History has long acknowledged that the "Ides
of March" can be a significant time in life and in business
affairs. Depending upon ones perspective, it can be foreboding
or foretelling. Consider the following events that transpired during
the week of March 15, 1999:
- Fleet Financial announced its plans to acquire
New England rival BankBoston Corp.
- Steve Forbes announced his intentions to run for
U.S. President in the Year 2000 election.
- Several hundreds of bankers gathered in Atlanta
at the Consumer Bankers Associations annual Auto Finance
- In its cover story, Business Week magazine
announced a new quarterly supplement aimed at CEOs for the new
What did these four seemingly disparate events have
in common? Two words: The Internet. From something that seemed
so out of the mainstream of our daily lives just five years ago,
the Internet has rapidly transformed so many aspects of the world
around us that it is mind-boggling. The Internet has already altered
how things are done in Washington, on Wall Street, in corporate
boardrooms, at our desks at work, and in our own homes. Lets
look beneath the surface of the four events highlighted above.
Internet Banking and Internet Brokerage will be the
top priority for Fleet Boston Corp., the entity to be formed by
the proposed $16 billion merger of the Fleet Financial Group and
BankBoston. "We intend to build our electronic banking and
brokerage services to become one of the worlds premier financial
services companies," said Robert Higgins, Fleets president
and chief operating officer, who would manage the merged $180 billion-asset
Steve Forbes not only launched his Presidential candidacy
over the Internet, but he also pledged that his campaign would be
run entirely over the Internet. Here is one of the wealthiest men
in America realizing the power, the reach, and the economic efficiencies
of this medium to reach millions of people. Forbes is adapting traditional
political campaign strategies to meet the voting population where
they are becoming more and more likely to be reached, and that is
in an online cyber-world that transcends barriers of time and of
The growing role that the World Wide Web is playing
in auto purchases was the prime topic of the Auto Finance Conference
of the Consumer Bankers Association. "Banks are facing a tectonic
plate shift because of the changing challenges in the distribution
of cars and financing through the Internet," said Joe Belew,
the trade groups president. Consumers now arrive in showrooms
armed with a wealth of information gleaned from hours spent surfing
the Net. Some banks and dealers today offer loans over the Internet,
leading many to worry that the time might not be too far off when
consumers will be able to find the cheapest loan rates in the nation
at the click of a mouse. Local lenders will be disintermediated
from their traditional roles in the highly profitable world of consumer
finance. Competition will no longer be coming from the bank down
the street or even from GMAC or from Ford Motor Credit, but will
emanate from some virtual entity representing a pool of funds looking
for investment opportunities within a variety of communities spread
across the globe.
And finally, Business Weeks cover story touted
"E-Business: What Every CEO Needs To Know." "Electronic
business is perhaps the most sweeping transformation of the corporate
landscape in decades," wrote Kathy Rebello, Managing Editor
of Business Weeks e.biz. "Whether it means hanging a
shingle out on the Web or reshaping every nook and cranny of a company
to tap into the power of the Internet, the E-business revolution
is upon us. And little will stay the same."
As these events above indicate, the Internet industry
as a whole has been moving at break-neck speed, with rapid development
and deployment of products for the World Wide Web as more end-users
become wired everyday. And with the increasing use of the Web for
a variety of Electronic Commerce purposes has come an increasing
demand for Internet Banking Solutions from Financial Institutions.
This Business Case will explore the role that BellSouth can play
as an Internet Banking Solutions provider for its many Financial
Before looking at Internet Banking explicitly, it
will be useful to understand the fundamental components that comprise
many customer-supplier transactional activities. As Figure 1.1 below
illustrates, the interaction between a customer and a supplier can
be broken into four distinct parts: the End-User Communications
Device, the Information Transport Medium, a Specialty Business Transaction/Application
Platform, and a Warehouse of Business Data.
The business model illustrated in Figure 1.1 can apply
to a consumer getting information on his bank accounts over a telephone
or a PC, a physician listening to lab reports or viewing CT-scan
images, a student registering for courses at a university, a business
person taking a Distance Learning or Continuing Education class
for professional development, or someone simply ordering merchandise
from a paper or an electronic catalog. When broken down into its
constituent parts, it becomes easier to understand how all of these
various activities are very much alike and how BellSouth can help
facilitate these transactions.
In certain circumstances, BellSouth is involved in
the deployment of the Communications Devices. BellSouths traditional
role has been as the provider the Information Transport Medium,
one that is evolving to include digital information over the Internet.
More and more, business customers are looking to BellSouth for the
Specialty Business Transaction/Application Platform and several
of these types of solutions are already in our portfolio. While
generally the purview of the business customer, there is even a
role that BellSouth can play in the development and management of
a Business Data Warehouse since we do exactly that for ourselves.
Customer-Supplier Interaction Diagram
No one would ever question whether having a consumer
use a telephone to dial-up his bank and listen to a computer tell
him his bank balances is a far-fetched idea. In fact, BellSouth
has helped hundreds of Financial Institutions deliver Interactive
Voice Response (IVR) services to do just that. Stripped of its mystique,
Internet Banking is no more than Visual IVR Banking! It is the same
basic bank account information delivered graphically instead of
verbally, using a PC instead of a telephone, transported digitally
over the same phone lines that exchange words in a more traditional
analog communication. In fact, the same technology platform that
BellSouth uses to facilitate IVR installations for its Clients is
also the foundation for delivering Internet Banking services.
With this business model as a backdrop and as a supplement
to other BellSouth Electronic Commerce strategies, this Business
Case will explain the opportunities that await BellSouth in providing
Internet Banking Solutions and Online Financial Services to its
Financial Institution Clients.
Some of the highlights of this Business Case are:
- There are almost 4,000 Financial Institutions
within the BellSouth nine-state territory, and over 95%
of them have yet to pick an Internet Banking Solution Provider.
- Expenditures on Internet Banking Services
are expected to grow from around $100 million in 1998 to
an aggregate of almost $1 billion by 2002 as more and more
Financial Institutions deploy Internet Banking Solutions.
- Internet Banking is forecasted to be one
of the hottest retail banking initiatives as banks solve
their Y2K issues since Financial Institutions have many
motivating factors pushing them in this direction, both
for internal efficiencies and from external competition.
- Households using Internet Banking and other
Online Financial Services are anticipated to grow from 10
million to over 30 million in the next 3 years.
- Consumer Internet Banking is the lynch pin
that ties a Financial Institution to its Internet Banking
Solution provider for other additional lucrative Online
Financial Service add-ons.
- The biggest opportunity for BellSouth lies
in operating an Internet Banking Service Bureau for Community
Banks, the largest segment of our Financial Institution
Clients. We have conservatively identified an initial target
market of almost 800 Financial Institutions for this BellSouth
Internet Banking Solution.
- All the individual piece parts and expertise
to offer an outstanding Internet Banking Solution already
exist within various BellSouth organizational units.
- BellSouth can accrue some internal economic
benefits and generate new revenues by using the foundation
of Internet Banking to offer Electronic Bill Presentment
services to its own customers as well as to those of other
utilities, all on behalf of our Financial Institution Clients.
- With a market share of about 15% of the identified
target market, BellSouth Internet Banking should generate
new revenues totaling almost $50 million over 5 years and
cumulative net income of almost $5 million over the same
- Increasing BellSouths market share
penetration to the 35% range will generate new revenues
in excess of $140 million over 5 years with the corresponding
net income contribution totaling almost $15 million.
These conclusions are explained in great detail in
the remaining sections of this Business Case. As Victor Hugo said
over a century ago, "There is one thing that is stronger than
all of the armies in the world, and that is an idea whose time has
come." The Financial Services Group of BellSouth Business Industry
Marketing believes strongly that the time for BellSouth to become
a serious Internet Banking Solutions provider has indeed come.