Growth of E-Finance in the Financial Services Industry - Essay Example

E-FINANCE By Name Course Instructor Institution City/State Date A Critical Overview of the Growth of E-Finance in the Financial Services Industry over the Last 10 Years Introduction Financial services industries across the globe have been experiencing swift changes promoted by technological advances as well as globalization. This includes the surfacing of electronic finance in addition to bringing about a rise in the significance of networks in the creation and supply of financial services (Claessens et al., 2002, p.31). Notably, systems for banking are merging in scores of markets while banks are broadening their availability across countries. Furthermore, financial corporations are growing in value while the novel financial services suppliers are up-and-coming, which includes businesses that permit their clients to evaluate financial services more effortlessly with regard to quality and price, as well as online-only brokerages and banks. E-finance is booming and nonfinancial bodies together with utility and telecommunication corporations as well as supermarket chains are coming into financial services markets (Curran & Orr, 2011, p.273). Besides, trading systems for foreign exchange, fixed income, as well as equities in asset markets, are merging worldwide and moving toward e-finance. Owing to these transitions, financial services are turning out to be less unique, and this makes policies to conserve the grant value of fiscal organizations less essential whereas it makes the competition policy application more viable. In addition, financial services profoundly and more progressively rely on networks for their creation and supply, which as a result, makes policy for competition more essential. Such advancements prove that the financial services industries’ competition policy model will have to be re-examined and will more and more demand to be like that utilized in other network industries. Financial services industry before e-finance Before 1970s, the financial services industry entailed hardly any definite and disconnected industries that handled the money: those few that were present included brokerage houses, banks as well credit card companies (Lingfen et al., 2010, p.100). In early 1970s, the banks’ profitability declined tremendously owing to the federal policy that limited banks from providing wide range of products, like stocks, mutual funds, and insurance, which their competitors who were less stringently controlled provided. Evidently, the convergence of organizations rendering financial services had clouded the conventional limits that on one occasion alienated insurance companies, brokerages, and banks. According to Ziyuan (2014), this trend has at the moment turned out to be global, and therefore, the financial services convergence has generated a new-fangled class of financial supplier. Claessens et al. (2002, p.31) posit that these financial services corporations endeavor to offer their clients with a enormous collection of structured financial services. Ever since 1970s, credit cards use has stretched out from occasional enormous purchases to contain such day after day purchases like telephone calls, fast food, and groceries. Owing to less strict underwriting principle at key credit card organizations, Shulan (2014) believe that credit cards are as well more simply accessible than ever before. Statistically, 56% of families in US had no less than one general utilization of credit card like Visa and MasterCard in 1989, but one decade afterwards the number rose to 67.5 % (Curran & Orr, 2011, p.277). Towards the 21st century, Credit card companies started targeted novel groups such as students on university campuses as well as collages, and as a result, it led to easier credit access. What’s more, technology allowed novel and frequently nonconventional competition to penetrate the conventional suppliers’ market space. In return, scores of companies offering financial services are at present deploying novel technologies such as E-finance to brace an integrated artifact approach, gambling that their clients will discover convenience and value in receiving all their financial services from one organisation. Financial services industry after e-finance Even though there have been a number of cutbacks in the technology industry, Lingfen et al. (2010, p.102) holds the view that technology has continued to change financial services the creation as well as distribution. Whether distributed online or by means of other remote means, E-financial services have lately diffused rapidly. Just like any novel trend, information on e-finance is difficult to gather and even more difficult to contrast across services as well as countries, but there is confirmation in e-finance convergence across boundaries. In spite of institutional drawbacks (like feebler telecommunications infrastructure) and more inauspicious supply and demand factors, Empson (2012) is of the view that Internet-established services such as e-finance are at times as trendy in up-and-coming markets as in developed economies or even more well-liked; For instance, e-banking is almost as prevalent in Brazil as in the United Kingdom. These findings according to Empson (2012), advocate that across the world, e-finance is reasonably simple to introduce and also for users to understand. Additionally, in nations with feeble financial services such as developing countries in Africa, clients may have a well-built enticement to shift to e-finance suppliers. Even though, banking services are still inadequate in such economies, e-finance provides a chance to widen access. Even if online-only banking has been somewhat productive than was expected, with a number of online-only financial institutions running into complexities, Empson (2012) assert that current financial institutions are beginning to offer e-finance. New entrants’ threats have compelled scores of financial institutions to offer electronic finance, which ranges from basic to completely incorporated Internet services. Ke et al., 2011 (p.261) posit that speed as well as other aspects affecting this change differ with organisation state of affairs and size, but outstandingly this development has lately accelerated in the United States and Europe. Therefore clients of current financial institutions in other global markets might also almost immediately shift to electronic finance. Evidently, electronic finance has made the utmost usurpations in securities markets, particularly on the side of retail, where trading through internet has rapidly seized big market shares. For instance, almost 30% of brokerage services are at the moment offered online, mostly in developed economies like UK and US, plus the shares are as well towering in a number of developing markets (Ziyuan, 2014). Benefits and growth of e-finance As highlighted, e-finance has rapidly spread out in scores of global markets and has vast potential. According to Claessens et al. (2002, p.32) the Internet along with interconnected technologies are above just new-fangled delivery channels they are a totally innovative means of offering financial services. Electronic finance is as well noticeably transforming the markets’ nature and structure for financial services. Besides, novel service providers are penetrating the market across and within boundaries, which includes the purported aggregators, brokerages, and online banks. Non-beneficial organizations are as well penetrating the market, together with utility and Telecommunication corporations that provide imbursement as well as other services by means of their customer relationships as well as delivery networks. Ke et al. (2011, p.258) posit that to harvest the latest technology benefits, and in reaction to this latest trend, financial institutions such as insurance companies and banks, and the rest are beginning to make use of e-finance. As a result, financial service industries are deviating from brick and mortar distribution channels to a mass of electronic-based channels, with aggregators as well as portals providing latest delivery and broadcasting channels for financial services. Financial service organizations that are vertically integrated are rising hastily and generating synergies by integrating service production, delivery networks, as well as brand names. Such advancements according to Lingfen et al. (2010, p.102) are shifting the competitive setting for financial services industries plus will persist on eroding the financial service companies’ franchise value that are unproductive or fail to implement competitive business paradigms. Steered by communications technology developments, systems designed for trading are merging and becoming international. What’s more, trading is shifting in the direction of electronic domains, which is not attached to any setting. A lot of benefits are brought about by e-finance; for instance, e-finance has reduced the trading cost of transaction as well as authorizes for enhanced price determination for the reason that electronic matching along with execution methods, which indicate less possibility of market exploitation. Unlike the traditional way of transacting, e-finance is hasty and so saves much time because all needed is a computer that is connected with internet (Curran & Orr, 2011, p.278). Disadvantages to e-finance According to Ziyuan (2014), every technology comes wih its drawbacks and so e-finanace is not an exceptional. Security is one of the leading drawbacks of e-finance, and with the commonness of Trojans, phishing emails, keyloggers as well as other online-based threats, it is normal for users to be worried about the security of their electronic financial transactions, funds as well as identity. Making use of antivirus and comparable programs is not safe enough, and for this reason some potential customers may prefer the conventional financial services rather than e-finance for the fear that their financial details can be hacked as well as accessed devoid of their knowledge. Effects of e-finance At the moment financial services are offered by means of several of distribution channels: from conventional brick-and-mortar delivery channels to wireless mechanisms. A number of phases can be differentiated in the creation and delivery of financial services, although practically these phases frequently extend beyond or are vertically incorporated. Besides that, Access devices (instead of a branch or teller) are turning out to be first contact point with financial services; thus, is attracting more and more customers (Empson, 2012). Such devices according to Ziyuan (2014) consist of PC, PDAs (like Palm Pilots), TVs furnished with Internet access, mobile handsets, and other devices that support wireless communication. Empson (2012) believe that these channels will in the future be harmonized by inexpensive kiosks, branches, other social access devices, common areas such as train stations and airports, and convenience stores. Importantly, portals (e-finance tool) are turning out to be the significant connection point between financial service industries and access devices. According to Curran and Orr (2011, p.281) portals provide admission to an array of financial service companies, mostly at a fixed cost or for free, but produce income from amount paid by companies referred by means of the portal. Such entail particularized portals created by financial service industries and wide-ranging portals like Microsoft and yahoo together with others in up-and-coming markets. Furthermore, through portals, companies that have embraced e-finance try to personalize as well as process information to retain consumers. The hasty approval of electronic finance in securities markets to a certain extent imitates the technology-steered temperament of such markets plus the easiness with which clients can change brokers. Furthermore, the stumpy fees of bringing in integrated as well as standalone brokerage services have enhanced the rapid expansion across the globe. According to Empson (2012), the rapid expansion as well affirms that that the e-brokerage technology is simple to set up and promote to customers. Regulations Regarding to E-finance Governments both in developed and developing economies control and monitor the financial industry for reasons of antitrust and competitiveness concerns, security and reliability, as well as consumer security. Ke et al., 2011 (p.260) affirm that the recent alterations in financial services industry raise crucial questions concerning whether the existing mechanisms to regulations in financial industry is sufficient, whether conventional basis for supervision and regulation stay legitimate, and what fields (customer security or competition policy) require heightened emphasis. In this regard, the 1998, E-commerce Regulations, which was enacted in 2002, are first and foremost proposed to make sure that internet-based businesses such as e-finance are lawfully enforceable and binding all over Europe. Noticeably, the privileges as well as duties of consumers and companies are at the moment grounded in this law to promote free movement of all electronic financial services across the European Economic Area (EEA). Another notable regulation regarding e-finance is the Distance Selling Regulations 2000, whose intention is protecting long distance clients. The regulation covers procurement made through internet as well as email. Summary When all's said and done, it is apparent that e-finance revolution is radically altering the financial services’ nature and structure across the globe. Basically, the e-finance effects are not restricted to developed economies, but as well to highly develop up-and-coming markets. By now, economies with undersized financial systems are making use of e-finance to leapfrog in a number of areas. References Claessens, S., Glaessner, T. & Klingebiel, D., 2002. Electronic Finance: Reshaping the Financial Landscape around the World. Journal of Financial Services Research, vol. 22, no. 1-2, pp.29-61. Curran, K. & Orr, J., 2011. Integrating geolocation into electronic finance applications for additional security. International Journal of Electronic Finance, vol. 5, no. 3, pp.272-85. Empson, R., 2012. Validity Sensors Raising $20M From Qualcomm, TeleSoft To Bring Fingerprint Security To Mobile Payments. [Online] Available at: HYPERLINK "http://techcrunch.com/2012/10/18/validity-sensors-raising-20m-from-qualcomm-telesoft-to-bring-fingerprint-security-to-mobile-payments/" http://techcrunch.com/2012/10/18/validity-sensors-raising-20m-from-qualcomm-telesoft-to-bring-fingerprint-security-to-mobile-payments/ [Accessed 25 February 2014]. Ke, K., Fan, Z., She, Z.-Y. & Huo, Y.-F., 2011. Electronic finance and risk management in the supernetwork age. Journal of University of Shanghai for Science and Technology/Shanghai Ligong Daxue Xuebao, vol. 33, no. 3, pp.258-63. Lingfen, C., Woods, D., Curran, K. & Doherty, J., 2010. Mobile development environments for electronic finance. International Journal of Electronic Finance, vol. 4, no. 2, pp.99-119. Shulan, Z., 2014. E-finance getting popular in China. [Online] Available at: HYPERLINK "http://en.ce.cn/Insight/201402/23/t20140223_2355275.shtml" http://en.ce.cn/Insight/201402/23/t20140223_2355275.shtml [Accessed 25 February 2014]. Ziyuan, G., 2014. E-finance booming in China. [Online] Available at: HYPERLINK "http://en.ce.cn/Insight/201402/08/t20140208_2260365.shtml" http://en.ce.cn/Insight/201402/08/t20140208_2260365.shtml [Accessed 25 February 2014]. Read More