Financial services providers have much to gain by automating their trade process by implementing straight-through processing (STP). However many providers are slow in applying this process, according to GartnerG2, a unit of Gartner, Inc.

"'STP makes sense for the industry and should be made a priority,'" said David Furlonger, vice president and research director for GartnerG2. "'STP is much larger than just an IT issue. It directly impacts the bottom line of a financial services firm and ultimately defines its competitive positioning. Firms that pursue STP more aggressively will achieve a competitive advantage over firms that put implementation lower on the priority list.'"

"'Firms implementing STP must establish and understand ROI expectations to be effective,'" said Furlonger. "'The continual expression of concern raised by business leaders over the value of IT emphasizes how dangerous it is for financial services providers to rely on perception of return rather than fact. Understanding and calculating ROI from both a business and IT perspective will help focus providers on their long-term value propositions and prevent expensive and potentially catastrophic mistakes.'"

Source: "GartnerG2 Says Financial Services Providers Must Implement Straight-Through Processing Initiatives to Achieve a Competitive Advantage," August 7, 2003

"'Speed is an important attribute of the shopping experience, particularly for grocery, convenience and dollar stores,'" said Susan Landry, vice president and research director for GartnerG2. "'Positioning payment solutions as being faster, particularly if there is unique privilege associated with its use, will be a compelling value proposition for consumers.'"

GartnerG2 analysts said the challenge is getting the banks to look more broadly at what will appeal to consumers and retailers. Retailers are loath to adopt new payment mechanisms until a critical mass of their customers are interested in using them, but a compelling trigger is necessary to inspire consumer adoption.

"'Banks, retailers and others in the payments business should design alternative-cash programs around a specific problem faced by a significant entity,'" Landry said. "'Metropolitan areas from Helsinki to Hong Kong have succeeded with cash alternatives that solve transportation agencies' problems of efficiently moving high volumes of travelers, while offering convenience and other incentives to consumers.'"

Source: "GartnerG2 Says U.S. Banks and Retailers Should Model Cash Alternatives on Successful Asian and European Approaches," July 24, 2003

An average business-to-business (B2B) biller can save approximately $10.1 million for automating the delivery of all bills over the Internet, automating all disputes and payments, and migrating all phone calls to Web-based self-service, according to Gartner, Inc.

"'Internet billing and payment reduces costs, and drives needed economies and savings to a company's bottom line,'" said Avivah Litan, vice president and research director for Gartner. "'By looking only at cost savings, however, a biller can forget that e-billing generates significant business value for a company by enabling it to deliver superior and efficient customer service that keeps customers coming back, and attracting new ones as well.'"

Gartner analysts said the most significant savings accrue to billers from automating invoice disputes. Approximately, 13 percent of business invoices are disputed at a cost of $55 each for manual resolution, vs. $27.50 for resolving the dispute online. The surveyed billers could save more than $3.2 million if all disputes are managed online, or more than $1.6 million if just half are resolved online.

"'Automating disputes also has the significant benefit of reducing day's sales outstanding for billers, thus enabling the billers to put money to work faster for their own companies,'" Litan said. "'It also allows billers to avoid paying extra days of interest on their debts because the faster collection of money owed on invoices means they have to borrow less.'"

Source: "Gartner Says Average B2B Biller Can Save More Than $10 Million per Year by Automating the Delivery of All Bills and Self-Service to The Internet," June 24, 2003

A majority of financial services providers (FSPs) do not have an accurate sense of customer value because they fail to calculate all revenue sources, says GartnerG2, a research service of Gartner, Inc. (NYSE: IT and ITB). To target potentially high-value customers with marketing and sales opportunities and provide effective tiered servicing, FSPs must not only understand the entire customer portfolio and current customer value, but they must also predict customer lifetime value.

"'Current customer value that is calculated using transactional detail and activity-based costing can tell a business how profitable customers are today, but it does not provide any insight into lifetime potential,'" said Kimberly Collins, research director for GartnerG2. "'By segmenting customers across both dimensions, financial firms can more appropriately align marketing, sales, service resources and expenditures to optimize long-term customer value and ultimately organizational profitability.'"

"'Models that firms must consider include measures that are sometimes difficult to predict, and are based on data such as expected length of the relationship, future products obtained or lost, expected success of migration plans, and expected future use of products and services,'" said Collins. "'Furthermore, few vendors offer prepackaged solutions that fully integrate those capabilities from model development to calculation.'"

Source: "GartnerG2 Says Financial Services Providers Must Calculate Customer Lifetime Value to Improve Profitability," May 28, 2003

As consumers continue to seek ways to save time and money, the use of online bill payment is becoming increasingly popular. In 2003, online bill payment in the United States is predicted to increase nearly 38 percent to 40 million users, forcing banks to make it a top priority in order to remain competitive, according to Gartner, Inc.

"'In 2003, online bill payment will be the fastest-growing online financial application, and banks will compete fiercely with billers to lure consumers over to their sites to view and pay bills,'" said Avivah Litan, vice president and research director for Gartner. "'Most of the growth in online bill payment will occur at the same site where consumers view their bills.'"

"'Aside from cost-saving incentives, banks should offer value-added features such as customer self-service, automatic enrollment, bundling of automated payment plans and a user interface that does not impose bank preferences on the customer,'" said Litan. "'With only 16 percent of U.S. adults banking online and just 15 percent paying bills online, a great amount of growth opportunity exists in this market.'"

Source: "Gartner Says Banks Must Focus on Online Financial Applications to Remain Competitive in 2003 and Beyond," February 20, 2003

IT spending in the banking industry is expected to rise 4.5 percent in 2003, rebounding from a 14.8 percent drop in 2002. Although there will ample opportunities for vendors, the saturated online banking and e-banking support market will continue to consolidate, and several more vendors will be acquired, according to Gartner.

Gartner advises that vendors focus on selling established bank customers more functionality and applications, in addition to winning new bank customers whose current online banking contracts are expiring.

"'Price will be a key differentiator of vendors in 2003, putting enormous pressure on them to continue to reduce fees,'" Litan said. "'Banks must also focus on channel integration in 2003, to ensure online banking applications are tightly integrated with branch, telephone support and ATM networks.'"

Source: "Gartner Survey Shows U.S. Banks Rank CheckFree, Corillian, Microsoft and S1 as Top Consumer E-Banking Vendors," December 17, 2002

"As companies try to cut costs and concentrate on return on investment (ROI), e-billing is quickly being adopted as the preferred way to send bills and collect payments, according to Gartner, Inc."

"Gartner research shows that the average large U.S.-based company sending invoices to businesses over the Internet can save at least $5.7 million per year, while the average large company sending invoices to consumers via e-billing can save at least $13.1 million per year. Reducing costs and achieving ROI has been the driving force behind e-billing initiatives. In the business-to-business (B2B) world, ROI can be achieved when just 2.3 percent of bills are viewed and paid over the Internet. Business-to-consumer (B2C) billers are able to achieve ROI with as little as a 9 percent adoption rate."

"'In the B2B space, both billers and payers are more driven than ever to lower administrative costs and overhead, and these goals are clearly driving today’s Internet billing and payment projects,' said Avivah Litan, vice president and research director for Gartner. 'The largest savings in the B2B space will come from moving cash faster and reducing working capital requirements. Administrative savings also come from automating costly reconciliation and manual invoice dispute processes, which involve more than 15 percent of all B2B invoices.'"

Source: "Gartner Says E-Billing Can Save Companies Millions Per Year," June 6, 2002