For the past three decades, banks have been getting electronic. In 1956, the National Cash Register Company, now known as the NCR Corporation, introduced the first electronic bank posting machine. Some years later, the credit card appeared in the marketplace with gasoline cards and the BankAmeriCard in 1958.
In the early 1960s, ATMs were introduced and the term “online” started to be used. In the late ’60s, computers with integrated circuits surfaced, giving banks the capability to process electronic transactions. As this industry grew, transactions proliferated. In the mid-1980s, the point-of-sale (POS) terminal was introduced into the marketplace as a way to transmit cardholder information to banks to authorize merchant transactions, and later to capture the data and settle the transaction between the merchant and the cardholder.
As ATMs and POS terminals proliferated, electronic fund transfers became commonplace and electronic banking started to become a reality. As the cost of processing checks and transactions grew, the utility of bill payment became very obvious. At the same time, a new communication platform was being born, the Internet. With it came online access to the bank, a broader offer of products and services available 24 hours a day, seven days a week worldwide, and comparison-shopping without having to leave home.
As the number of Internet users grows, the demand for information rises, and the companies providing services will tend to evolve. Banks will initially provide information, and as the number of users increases, banks will provide them with the capability of making transactions, from transfers to bill payment. Eventually more and more products and services will be offered giving consumers the capability to carry out all financial needs online. Finally, as this process becomes more and more automated and technology continues to improve, consumers will allow the banks, brokers and other financial institutions to carry out transactions for them-to automatically pay bills as they arrive, buy or sell stocks and/or mutual funds, and renew insurance coverage automatically.
In Latin America, out of a total population of 500 million, there are an estimated 209 million adults, of which 144 million are economically active and 57 million have some type of bank account. Today there are 10 million Internet subscribers in Latin America, and the number is expected to grow to 67 million by the year 2005, at which time analysts predict $8.3 billion will be sold online in the region. Even though this does not include financial transactions, it is a clear indication of a growing tendency-using the Internet as a more convenient and global way to obtain goods and services.
Of the 500 million people in Latin America, 34% are under the age of 15. This growing and upcoming population will tend to go online for financial providers and services.
As PC penetration and Internet accounts increase, telecommunications prices decrease and service levels improve, consumers will go to their computer or wireless device more and more frequently. Banks will be faced with several challenges and eventually electronic transfer and settlement infrastructures will have to be established. As economies of scale become more imminent, Internet merchants will demand one bank to provide all their payment settlement needs regionally and local banks will be faced with competition from global players who can provide global services at very competitive prices.
As the Internet becomes a widespread channel of communication, banks will tend to expand into other areas that complement their offerings. Today they are already investing in Internet access, content provision, brokerage and e-commerce. These efforts are directed at customer acquisition and retention to enable banks to obtain traffic and or customers, new sales revenues and brand building. This expansion will bring about integration between the traditional off-line banks and the new online players, which together will be able to offer the consumer greater utility and an expanded offering. This consolidation will boost the number of accounts per institution.
In Latin America, the Internet revolution is occurring rapidly, in a compressed manner. It is thus likely that the changes required for Internet banking will occur in a much shorter period of time, allowing banks in the region to leapfrog from the stage they are today to a new stage of virtual banking.
The new e-bank will provide one interface, one account with which the consumer will be able to access all the available products and services anywhere in the world. It will not only provide one-stop shopping but will also give the consumer the ability to comparison shop with superb customer service.
Mobile Commerce
In the coming years, and as infrastructures evolve, analysts expect mobile commerce, m-commerce, to be the newest killer application for the Internet industry. The ability to surf the web on a wireless device will give users the freedom of location that fixed line access cannot compete with.
One of the devices that will be used with m-commerce is the web phone or wireless access protocol (WAP) phone (see article on page 23). Today there are some 50 million cellular phones in Latin America, about 5 times more than the 10 million Internet users cited in Jupiter’s latest study. Of the 50 million phones, about 30 million have the capability to receive messages sent over the Internet using the short messaging standard (SMS). This is the precursor to the new WAP that allows users to access the web, send and receive e-mails and interactively communicate with others. The best example of this is executing a stock trade or bill payment online.
Nokia, one of the world’s largest cellular handset producers, has boldly predicted that the number of Latin Americans accessing the web by cellular devices should exceed those using PCs by as early as 2003. One of the reasons is that cellular companies always know their customers’ whereabouts. This knowledge allows them to provide customers with a series of services that offer timely information such as traffic reports, nearby restaurants and stores, news, stock quotes, banking information, and much more.
Given that small screens do not lend themselves to advertising, some reformulating of traditional e-business is being evaluated. For now, it looks as though most cellular companies intend to develop their own portals with services and content. Another aspect that still remains unclear regarding that development of m-commerce is regulation.
Although there is still much uncharted territory, Patagon.com is looking at multiple platforms that can provide our customers different channels of accessing their accounts and executing transactions from anywhere at any time. Today, you can already access the Patagon websites from your Palm Pilot; tomorrow we will allow access from any wireless device. Welcome to the future
Day Jimenez is chief business officer for Patagon.com.