Bài giảng E-Business and e-Commerce - Chapter 16: Online Banking and Investing

Chapter 16, Online Banking and InvestingOutline16.1 Introduction16.2 Online Banking Services 16.2.1 Hybrid Banks 16.2.2 Internet-Only Banks16.3 Online Loans16.4 How the Web Is Changing the Investment Community 16.4.1 Electronic Communication Networks (ECNs) 16.4.2 Online Trading 16.4.3 Online Bond Trading16.5 Merging Financial Services16.6 Financial Aggregation Services16.7 Wireless Banking and Trading16.8 Financial Planning Online 16.1 IntroductionTopics of discussion Online banking services provided by Internet-only banksClick-and-mortar banksThe impact of the Internet on Wall Street Online stock and bond tradingElectronic communication networks (ECNs) Financial aggregators Online lending and mortgage services Financial planning 16.2 Online Banking ServicesBrick-and-mortar banks have become click-and-mortarInternet-only banks lack the brand awareness and recognition of the click-and-mortar banksInternet banking services can reduce expensesOnline payment decreases the floatThe time it takes for checks to clear after they have been sent for payment or deposited16.2 Online Banking ServicesInternet delivers payments faster than mail Frees up cash and decreases accounts receivableThe expected amount of payments owed to a company for products and services sold to customersBenefits to customersCan avoid buying stampsDo not have to send bills out earlyAccount information available 24-by-7Can view detailed account history at one time online instead of listening to individual transactions over the phoneRisksSecurity breachesOffice of the Currency (OCC) has warned people that sites mimicking bank sites can scam them for account information16.2.1 Hybrid BanksHybrid bank model Brick-and-mortar banks offering online servicesProminence of brick-and-mortar brand names increase customers’ comfort levels when banking online Customers can visit a physical branchPhysical presence includes the large network of ATMsSome charge monthly fees to use online bill-paying services Important to the survival and growth of small local banksBy going online, small banks can offer competitive services and attract national customers 16.2.1 Wells Fargo FeatureWells Fargo is a hybrid bank Services are broken into three main sectorsPersonal finance, small business and commercial bankingOffers free bill-paying, checking-account comparisons and specialized resource centersPlans to offer a portal site providing financial services, such as stock trading, news, weather and financial aggregationAllowing people to view information from all of their financial accounts in one place on the Internet16.2.2 Internet-Only BanksInternet-only banks Offer convenience and often lower fees and higher interest rates to their customers as compared to traditional banksCan lower costs of buildings and equipment and can decrease payroll as traditional employee roles are eliminatedMust accept deposits by mail because lack of physical branches Little brand recognition compared to brick-and-click banksInsured by the FDICSome Internet-only banks are attempting to establish a physical presence16.2.2 NetBank FeatureNetBank is the largest Internet-only bank Customer Online ServicesChecking, savings and credit accountsPlan for retirementConduct online tradingObtain mortgage, car and business loansObtain a line of credit, free online bill payment and presentment, ATM card and Visa credit cardRates and calculators are available16.2.2 Internet-Only Banks16.2.2 Internet-Only Banks16.3 Online LoansTraditionallyCompanies and individuals would deal with a few different lendersFilling out documents and comparing options was a time-consuming processOnlineProcess can be more efficient, sometimes returning loan approvals within minutesGives people access to many lending institutions, enabling those seeking loans to shop for the best deals E-LOAN,  PrimeStreet, LiveCapital, companyfinance.com The Small Business Administration Office of Advocacy16.3 Online LoansE-LOAN’s E-TRACK demo. (Courtesy of E-LOAN, Inc.)16.3 Online LoansOnline mortgage servicesDecrease the time it takes to find a mortgageMany online companies still need standard paperwork that cannot be completed over the InternetDigital signatures may allow companies to accept documents legally over the WebDitech.com, MortgageRamp.com and LoopNetSome sites provide mortgages directly from the lendersSome sites act as brokers and allow customers to search for the best mortgageMay reduce number of broker jobs Stability of the lender16.4 How the Web Is Changing the Investment CommunityIn this section, we discussTechniques of online tradingAdvantages and disadvantages of trading on the Internet The ways in which online trading has affected stock exchanges16.4.1 Electronic Communication Networks (ECNs)Electronic communication networks (ECNs)Electronic networks that facilitate electronic trading by listing securities order sizes and prices, connecting buyers and sellers and processing digital ordersTransactions completed faster because buyers and sellers communicate directlyFaster trading helps to lock in a buy or sell price Offer before and after-hours trading and increase price transparency by listing prices from more than one exchangeMay mean the loss of the middlemen and the trading floorsInstinet Island, REDIBook and Archipelago16.4.1 Electronic Communication Networks (ECNs)ECNs will benefit from decimalization—the change of stock prices from fractions to decimalsDecimalization saves investors moneyNasdaq and the NYSE do not currently use ECNsThe NYSE is attempting to address ECN competition by offering many of the ECN advantagesSecurities Can represent ownership, such as stocks, or debt, such as bonds   16.4.1 Archipelago FeatureArchipelago is an ECN Provides anonymity to it clientsSmartBook software executes orders by searching internally (within Archipelago) and externally (outside of Archipelago’s system, including other ECNs) for best priceOnce match is made, order is executed in real timeArchipelago has trading hours from 8 a.m. to 8 p.m. Eastern TimeClients can trade, buy and sell listed, Nasdaq National Market and Nasdaq SmallCap stocks16.4.1 Archipelago FeatureArchipelago has partnered with Pacific Exchange (PCX) to create first U.S. electronic stock exchangeIf SEC approves, the Archipelago Exchange will permit the trading of stocks from the American Stock Exchange (AMEX), New York Stock Exchange (NYSE) and NasdaqWill be in direct competition with current exchanges (AMEX, NYSE and Nasdaq)16.4.1 Archipelago FeatureArchipelago order routing and execution example. (Courtesy of Archipelago Holdings, L.L.C.).16.4.2 Online TradingFull-service brokersOffer the speed and convenience of online trading together with the advice of a brokerDiscount-brokerage serviceRequires self-sufficiency, leaving the investor responsible for making and executing investment decisions Internet-only brokerages and hybrid brokeragesFactors to consider when choosing to invest online Type of investments you wish to make Quality of site navigation tools and customer serviceCost of transactional fees versus the number of trades per year16.4.2 Online TradingOnline companies usually charge a fee for every purchase or sale of securities made The Internet serves as a valuable learning tool for new and seasoned investorsThe Motley Fool, MoneyCentral and Money.com Companies offering online services Have made investing in stocks and options accessible to a larger audienceProvide real-time market information 16.4.2 E*TRADE FeatureE*TRADE allows individual investors to manage their own investments without need for brokersCommunity section in which users can chat with others and view Live Events over the WebExtended hours for tradingFinancial services include banking, insurance, taxes, retirement and real estate E*TRADE BANK is FDIC insured and offers ATMs, checking, savings, money markets and bill payment Offers two games in which you use “game money” to carry out stock and options trades Ameritrade also offers an online stock game16.4.2 E*TRADE FeatureE*TRADE offers investing and financial services. (Courtesy of E*TRADE Securities, Inc.)16.4.2 ShareBuilder FeatureShareBuilder offers dollar-based investing (investors can purchase stock based on a dollar amount)ShareBuilder Securities Corp. collects the money and purchases stocks once a week in a lump sum at the market price of the stockInvestors can purchase stock in real time by paying a higher feeTo sell stock, investors pay the real-time fee per transactionInvestors can choose to periodically invest a designated amount of money or make a one-time investmentPayment can be made by automatic payroll deductions, check, wired money or transfers from bank accountsThe investor can select from more than 3,500 stocks and 68 Index shares (shares of a portfolio of stocks) 16.4.2 ShareBuilder FeatureDollar-based investing through ShareBuilder. (Courtesy of Netstock Corporation.)16.4.2 ShareBuilder FeatureShareBuilder example of sample investments. (Courtesy of Netstock Corporation.)16.4.2 Online Trading16.4.2 Online TradingTrading on marginWhen an investor buys stock and borrows money from the broker to invest in the stockOpening a margin account online requires a relatively low minimum balance, answering a questionnaire (which sometimes replaces a credit check) and being qualified electronically, with no assessment made by a human brokerPotentially, a stock’s value could fall to a price that, when sold at the market price, will not cover the loanThe broker can issue a margin call—the broker requires the investor to invest more cash or securities or sell the stock to pay back the loan16.4.2 Online TradingDay tradingMaking short-term trades in an attempt to profit off of market inefficiencies (e.g. news affecting the market, disproportionate risk to price value of a stock or arbitrage, wherein someone profits by converting money from one currency to another)Easier on InternetTransactions limited by modem speed and server-side transaction speedFees can be expensive Day traders still bear the same risks as other tradersCareerDayTrader.com, DayTradingOnline.com and OnlineTradingAcademy.com16.4.2 Online TradingFederal Trade Commission, the Commodity Futures Trading Commission and the Securities and Exchange Commission warn traders about the exaggerations and counter factual claims made by some online trading firmsOnline trading does not reduce stock market riskForeign-exchange banks have begun to move their services to the Internet to remain competitiveForeign exchange systems allow traders to find the best deals on foreign currencyThe Internet facilitates trading commodities globally EnronOnline16.4.3 Online Bond TradingBondA written promise that an entity will repay a debt that is sold to an investor (investor receives original investments and a dividend for a certain period of time)Traditionally, someone would check the newspapers and call different institutions to buy or sell a bondOnline companies offer bond trading with the claim that the process is easier and cheaperTradebonds.com, bondsonline and MuniDirect The Internet can cut the cost of issuing bondsNeed for a standardized system for the bond sales process16.4.3 Online Bond TradingTradebonds.com’s zero coupon bond query. (Courtesy of Tradebonds.com.)16.5 Merging Financial ServicesGlass–Steagle ActProhibited financial institutions from engaging in multiple financial operations (i.e.,one institution offering banking services and trading services) Since repeal, banks, brokerages and insurance companies are permitted to offer a wide range of financial servicesMost online financial services offer electronic bill presentment and payment (EBPP) It is crucial for financial institutions to offer a wide variety of services to remain competitivePrudential16.6 Financial Aggregation ServicesOnline aggregation services give users the option of keeping all their financial information in one location on the InternetAggregation services use screen scrapingA process whereby the aggregator visits the sites that have your financial information and services and uses your usernames and passwords to log in, download the information and store it in one place, where the user can access itMany banks do not authorize screen scraping, although the aggregators are not required to have authorizationVerticalOne, ebalance, 1View Network, ezlogin and GainsKeeper16.6 Financial Aggregation ServicesFinancial Services Technology Consortium (FSTC) Trying to stop the screen-scraping process and implement another form of gathering information to create a standardPrivacy and security concernsNot regulated by the federal government Aggregators are not required to compensate users if security is compromised by a hackerPose a threat to traffic at online banking and investing sitesBanks have reacted by implementing these services on their sites16.6 Yodlee FeatureYodlee is a financial aggregatorAllows transactions through partnerships with financial institutions and providers Offers aggregation of non-financial content such as travel reservations, e-mail, news, shopping accounts, frequent-flyer and reward programs, etc. Access Yodlee’s services from one of Yodlee’s partners, including AltaVista, AOL, Citibank, Chase Manhattan Bank and Morgan Stanley Dean Witter16.6 Yodlee FeatureExample of Yodlee’s service through Citibank’s myciti. (Courtesy of Yodlee, Inc.)16.6 Yodlee FeatureThe company’s personalized aggregation solution can be delivered over the Web, personal digital assistants (PDAs) and Web-enabled wireless phonesYodlee2Go allows users to access real-time personal account information, including investments, banking and e-mail, on their wireless phones and PDAsProvides customers with personalized alertsCan track and chart account activity16.6 Yodlee FeatureExample of Yodlee’s charting capability. (Courtesy of Yodlee, Inc.)16.7 Wireless Banking and TradingCompanies can use wireless technology to offer their customers a value-added serviceWireless banking Allows users to pay bills from anywhereTransfer funds between accounts Check account activityTD Bank Financial Group and Netbank16.7 Wireless Banking and TradingWhile the market may be adopting wireless banking slowly, wireless securities trading is growing rapidlyTraders can receive important information and news about the market or their investments and make trades immediatelyCompanies offering wireless trading servicesAmeritrade, DLJ Direct, SureTrade.com, Morgan Stanley Dean Witter Online, Fidelity Investments and Trade.com Wireless access to financial information may grow more slowly in the United States than in Europe and Asia, because the United States has more technical standards and wireless devices in use16.8 Financial Planning OnlineThe Internet has made financial planning easier for service providers and customersPeople can educate themselves about financial-planning optionsCompanies can offer online applications, account histories, new-product offerings, investment tracking and other services 401kafe offers information regarding 401(k) plans—investing vehicles for employee retirementmPower offers retirement-planning advice to employees of member companies that sign up for the subscription-based serviceihatefinancialplanning.com provides information on all financial-planning topics