A report by the Association for Financial Professionals (AFP) found that chief financial officers, treasurers and cash managers are increasing their use of Internet sites that offer financial services.
When comparing data from November 2000 with data from October 1999, the survey found double- and triple-digit increases in the use of the Internet to obtain information, transact business and communicate with and select service providers. For example, 63 percent of respondents now use the Internet to conduct business transactions, compared to 36 percent in 1999. Another 92 percent currently use the Internet to obtain information for one or more financial services including cash management, investment services, credit, foreign exchange, capital market services and derivative/hedging services, compared to 77 percent in 1999.
“Now more than ever, the Internet is being used not only as a communications tool, but also as an instrument in making decisions and transacting business,” said AFP’s President and Chief Executive Officer Jim Kaitz. “The results further validate AFP’s strategic plan to deliver products and services over the Internet, and help our members better navigate the challenges and opportunities provided by e-technologies.”
Obtaining information on services such as cash management, investment services, credit and foreign exchange remains the leading reason why financial professionals use the Internet. Further, Internet usage is higher for services such as cash management and investment than for services that might require more consultation such as derivative/hedging and capital markets activities.
But despite the steady increases, trend analysis shows that actual usage growth trails the plans set by financial professionals in AFP’s October 1999 survey which asked similar questions. The projected use of the Internet for purchasing over-the-counter (OTC) derivatives in October 1999 was 14 percent, however only two percent reported using the Internet for this purpose in November 2000.
The AFP report shows that while Internet usage has grown steadily, significant barriers to a truly electronic corporate finance environment still exist. Respondents ranked authentication of counterparty, integrity of message, security of information and enforceability of contracts among the leading obstacles. Other barriers include the counterparty’s credit quality, an inability to integrate and a lack of personal counsel.
The survey participants remain optimistic for the future and reported substantial growth plans for their use of the Internet to purchase financial products over the next two years. More than 40 percent indicated they would be either somewhat likely or very likely to purchase foreign exchange; 41 percent are likely to purchase letters of credit and 40 percent to purchase securities.
Finally, when obtaining financial products (excluding insurance), respondents prefer to use a Web site operated by a single financial institution, followed by consortiums of specified financial institutions. A much lower percentage of respondents prefer a Web site operated by a third-party exchange.
When comparing responses by company size, all companies prefer to use Web sites operated by a single financial institution for obtaining loans, letters of credit and securities. Smaller companies (annual revenues of less than $1 billion) have a greater preference than larger companies (annual revenues of $1 billion or more) for obtaining these financial products from a single financial institution rather than consortiums, by an average of 10 percent.
The survey was administered to AFP members and members of the Financial Executives Networking Group (FENG) in November 2000. A total of 10,050 corporate practitioners received the survey. One thousand fifty people returned the survey, yielding a 10 percent response rate.
Reprinted from internet.com’s dc.internet.com.
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