eBusiness - Capitalising on the infrastructure investments

Abstract: This article takes a business view to the above questions and will show an assessment of the current market  situation of Financial Institutions regarding their online infrastructure. It will highlight, if, why and how Banks can commercialise their online investments for their established services and how to create a business  model that will take into account both the established infrastructures and processes and the newly set-up online procedures and implementations.

The eCommerce "Boom" of recent years resulted in some significant  investment in online infrastructure  developments made to support eCommerce visions for a "new way" of conducting business. The "new business vision" did not take place as promised. It rather turned out that the established business principles, which were  supposed to be substituted, remained valid after all. Many financial institutions are now concentrating again on their core services and specialist know-how around financial offerings. Does this mean that the invested  capital for online infrastructures has been a write off? Can the investment made for new business visions be used for established business principles? Were the new business visions valid in the first place? What do  banks have to do in order to recoup on their investments?

Understanding the past and present objectives
Has it changed?

Infrastructure investments during the e-commerce hype had one  major objective: to exchange existing heavy and often proprietary front end and back end infrastructures for internet-based technologies. The vision to renew old and established systems for faster and cheaper processing  of data and transactions drove the e-commerce idea forward.

And, for the first time, the vision of global, interoperable systems with unlimited straight through processing capabilities promised to come true.  However,the anticipated returns on investment did not materialise and the financial services industry had to react. But instead of re-assessing the reasons for the downfall, many online solutions and plans were put on  hold or were stopped completely.

But was the vision wrong? Were all the demands made up? Was nothing of the 'new economy' respectable? Were all infrastructure efforts a waste of time and money? It is most probably  true that online infrastructures were oversold and over-promised.

However, the objectives of reducing costs, faster processing,quicker turnaround time and international presence at acceptable cost are probably ever  more true today. The objective to harmonise systems and to make them interoperable via internet technology is still correct and desirable.

Therefore it is important for future e-commerce engagements to have an  understanding of what went wrong. To a large degree the solution of the set objectives were assessed in technical terms. An online infrastructure during that time was hardly ever designed around business principles but  more on newly available technology standards or the requirement for technical solutions to be fast and state of the art. Business principles, specific client requirements or the usability of many systems were often not  taken into account or given a low priority in the excitement of new technology. End users did not use many of the new services, not least of all because they did not necessarily meet their specific needs and  expectations.

Moreover not all systems were interoperable because so many new technical standards and solutions, interpreted in different ways, were not interlinked. Many were implemented as island solutions rather  than aligned to the existing back office infrastructure. One had to be quick – and this did not leave time for full system integration. As the main objective of the past and the present is still similar, the valid  question has to be asked, whether all online investments have to be written off or if some or all of them can be recouped?

All is not lost - Online technology for Banks remain important

 The need for online infrastructure development remains and becomes even more vital for secure end to end processing and financial transactions over the internet. This applies to basic services (internet access), for  established processes like message exchange (email) as well as for meeting the demand for 'business globalisation'. Online availability is designed to satisfy the growing demand for more flexible, faster and most of all  cheaper services.

It is important however that online systems are interoperable with other infrastructure initiatives, for example,from a procurement system into the back office infrastructure for financial  transactions towards clearing services for payments of other organisations, such as Swift and Apacs. Only an integrated process flow can provide the above mentioned benefits.

It is also a fact that investment in  online technical infrastructure has been substantial in many cases and needs to be capitalised upon. From a financial point of view, in many cases the considerable investment made remains relevant to the requirements of  the business. Technically considered, the infrastructure is still advanced enough to build new services.

Past investments versus new requirements

What are the factors to consider when  deciding what to do with existing online infrastructures? Three major questions can be identified:

  • What is the bank's strategy and business objective?
    Depending on the strategic direction and market positioning, online infrastructure must support existing but especially future business opportunities.  For example, a niche player must decide whether it wants to position its services regionally or globally (although global does not need to mean worldwide but could also be regionally diversified). A global  offering needs a widely accessible infrastructure for serving major markets and core clients
  • What do the clients require?
    If it is unclear what client demands are in terms of their financial service needs, it is impossible to create compelling financial services. The infrastructure must be a  profound component of new service offering planning. Finally the client has to pay – directly or indirectly – for real time services and immediate messaging solutions, but will only pay if real benefit is  achieved. Therefore it is crucial to identify and classify clients' functional requirements (conditional payments, trade finance support, eFX, procurement services); operational requirements (service  availability, applicability, processing time, costs) and infrastructure prerequisites (operating systems, internet connectivity, system access, security)
  • What are the potential 'quick wins' for further activities?
    Nobody is going to wait for several years to gain some first return on invested capital. The goal could be to decide on potentially less  complex solutions for example, via a phased approach of complex service delivery but with the generation of a small but positive revenue after a short time

The new commercial objective
Putting the Business Driver back on track

Overall it is vital to realise that technological infrastructure serves commercial objectives and business  requirements, not vice versa. Particularly in times of dominant cost awareness financial institutions today more than ever need to consider business objectives such as flexibility – what to offer to whom and when;  internationality – where the offer is available and connection with other parties; and fast services and response times – acting in real time or near real time and upon demand. This all is supported in a perfect way via  online services.

The commercial value will be generated via clients and external services. Therefore the analysis of these external business requirements drives the technological infrastructure and should be specified  in a clear strategy. Often a reinvention of an existing strategy and its related services is not needed,but a rigorous re-assessment is compulsory. This should also be based on lessons learned information from previous  online activity development.

The assessment of online services should state what is essentially required from clients, partners, suppliers and bank internal groups, and how it can be established, including risk  assessment and alternatives. The assessment can very often profit from a large pool of resource and knowledge existing in the financial institution. It should also include new areas for cooperation with other parties  and enhancement of established services.

It becomes clear therefore that online technology must assist business needs to be successful, either by meeting external client needs, strategic developments and positioning,  or internal cost reduction efforts. This can be best achieved by

  • Developing a clear services, product and application strategy
  • Conducting a risk assessment of existing and planned services and
  • Defining a clear financial business plan providing a commercial consideration of any solution

It should then be determined how to use or reuse the technical infrastructure in place today for the assessed service engagements of the future.

 Business transformation as a result of successful online infrastructure

Online infrastructure exists therefore to support business processes and methodologies. There is little need to reinvent  processes, but to restructure and re-engineer them. This will eventually lead towards the necessary business transformation for the benefit of all involved parties of the value chain. A business transformation will only  take place if all efforts serve client needs and support existing business principles. Only then the integration of flexible and fast services will reassure existing business relationships and foster business  reputations. This will of course also reduce costs and operational risks on all sides. Such a desirable transformation is not done in days or weeks. However, a business transformation is imperative to be competitive,  flexible and international for the global future.

Having worked with a number of Financial Institutions before, during and after the eCommerce Boom we have realised and assisted them to concentrate  particularly on five major activities, which are vital to recoup on the online infrastructure investments:

  • Pursuit of interoperability as high priority objective.
    Without technical interoperability seamless processing will not be feasible to reduce transactional costs and processing times. Only with true  interoperability, and this includes business and legal interoperability, will an expanded service reach to multiple environments be possible
  • Understanding of and alignment with the financial institution's global strategy.
    In order to be successful with any client service offering, a clear and recognised direction is required with clearly  defined objectives. The vision must be transparent, attainable and understood by all
  • Alignment with industry verticals and customer requirements.
    Industry and clients are the ones with business requirements to be met and business solutions to be developed. An alignment with their  objectives is the only way to combine business benefits for both the clients and the bank. The client will always follow the innovative bank that provides and works with them to develop beneficial business  solutions
  • Consideration of co-operation with other financial institutions or country schemes.
    As globalisation continues,service cooperation and alliances are important to ensure international acceptance of  similar services. Maybe it is not practical to be present in each market and to be compliant to all regulations. However, it is commercially not only valuable but also mandatory to interlink own solutions with  other players in respective markets. This helps to not only achieve wider and better acceptance of services, but also reduces the financial and operational risks
  • Recognition that business ideas and transformation processes must be largely driven by the financial institutions themselves in order for them to also reap the benefits


Full exploitation of past online investment has merely been delayed and needs to be realigned to a financial institution's overall service and business strategy. When  properly planned and aligned to commercial objectives and planned business strategy the online infrastructure will and must support client demands, streamlined processing, fast and reliable access to information and  services at any time and in real time. And the more usable and widespread it becomes, the more beneficial it will be for all players: clients, suppliers, partners and the financial institutions themselves.


Published in ePayments Magazine, Edition 4, Sibos, October 2002.