Supply Chain for Financial Institutions

Supply Chains for Financial Institutions

As a consequence of the Internet and advanced technologies, companies that operate brick and mortar businesses are finding that to survive they must have a strong internet presence. In the banking and financial industry, all the major banks have online banking services, and other firms that are not affiliated with existing banks, such as First Internet Bank of Indiana, have opened online banks. Because financial services do not involve a physical product, they are easy to offer on the Web (Schneider, 2004). The supply chain used for a brick-and-mortar business differs from the supply chain used for businesses that operate on the web. Originally supply chain management was developed to reduce costs, but today the goal of the supply chain is to add value in the form of benefits to the ultimate consumer at the end of the supply chain (Schneider 2004). When a company makes the important decision to offer services online, modifications must be made to the supply chain. In this paper the writers will describe the supply chain used the banking industry for a brick-and-mortar business and the supply chain modifications necessary to move from brick-and-mortar to a Website.

Financial Institutions in a Brick and Mortar Environment

Financial investors and analysts are progressively placing money on big and traditional bricks and mortar companies with Internet tactics or on companies that center on Internet infrastructure (Author Unknown, n.d). In current times, many banks have been forced to outsource due to the pressures of expansion, competition and widespread cost-cutting initiatives (Author Unknown, n.d). Not so long ago, branches were believed to be Paleolithic but because of their unrivalled ability to strengthen customer relationships, branches have evolved and innovated into multi-product internet sales offices (Author Unknown, n.d). As the banking financial industry rises up its spending on brick and mortar so does the branch productivity.

The necessary attempts to reduce branch networks are mainly quantitative. Nonetheless, identifying the meticulous blend of people, technology, incentives and metrics that leads to overall system profitability is more art than science (Insley, R., n.d). Bankers are certain that one fundamental component in internet baking is cross-selling non-bank products to bank customers. Even though Internet banks propose several of the similar services, like traditional brick-and-mortar Banks, analysts see Internet banking as a revenue of retaining increasingly sophisticated customers, developing new customer base, and capturing greater share of depositor assets (Insley, R., n.d). A distinctive Internet bank site also describes the types of transactions offered and provides information about account security. Because Internet banks generally have lower operational and transactional costs than traditional brick-and-mortar banks, they are frequently able to offer low-cost checking and high-yield Certificates of deposit (Insley, R., n.d). Internet banking is not limited to a physical site. Some Internet banks exist without physical branches, for example, Telebank (Arlington, Virginia) and Banknet (UK) and in some cases, web banks are not restricted to conducting transactions within national borders and can make transactions concerning large amounts of assets instantaneously (Johnson, T. P., 2004). According to industry analysts, electronic banking offers a range of eye-catching potential for inaccessible account access, including availability of inquiry and transaction services 24 hours, worldwide connectivity, easy access to transaction data, both recent and historical, and direct customer control of international movement of funds without intermediation of financial institutions in customer’s jurisdiction (Johnson, T. P., 2004). Today, other banks have established an advertising existence on the Internet mostly in the structure of informational or interactive web sites than have created transactional web sites. However, a number of Banks that do not yet offer transactional Internet banking services have indicated on its web sites that they will offer such banking activities in the future (Johnson, T. P., 2004).

Modification of Supply Chain for Websites

It is easy for financial institutions to offer services on the web because no physical product is involved. As banks enter the financial supply chain management space, they must keep the security of transactions in mind. This goes beyond simple encryption to the actual authentication of the parties involved in a transaction, according to Andrea Klein, chief marketing officer with IdenTrust (San Francisco)