The Emerging Role of Banks in E-Commerce
How is the banking industry responding to the rapid development of online commerce?
Many banks in e-commerce are beginning to deliver credit and deposit their products electronically, as well.
Some large banks are also developing products designed exclusively for e-commerce.
As banks venture into the electronic arena, however, they are finding that new opportunities bring new operational and strategic risks.
Many companies are embracing “e-commerce,” or business conducted on-line over computer networks, as a means of expanding markets, improving customer service, reducing costs, and enhancing productivity.
Like other companies, banks are taking steps to expand the use of networking technology in their business operations. For these institutions, however, the advent of
electronic commerce poses questions as well as opportunities.
Our analysis of banks’ entry into e-commerce includes
a look at the strategic and operational risks banks may
face in this arena. E-commerce will create new forms of
competition and compel banks to make choices about the
services they offer, the size of their branch networks, and
the extent of their support for interbank payment networks.
Participation in e-commerce will also increase
banks’ exposure to technological problems. Banks’ success
in coping with such challenges will help determine the
scale of their influence in the electronic marketplace.
Advantages of Banks in E-Commerce
In the last few years, many banks have begun to use the Internet as a supplementary channel for delivering traditional products to consumers and businesses. Some banks are also investigating how they might expand their current service offerings to include some products designed exclusively for e-commerce.
Issuing Electronic Money and Electronic Checks. Two
e-commerce products still in the planning stage are
electronic money and electronic checks. As more computers
become equipped with “smart card” readers, banks are
considering issuing electronic money that could be stored
on these cards and spent over the Internet. In addition, a
banking technology organization is working with the
U.S. Treasury and some banks to test an electronic
version of a paper check. The check could be sent over
the Internet from a buyer to a seller, electronically
endorsed by the seller, and then forwarded on-line to
the seller’s bank for electronic collection from the
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