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Financial services must measure investment in e-commerce Back  
Banks and insurance companies are not measuring return on investment effectively on their e-commerce initiatives, according to Ernst & Young. The strategy deployed is defensive and based on the view that 'everyone else is doing it so why don't we'. The eighth annual report, Technology in Financial Services, a survey of more than 100 financial services companies world-wide suggests that with e-commerce channels radically reshaping the retail financial services market, the key to future success will be an understanding of how technology can help companies build customer value.

The growth of internet and digital television as channels to market will fundamentally change the financial services marketplace. Ownership of customer relationships will gain central importance and proof of that is the increase in customer relationship management (CRM) spending by financial services companies by 31% in 1998.

Respondents predict that by 2002, 14 p.c. of total technology spend will be on electronic commerce with 58 p.c. stating PC-internet being the most important area of technology spending compared to 1 p.c. for ATMs and 13 p.c. for telephone service centres

With this volume of investment there is still very little effective monitoring of its impact on the balance sheet. The only measurement being used to date according to Paul Farrell, partner with Ernst & Young, is the reduction in total operating costs due to e-commerce investment. Thus far this has been less than expected at 2 p.c. in 1998 compared to an expected saving of 6 p.c.

According to 27 p.c. of respondents the principal aim of e-commerce initiatives is customer retention. Yet 63 p.c. have no means of measuring CRM systems' impact on the bottom line. Farrell comments 'the danger is investing in the wrong customer segments. Identifying valuable customers and building lasting relationships with them will be the key to success - share of pocket will replace market share as the key industry driver.'

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