CBI forecasts slowdown in e-business

Sudhir Junankar, associate director of economics at the CBI said the most critical barrier to the expansion of internet business was a general lack of understanding amongst customers and suppliers of e-business.

Other reasons cited in the report included the speed of change, the general lack of professional staff and the lack of security standards – with respondents calling for increasing regulation of the internet.

In terms of e-business, John Hitchins, a senior-banking partner at PwC, said firms were more likely to adopt a multi-channel approach to providing products and services that gave customers the freedom of choice.

As to the future success of pure web-based firms in the financial sector, Hitchins told ‘No-one in the sector has attempted a purely internet operation in the sector’, and added that the ‘jury was still out’ on that issue.

However he said online banks such as Egg, First Direct and Cahoot, which have been largely successful, were unlikely to suffer significantly as a result of the slowdown in e-business because they were build on the backing of established financial institutions.

The report found the majority of banking customers still shied away from online services with 60% of customers using the internet for 1% of its transactions, while only a third used the online channel for 10% of their transactions.

Despite this, Hitchins said most banks still considered the internet ‘new and exciting’ and added the decreasing level of growth followed a decline in IT spending and a consolidation in systems development as other industries within the financial sector caught up with banking.

The report found the most consistent approach to e-business across the sector was web enabling and the extension of current business activities. Just over one-fifth of respondents said they had launched an online brand, while 12% of respondents said they were planning to do so in 2001.

In terms of the overall financial sector, the report found that business confidence remained broadly stable, despite an increase in overall business volumes.

The survey hightlighted fluctuating fortunes across the sector with banks and general insurers reporting the strongest increases in business volumes over the last three months, while securities traders, fund managers and finance houses saw business volumes decline steeply.

An overall increase in operating costs coupled with profitability climbing at a slower rate resulted in a narrowing in profit margins. All in all, profitability in the financial sector is expected to decline in the first quarter of the year.

As to the future, Junankar said the CBI predicted a slowdown in growth in 2001, while business confidence would hold steady and employment rise modestly.

Links’s E-business special report

CBI online

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