Despite the pervasiveness of online trading, most Web-based financial services have yet to win acceptance among consumers, according to a study by Mercer Management Consulting.

The study, which assesses the impact of the Internet throughout the financial services industry, found that since July 1999, online traffic of new customers or visitors at the Web sites of financial services firms has increased some 150%--more than twice as fast as overall Internet usage. However, it also found that consumers make online purchases of insurance, loans and mortgages far less often than they buy computer hardware, books, travel, clothing, and other consumer goods and services online.

The study, which was released on Dec. 20, offers an overview of the impact of the Internet across the primary fields of brokerage, banking and insurance. The study identifies brokerage and banking firms as the industry’s e-business leaders. More than 50 companies were evaluated.

The study also revealed that brokerage and banking companies have been best able to translate digital capabilities into value creation. The insurance industry has been the least successful.

In all three industry sectors, "Old Economy" names hold the greatest promise as e-business competitors.

According to Mercer, average time spent online was highest at Web sites of "Old Economy" incumbents Merrill Lynch, Charles Schwab and Fidelity. These companies also have very successful digital business designs, emphasizing "multiple products," "multiple channels" and "open architecture" offering customers ample information and choice. In contrast, new financial services entrants are frequently single-product companies hindered by lower customer retention and higher customer acquisition expenses resulting from costly Web alliances.

Business design, not technology, will generate profits, the study showed. Mercer's study cites the success of Edward Jones, which emphasizes relationship marketing to its clientele and is decidedly low-tech. -- RR Online

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