The objective of this study is to identify the capability of providing banking service on the Internet by the information technology based firms. For this purpose, this study investigates core business of two retail banks and compares the business of banks with one of the online service company.
Four research questions are raised: (i) What kind of services are able to be provided via the Internet among traditional banking services? (ii) What are the comparative advantages and disadvantages of online service company in providing the Internet banking services by online service company in comparing with traditional banks? (iii) What are alternative policies to overcome the disadvantageous factors? (iv) What is the effective Internet banking strategy from the online service company‘s perspective?
We used the value chain framework as a tool of evaluating core businesses of banks. Based on that, we suggest the following conclusions and managerial implications.
First, in each step of value chain framework, the on-line service company has capability in IT(information technology)used banking service, such as database management, network operation and management. On the other hand, online service company has little capability about core activities of banks, for instance, risk management, credit evaluation and money market. But online service company has comparative capabilities in marketing and sales and services of the value chain of banks. These steps of the value chain framework are important to build up the Internet bank because these are unique channel to deliver bank‘s services to the customers.
Second, based on above findings, there are 3 domains of providing banking service by online service company. The first domain is IT-related domain, which is the strongest domain in the online service company, so it can provide IT-based banking activities, such as building a banking system and supporting network. The second domain is relatively strong domain against traditional banks, for instance, deposit, withdraw, inquiry and money transfer. Because this domain is a front end service of the banks, online service company should make an alliance with banks to support full service to its customer. The third domain is the weakest domain to online service company because this is core business of the banks, such as investment decision making, risk management, credit evaluation, money market and product development. In order that online service company supports banking capability, it should have an alliance with traditional banks.
After all, online service companies have some extent of banking capability using its own capability based on IT. Many IT based companies have some opportunities to provide banking service on the Internet because the Internet banking services consist of traditional banking service and IT. Therefore, in order that IT firms catch opportunity to Internet banking service, each IT based company must identify its own capability in related to the Internet banking.
