ELECTRONIC FINANCE

Submitted By – Bhargav Rishabh Baruah (14)

Kunal Singh (61)
Trishanku Borah (54)

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 E-FINANCE
Electronic Finance transaction is a financial transaction that
depends on the internet or a similar network to which
households or non-financial enterprises have access to bank.

Global integration and deregulation are dramatically changing

the structure and nature of financial services.

World Bank study in 2000:

E-finance has great potential to improve the quality and scope
of financial services and expand opportunities for covering
trading risks and can widen access to financial services for a
much greater set of retail and commercial clients by offering
more cost effective services

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 Key Drivers of Evolution of E-finance

1-Technology: Computer, Internet and Telecommunication

Technologies enabled businesses to be conducted in a fast,
efficient and secure way.

2-Globalization: Worldwide liberalization of trade and

investment facilitated the growth of global business including
the Internet based e-business and e-finance.

3-Regulations: Both deregulations of the finance industry and

re-regulations of e-commerce facilitated the growth though in
some areas lacking behind technology.
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Key Drivers of Evolution of E-finance (Cont.)
4-Entrepreneurship: Creativity allowed entrepreneurs, start-
ups and seasoned companies to break ‘old economy’ traditions
and deliver business solutions through new, exciting and often
radically different structures.

5-Capital: Capital provided the financial means to put these

technical and human wheels in motion.

6-Competition: The above factors created a globally

competitive environment and pool of talents to compete for
introducing new technologies, concepts, and models.

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 E-FINANCE MODELS
 The E-Finance sector can be divided into five broad categories:

1-Business to business (B2B)

2-Business to Consumer (B2C)

3-Consumer to consumer (C2C)

4-Technical infrastructure to support the e-Finance platform

5-Global, institutional and regulatory environment that facilitate

the functioning and growth of e-commerce and e-finance
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 E-FINANCE MODELS (CONT.)
1-Business to business (B2B):
Internet platforms created by institutions to serve other
institutions.

 In B2B sector, businesses supply information, goods and

services to other businesses and develop business related
exchanges to serve other businesses.

 B2B business exchanges bring together companies from

identical (vertical) or different (horizontal) industries.

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 Trends in the B2B Financial Service Sector
A-Reduced Transaction Costs

B-Disintermediation and Electronic Re-intermediation

C-Customized Solutions and Integrated Services

D- Electronic Trading

E- Electronic Funding – Venture Capital – IPOs

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E-FINANCE MODELS (CONT.)
2-Business to Consumer (B2C):
Retailing of goods and services directly to individual
customers.

 In B2C, business supply information, goods and

services to individuals; they can purchase the goods
directly from B2C platform.

 Most established segment of E-commerce

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 Trends in B2C Financial Service Sector

A-Customer-centered retailing

B-Online Trading

C- E-Banking - Online Banking

D- Personal Finance/Wealth Management

E- Insurance and Annuities

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 E-FINANCE MODELS (CONT.)
3-Consumer to consumer (C2C):
Individuals using the web for private sales or
exchange.
 It is a small but emerging sector, is designed to let
customers deal directly with one another through
mechanisms such as electronic auctions.
Trends in B2C Financial Service Sector:
 A-Online Trading
 B- Trading Circles

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Adoption of E-finance by the financial service firms
 This section is talking about how different types of financial
service firms, depository institutions and security companies have
deployed e-finance technologies.

Financial Intermediaries:
 Banks, insurance companies, mutual funds, finance companies and
similar financial service providers are financial intermediaries.

 Disintermediation?
 Reintermediation (information providing companies)

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Adoption of E-finance by the financial service firms

 By the end of 1990s, e-finance technologies affected all

aspects of the business of banking and financial
intermediation. Depository institutions have used electronic
information technologies, for example, to make credit
decisions to consumers since 1980s.
Ex: Credit Scoring: used by financial institutions to
evaluate the loan applications received from the
customers.
 Handle large volume of credit applications quickly
with minimal labor, thus reducing operating cost.

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Insurance: The security underwriting business, the
insurance industry has not adopted e-finance
technologies largely yet. In 1999 12% of the US insurers
used the internet to sell products amounting to 1% of
total sales.
Security Firms: How securities are issued?
 Investment banks
 Private placement
 Initial Public Offering (IPOs)

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• “Book Building” is a process by which investment banks
assess the demand for a security issuance from a small
number of well-connected institutional investors before
finalizing the terms of the offering.
• By lowering the search and information costs, however,
e-finance technologies may reduce the comparative
advantage of the relationship-based approach relative to a
more arm’s length process, such as an online auction.

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 ORGANIZATIONS FACILITATING E-FINANCE
1. Society for Worldwide Interbank Financial
Telecommunication (SWIFT)
2. Automated Clearing House (ACH)
3. Online Trading Community
4. E-Money
5. Price Comparison Service
6. Value Proposition
7. Online Auction Business Model
8 M-Finance: Mobile Banking

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