NEW YORK -- E-commerce is not as prevalent in the money management industry as some might think, according to CWB, an information technology consulting firm.
CWB interviewed 103 senior information technology executives at institutional money management firms and investment banks in the United States and Europe to gauge the prevalence of e-commerce in their business strategies.
The survey confirms the perception that after converting to the euro and preparing for Y2K, banks and money managers "did not have much discretionary cash or energy," said Craig Birkelund, general manager in CWB's New York office.
He predicted the industry will begin a big push to e-commerce this year.
Almost half, 48%, of those in the survey said they do not engage in e-commerce. And 20% have no current plans to participate in e-commerce as a provider or user.
Overall, 50% of respondents said they believe it is necessary to use e-commerce initiatives to be an industry leader, while 20% said it's vital or essential to a company's survival.
Of the respondents already engaged in e-commerce, 54% said they had been involved for one year or less.
For the purposes of the survey, CWB defined e-commerce as any kind of electronic-based transaction where there is economic value associated with the transaction, said Alan Knights, principal consultant. The types of transactions with "economic value" may be as indirect as dissemination of market research or as direct as online trading, he said.
The survey showed firms in the United States are more open to using e-commerce than are European firms. According to CWB, a quarter of European firms view the use of e-commerce as an experiment, while 37% of U.S.-based firms said it is critical for survival.
"The U.S. technology community realized this would be a big part of business before the Europeans did," said Mr. Birkelund.
A total of 77% of the firms CWB interviewed were from London or elsewhere in Europe, while 23% of those surveyed were from the United States.
More than half of the European firms have been using e-commerce for less than a year, but have not been providing the same e-commerce access to their clients, the survey showed. American firms, on the other hand, have been acting as a provider of e-commerce activity as well as a user, the CWB survey concluded.
U.S. money managers and investment banks are ahead of Europe in all types of e-commerce. A total of 69% of U.S. firms and 19% of European firms provide market data electronically; 100% in the U.S. and 50% in Europe provide fund transfers; 86% of U.S. and 25% of Europe, electronic communications networks ; and 100% of U.S. and 50% of Europe, trading services.
According to Mr. Birkelund, the challenges to firms looking to provide e-commerce services to clients are multifaceted.
For banks, the biggest challenge is getting the specific information out of their own information management systems and to clients via the Internet. But for asset managers, which have better ways of tracking client information, it's a matter of getting real-time information to the clients, he said.
Overall, the biggest e-commerce challenge cited by firms was security, with 80% of respondents listing that. Those surveyed said user concerns about security would be among the greatest impediments to future growth of e-commerce.
Other challenges given by firms were: difficulty of implementation, 61%; cost, 59%; lack of internal knowledge or skills, 56%; fear of new technology, 54%; lack of participating clients, 46%; lack of industry standards, 46%; and competition, 44%.
In considering the benefits of using e-commerce capabilities, both investment banks and money managers considered the competitive advantage the most important, at 65%; along with revenue enhancements, 57%; and market penetration, 59%. The advantages of creating new business models and enhancing service and of reducing costs were rated less highly.
CWB also asked how respondents would spend $10 million on e-commerce. Financial product development was rated top priority.