The vast majority of financial services organizations are only slowly adapting to the virtual world of the digital age, according to a study by the Economist Intelligence Unit in cooperation with Andersen Consulting.
The study found that financial services firms are increasingly vulnerable to more-nimble competitors.The study explores the effect of ''virtualization'' - defined as the migration of business from traditional ''bricks and mortar''-based delivery channels to electronic channels, such as the Internet, automated teller machines, and telephones - on financial services firms.
The study reveals a picture of a complacent industry. For instance, most financial services companies have not begun to realign internal processes across functions based on customer values, even though this is key to delivering services in a virtual world, it said.
''Responding in years to a world that now moves in nanoseconds is a dangerous strategy,'' said Robert Baldock, a partner in Andersen Consulting's global financial services practice.
''This lack of urgency increasingly exposes financial institutions to new entrants who act faster to capitalize on changing customer demands and the corresponding opportunities in electronic commerce,'' he said.
Based on surveys of 184 senior executives at financial service companies from around the world, the study found that just 10 percent of U.S. respondents currently provide their customers with access via the Internet.
However, this is still better than the mere 3 percent of European survey participants providing access via the Internet. None of the Asian respondents offers access via the Internet.
Most companies are just beginning to try to merge customer information from various product databases, the study found, although doing so is critical to understanding customer values.
The need for consolidated information is driving interest in data-warehousing and data-mining technologies, which enable organizations to combine and gain easier access to various types of information.
The study cited a few standouts that are moving quickly to embrace the digital age. Among these are Advance Bank Australia, which leads its home market in implementing new banking technologies, and the Teachers Insurance and Annuity Association - College Retirement Equities Fund.
Copies of the study, ''Financial services in the virtual world,'' are available for purchase from the Economist Intelligence Unit for $495. Contact Will Brown at (212) 554-0617, or fax (212) 586-1181.
The EIU is a member of The Economist Group, London, which publishes The Journal of Commerce.
CHANGES WORLD TRADE
Vertical specialization in international trade has contributed significantly to increased global flows of goods and services, according to an article in the Federal Reserve Bank of New York's Economic Policy Review.
In the United States, international trade accounted for 23.9 percent of gross domestic product in 1996, up from 9.2 percent in 1962.
The article by David Hummels, Dana Rapoport and Kei-Mu Yi concludes that vertical specialization has accounted for a large and increasing share of international trade in the last several decades. That share has been as high as 50 percent in some of the smaller countries.
Vertical specialization occurs when a country uses imported intermediate parts to produce goods it later exports.
Countries link sequentially to produce a final good, with each country specializing in a particular stage of the production process.
Although tariff and non-tariff barriers worldwide are quite low, vertical specialization can magnify the gains achieved by lowering these barriers even further, the authors said.
The trends that have led to increased vertical specialization - lower trade barriers and transportation and communications technology enhancements - are likely to continue, they said.
The text of the Economic Policy Review is available at http://www.ny.frb.org, which is the New York Fed's Internet site.
FIRST AMERICAN GETS
NEW ENGLAND CONNECTION
First American Trade Finance Inc., Dallas, is bringing its brand of transaction financing to the New England area.
Larry Renfro was named to represent First American in the New England states.
Mr. Renfro, who founded and heads LCR Financial Group, may be contacted at (978) 749-8891, or by e-mail at lrenfro(AT)ix.netcom.com.
Serving small and mid-sized companies, First American relies primarily on the performance capabilities of exporters and importers, whereas banks and other conventional lenders rely on hard asset collateral or the borrower's balance sheet ratios.
First American provides its own funds to carry out a client's transaction. Support can begin with pre-shipment financing to acquire or produce goods and can continue through collection of the sale proceeds.
The firm helps to properly structure letters of credit and supervise the documentation process to better assure collection for the sale.
IFC TO INVEST IN
BANC POST OF ROMANIA
International Finance Corp., a member of the World Bank Group, signed agreements to invest $10 million in Banc Post, a commercial bank that is slated to become Romania's first state-owned bank to be privatized.
Banc Post was created in 1991 to take over the Romanian Postal System's banking and payment transactions.
IFC agreed to make a subordinated convertible loan of $10 million to finance the expansion of the bank's network of branches and automatic teller machines and to modernize its information technology systems.
IFC said its investment will help prepare Banc Post for privatization and strengthen its operating capacity. The loan will be convertible into equity in the bank when it is privatized.