eNET Internetkutató és Tanácsadó Kft.

Report on the internet economy In focus: The financial sector, Q2 2001

2002. November 17.

In association with Webigen Inc. and Sun Microsystems Hungary, GKI Economic Research Co. launched a new research project exploring the entire corporate sector. The project was started in the fourth quarter of 2000 with the purpose of investigating the knowledge, use and future role of the internet and internet-based business applications, as well as assessing corporate expectations regarding e-commerce and the information technology market. For our study, we divided the domestic corporate sector into five categories based on the level of participation and experience in the internet economy.

-general corporate group (industry, construction, transport, business services),

-retail and wholesale trade,

-tourism (restaurants, hotels, travel services, transportation),

-financial operations (banks, brokerages, insurance companies),

-expert group (internet service providers, cable television companies).

GKIeNET-Webigen Financial Service Providers’ Internet Usage Index

As in numerous other research projects of GKI Economic Research Co.,   the results of this survey  are synthesized in one index, called the  GKI-Webigen Financial Service Providers’ Internet Usage Index. This sentiment index,  representing  the expectations of certain segments of the economy regarding internet usage and the impact of internet applications on business operations,  is  comprised of the responses of financial institutions to three questions. The index includes the following  subindexes: electronic sales subindex, internet impact subindex, internet potential subindex.

The electronic sales subindex was at 32 in the second quarter of 2001. This figure was calculated on the basis of expectations regarding the online sales growth of typical products offered by the individual financial institutions within the next twelve months, as well as the projected increase in online customers. The figure dropped since the previous survey (38), but it still indicates optimistic sentiments. Expectations of securities companies declined particularly, in which the general loss of interest in the market plays a key role. The expectations of banks also diminished, while those of insurance companies rose remarkably.

The internet impact subindex was at 34.3, considerably higher than in the previous survey (22). All segments of the financial sector became more optimistic in terms of the potential of the internet to reshape their markets.

Compared with the survey of Q1 2001, financial service providers assessed their future capacities and the expected utilization of the internet more positively, while their assessment of their current status was somewhat more negatively. Based on the responses, the internet potential subindex is at 28.2, which is the result of negative responses in terms of the current situation and positive expectations for the future.

In the second quarter of 2001, the GKI-Webigen Financial Service Providers’ Internet Usage Index was at 31.5, which reflects a 4.6 point increase from the previous survey (26.9).

Reliability of the survey:

Banks participating in the research project account for over 73% of the total assets of the entire banking system. Participating insurance companies represent 47% of the total revenues of the sector, and securities firms accounted for  47%  of the  stock market volume in the first quarter.

Highlights of the briefing:

Seven out of the nineteen responding banks indicated that they offered online financial services. Two respondents are planning to launch online services this year, while eight banks plan to do so some time after 2001. Two credit institutions said they did not plan to provide internet-based services in the near future at all.

Two of the eleven responding insurance companies indicated that  they offered online services. One firm intends to launch online services during the course of 2001 and five companies after 2001. Three insurance firms have no plans to use online services to complement their existing sales channels.

Eight of the responding fifteen securities companies offer online services at present. One firm plans to launch internet-based services during the course of 2001 and four plan to do so after 2001. Two securities firms have no plans to offer online brokerage services in the future.

Two of the responding banks offer WAP-based mobile financial services. One bank will likely join them this year, with five more in the future. Ten banks participating in the survey have no intention to  provide WAP-based services.

One of the responding securities companies indicated that it was using WAP for its services. No other firm plans to take advantage of WAP this year, but six companies have plans to launch WAP-based services in the future. This segment also has a high percentage of companies  (eight firms) that do not intend to use WAP as a sales channel.

On March 31, 2001, banks offering  checking account services  had 80 thousand individual and 14 thousand corporate online customers, indicating that 10% of the domestic internet users take advantage of online banking services.

Sweden is the leading  country in Europe in terms of the percentage of internet banking customers, with 44% of internet users accessing online banking services. Germany ranks second with 34%. The European average is 31% (source: Datamonitor). In the Eastern Central European region Hungary is approximately at the level of Poland (10%) in terms of the percentage of online banking customers.

Based on the expectations of insurance companies, internet sales will account for 0.2-1% of the total revenues in 2001, which will increase to 1.5% in 2002.

Currently the number of online brokerage customers in Hungary is approximately 10-11 thousand.

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