morgan-Chase, and Morgan Stanley-Dean Witter. Company leaders have continued to identify attractive synergies available from multifaceted organizations. The result has been great demand on it systems to facilitate data integration from diverse functional areas" (Diwan et al., 2002, p. 25).

Not surprisingly, then, many financial services companies today are in the awkward position of being required to reinvent themselves to remain competitive in an increasingly globalized and diversified environment. According to Divanna (2002), "The incumbent industry, banks, brokerages, insurance companies, fund management, and capital markets are now presented with a question: What is the value proposition for financial services organizations in the new connected business environment?" (p. 4). In fact, financial services companies are being confronted with an increasingly competitive marketplace wherein they must prioritize the management of customer relationships as a firm-wide imperative. For example, John (2003) reports that Dell Computer uses a "customer experience council" comprised of senior executives from each division or business line and major function that reports to a corporate vice chairman. According to this author, "The council oversees measurement of several aspects of customer behavior, including the effectiveness of its loyalty programs. Dell even measures all the costs its customers incur in purchasing and using their products, including such things as shopping, ordering, installing, operating, servicing, and disposing of products" (p. 160). Keeping track of these revenues and costs over the lifetime value of the customer allows companies to identify their brand-loyal customers and anticipate their future needs; these types of management practices will be able to deliver benefits to the heavy user to maximize their lifetime value (John, 2003).

The lifetime value of the customer must therefore be calculated for each individual customer; this assessment extends to revenues and costs over the lifetime of the customer's relationship with the company; the investment in acquiring and retaining a customer must be made based on the customer's lifetime value to the firm (John, 2003). Furthermore, an ongoing review of up-sell and cross-sell opportunities could increase the lifetime value of the customer because the potential customer equity from each segment or customer should serve to identify the extent of value-creating adjustments to be made in terms of delivery process or product outcome customization in terms of value or other benefits to the customer or in terms of adjusting the price and other costs to the customer (John, 2003).

Opportunities for Application and the Effective Management of the it Function.

The number of financial services companies and customers embracing Web-based technologies is growing at a faster rate than ever before and as estimated by Forrester Research the growth of e-business would increase three times between 2002 and 2004. According to Ghosh and Surjadjaja (2004), "E-business is a broad term used to express the conduct of business (buying and selling, servicing customers, and collaborating with partners)...

E-commerce mainly focuses on the buying and selling of physical goods/products that results in monetary exchange whereas e-service refers to delivery of services through the internet either paid or free" (p. 616). According to Muir and Douglas (2001), "E-commerce had been defined variously as, 'online commercial activity enabled by the Internet and World Wide Web,' and 'the use of the Internet for the exchange of information of value.' Two forms of e-commerce are identified: business-to-business (B2B) and self-selection purchasing or business-to-consumer (B2C) as it is more commonly known" (p. 176).
Today, such e-service operations are comprised of all customer centric activities beginning with pre-transaction activities, transaction and post transaction interactions all the way through the internet in delivering products/services within a service level agreement (Ghosh & Surjadjaja, 2004). These authors also note that by definition, it is implied that e-business, e-commerce and e-service are inextricably interrelated with each other's boundaries as illustrated through the Venn diagram shown in Figure ____ below.

Figure ____. E-Service Boundary Overlaps.

Source: Ghosh and Surjadjaja, 2004, p. 617.

A list of 20 determinants that were found to affect a customer's decision to use an e-commerce approach over another, traditional business form alternative are described in Table ____ below:

Table ____. A set of determinants illustrating differences and uniqueness between e-business and traditional business.

Determinant

Definition

Trusted service

Exact delivery of promised services

Responsiveness

Lead time, accuracy, and consistency of response

Site effectiveness and functionality

Effectiveness of web functions such as: help desk, search engine, FAQ (Frequently Asked

Questions) section

Customer service representative

Availability and helpfulness of a customer service representative

Fulfilment

Delivery of products/services on time and as specified

External communication

Building a positive image of a service provider towards the existing and potential customers

Interactivity

Web-enabled interaction between customers, between customer and a service provider, and customers' direct interaction with products/services

Up to date information

Keeping customers updated with latest information on products/services

Systems integration

Integration of operational systems within a company

Personalisation

One-to-one interaction, personalised services to individual customer

Navigability

Ease of finding products/services

Availability

24/7 access to web site and services

Convenience

Elimination of physical restrictions such as place and trading hours

Security

Safety provided by technology against fraud/hackers during online transaction

Return process

Return policies and procedures

Supply chain integration

Close relationships with business partners

Internal communication

Dissemination of information within a company

Customisation

Providing facility for customers to modify/adjust the system according to their specific requirements

Service recovery

Providing an alternative service to the satisfaction of the customer and/or redressing loss to customers in the event of a failure in the service process

Price

Competitive pricing of products/services

Source: Ghosh & Surjadjaja, 2004, p. 617.

These determinants can be further grouped into three main service processes as follows:

Service marketing;

Service design; and,

Service delivery (Ghosh & Surjadjaja, 2004).

For the purposes of their investigation, service marketing was considered to involve matching market needs and firm's resources ability. This component focuses primarily on determining the marketing mix of product/service features such as price, brand image, and accessibility of services. "In other words," the authors note, "marketing deals with the expected quality of products/services" (Ghosh & Surjadjaja, 2004, p. 619). For the purposes of the instant analysis, the marketing mix can be defined as "the blend of tools and techniques that marketers use to provide value for customers. It is most widely known as E. Jerome McCarthy's '4Ps': Place, Product, Price and Promotion" (Dennis & Harris, 2002, p. 221). The four components are described further in Table __ below.

Table ____.

The 4Ps of the Marketing Mix.

Component

Definition

Place

This refers to the routes organizations take to get the benefits of the product or service to the intended customers - channels of distribution

Product

This means both tangible product and also 'service' and all the ways in which an organization adds value to them.

Price

This term means not just the price charged, but also all aspects of pricing policy, including, for example, distributor margins.

Promotion

This component does not just refer to the more specialized 'sales promotion', but also every way in which a product is promoted to customers - from print advertising to Web sites.

Source: Dennis & Harris, 2002, p.…