Bank Role Must Evolve With Electronic Business

E-commerce is defined in many different ways in today's changing landscape of treasury and finance. Simply put, e-commerce is the ability to "do business electronically," and it can be used in a variety of business environments:

- Business-to-Business

- Business-to-Consumer

- Business-to-Government

- Government-to-Constituent

The explosive use of the Web has dramatically changed the ways e-commerce can be applied and has propelled its adoption across all organizational sectors. As the Internet delivery channel continues to gain market acceptance, more and more businesses will be able to benefit from this technology. However, it is important to note that e-commerce is a means to an end, not an end in itself.

At first, the key drivers in implementing an e-commerce system were to achieve greater efficiency in the business cycle and reduce costs. Given the "re-engineering" environment that prevailed during that time (early 1990s), it's no surprise that businesses and governments alike were focused on accomplishing these goals.

However, over the last few years, e-commerce has been used more and more as a means to generate additional revenue and improve customer care and retention. The value of e-commerce is predicted to ramp up significantly over the next four years, with much of that growth focused on the B2B market. In fact, it is anticipated that by 2004, between 40% and 70% of all B2B transactions will be made electronically. The computer, electronics, shipping, utilities and government sectors are expected to be among the greatest users of e-commerce.

Initially, banks focused on their traditional areas of expertise, offering electronic-based payments initiation and information reporting capabilities. Today, banks are expanding their involvement, partnering with their customers, including government clients, to help them keep pace with the e-commerce revolution as new technology and applications continue to emerge.

For example, a company or government entity can now outsource its entire payables process by transmitting an electronic file of all payments directly from their accounts payable system to a bank. The bank then executes the payments as authorized, creating electronic payments (ACH credits or wire transfers), as well as paper-based checks. This integrated payables solution enables the customer to conduct business electronically with all their suppliers, even those still requiring payment via check. Banks also are pioneering the electronic conversion of checks at point-of-sale into ACH payments, improving both cash flow and the overall collection process for businesses or governments that receive consumer payments "in-person."

Financial institutions have been quick to offer a variety of Web-based services, including payments initiation and information reporting. Customers also can provide payment instructions, check issue information and other data over the Internet using secure file transfer methods. Electronic bill presentment and payment (EBPP) is another innovative e-commerce solution banks have added to their suite of services. With EBPP, any biller-from the corporate or government sector-can benefit from the opportunity to lower billing costs, improve customer care, accelerate cash flow and deliver meaningful information to their customers or citizens.

With the advent of the digital marketplace, banks are discovering even more creative ways to provide services for their customers. For instance, some bank Web sites offer marketplaces that enable smaller businesses or government entities to purchase a variety of goods and services and achieve savings that wouldn't have been possible as a single buyer.

There's no question that that this revolutionary technology is changing the way business is conducted, and it is changing it for the better. Businesses, municipalities, state governments and consumers have made successful forays into e-commerce, and many more will be taking the plunge over the next 12-18 months. The transformation is just beginning, and with new technology and applications evolving at breakneck speed, e-commerce promises to take many different forms as it continues to spearhead change. No one knows what the future holds, but it's safe to say that it won't be business as usual!