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2.3 Cost savings Banks are keen to make greater use of Internet banking for many reasons, but a key factor is the substantial cost advantage this activity enjoys. The range of channels that the banking sector can use at present and their differing cost is illustrated in the following graph. Figure 2.1 Costs favour electronic banking 1.2 1 Cost per Transaction US$ Cost US$ 0.8 0.6 0.4 0.2 0 Internet PC Banking ATM Telephone Branch Source: The Emerging Digital Economy, US Department of Commerce 1998. Similar cost differentials in Australia are driving the banks to rely more on electronic banking channels. The Commonwealth Bank states in its 1998 Annual Report that 72 per cent of all banking transactions are conducted through electronic channels, such as telephone, the Internet, ATMs, and EFTPOS terminals. Similarly, Westpac states that around 80 per cent of their transactions are done electronically. The National Australia Bank have recently reduced the percentage of transactions through branches from 19 per cent to 14 per cent. Every customer that is to switch from a branch transaction to a lower cost channel results in a substantial saving. Competition will force the banks to pass these savings on to customers as lower fees and prices. Using the Internet for bill payment can provide savings to all parties involved including the merchant, customer and the bank. Electronic billing is likely to be a significant growth area in the economy in 2000. Table 2.2 Online banking equals lower service costs and fees US$ Traditional Online (cheque by mail) (Internet and credit card) Cost to merchant 1.65–2.70 0.60–1.00 Cost to customer 0.42 0.00 Cost to bank 0.15–0.20 0.05–0.10 Cost to all parties 2.22–3.32 0.65–1.10 A flow on impact of greater use of the electronic channels and consolidation in general has been the reduction in staff required. The following graph indicates the change in employee numbers of the four Australian major banks. It is important to note that these employee numbers include those added through domestic and international acquisitions by these banks. 94
Figure 2.2 No. of banking employees 50 000 CBA WPAC ANZ NAB Employee Numbers 45 000 40 000 35 000 30 000 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: ETC. 2.4 New costs and intermediaries In order to obtain the cost savings offered by the Internet, the banking and finance sector is buying significant volumes of IT inputs. Figure 2.3 Trends in major bank expenditure on IT $ Million 400 350 300 250 200 150 100 50 CBA WPAC ANZ NAB 0 1994 1995 1996 1997 1998 Source: Banking Annual Reports. It seems likely that the major banks have raised their IT spending to accommodate a major upgrade of e-commerce requirements. It is not clear if they intend to raise spending above these levels or merely to sustain them, or indeed, if the new capital expenditure round is now complete. In order to compete in the Internet market, banks and other financial sector firms must ensure that consumers are aware of their presence in this new context. The financial sector is the biggest spender on Internet advertising in Australia, nearly a quarter of the total spent coming from the sector. Five of the top-ten online advertisers in 1998 were from the financial services industry. 7 7 Margaret Banaghan ‘Inside Story – Part two: Cyber retail case studies’, Business Review Weekly, Friday 30 July 1999. 95
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© Commonwealth of Australia 2000 I
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Table of contents Foreword ........
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Part 2 - Case studies Section One I
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Executive summary E-commerce is sti
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Part 1— economic analysis
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Chapter One Study context, aims and
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Within the business-to-business cat
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Table 1.4 Projected growth in econo
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Chapter Two Economic issues What di
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Exhibit 2.1 Disintermediation effec
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Table 2.1 E-commerce impact on vari
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Chapter Three Changes ahead—indus
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Health Significant efficiencies sta
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Chapter Four Economy-wide assessmen
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Direct changes and flow on impacts
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consumption relative to economic ac
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External competitiveness Greater us
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Industry outcomes Greater use of e-
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Food products The food products sec
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people with differing occupational
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Tasmania and the Northern Territory
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Table 4.2 Regional growth and emplo
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The data for country regions (Exhib
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impacts are a reasonable representa
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Chapter Six Policy implications and
Page 55 and 56: Appendix A Study methodology, shock
Page 57 and 58: confidence. This is at the expense
Page 59 and 60: All of the GDP gain generated by ch
Page 61 and 62: (s11) Saving of particular inputs I
Page 63 and 64: Table A.1 continued Commodity Per c
Page 65 and 66: Table A.2 continued Engine & Boiler
Page 67 and 68: Table A.2 continued Safety Inspecto
Page 69 and 70: Table A.3 continued Industries 2007
Page 71 and 72: B.2 The structure of MONASH The cor
Page 73 and 74: simulations it is assumed that the
Page 75 and 76: Table B.1 (Continued) MONASH-RR Reg
Page 77 and 78: C.2 Forecasts for macroeconomic var
Page 79 and 80: other grains, iron and non-iron ore
Page 81 and 82: The numbers in column (II) of Table
Page 83 and 84: Productivity growth over the histor
Page 85 and 86: forecast of a 0.1 per cent decline
Page 87 and 88: Productivity growth in the construc
Page 89 and 90: Employment prospects in the sector
Page 91 and 92: Table D.1 continued Textiles, cloth
Page 93 and 94: Table D.1 continued Health, educati
Page 95 and 96: Table D.2 continued 45 Bags and Con
Page 97: Part 2 — case studies
Page 100 and 101: Industry sectors’ use of e-commer
Page 102 and 103: e-commerce were chosen. Key questio
Page 104 and 105: Banking For some time now most of t
Page 108 and 109: 2.5 Changing business modes Branch
Page 110 and 111: Banks are also looking to take adva
Page 112 and 113: NAB, as a multinational, is already
Page 114 and 115: activities such as consumer electro
Page 116 and 117: Box 3.2 Building a business on e-co
Page 118 and 119: One of the issues for all industrie
Page 120 and 121: 108
Page 122 and 123: Box 4.2 Australia Post and e-commer
Page 124 and 125: Opportunities are being created for
Page 126 and 127: Value can be transferred into Austr
Page 128 and 129: Continued use of email and the deve
Page 130 and 131: E-commerce allows some flexibility
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Page 134 and 135: are introduced to market at a start
Page 136 and 137: educe the duplication of assessment
Page 138 and 139: 6.3 Cost savings as a result of ele
Page 140 and 141: The primary e-commerce tools for im
Page 142 and 143: New service modes and channels to t
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Page 146 and 147: This Section will review the implic
Page 148 and 149: of greater depth. (It should be not
Page 150 and 151: consumers watch five per cent less
Page 152 and 153: artist is the promotion which airpl
Page 154 and 155: New costs The fragmentation and reg
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gambled. The development of Interne
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146
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Making a purchase over the Internet
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Customers who access troubleshootin
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they does not actually sell those i
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Key points There are few other sect
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e-commerce allows quicker order pro
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9.3 New costs The demand for busine
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How a ticket is sold, through an ag
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Box 10.1 Case study: E-commerce and
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The education and training sector h
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166
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11.2 Production Manufacturing busin
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Opportunities for re-intermediation
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Value could transfer within the sec
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174
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years’ time. 30 This reflects an
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seeks to provide a point of referen
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To a small extent, direct selling t
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Box 13.1 Austmine—a window for th
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Box 13.2 Leaving mining sites for w
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