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  1. Virginia Newcome
  2. Sherlock Holmes
  3. Financial Services
  4. Wednesday, 04 October 2017

What is the state of B2B e-commerce in the financial sector? Can anyone fill me in on this? 

Accepted Answer Pending Moderation

I could take a shot at that if you like, but my information may not be entirely accurate or up to date so take it with a pinch of salt. But I think it is broadly right.

  if we were to consider the financial sector as a whole, it is a vast and complex area and our treatment of B2B e-commerce in the financial sector has therefore got to be somewhat selective. The best way to look at it,is to break down the sector into it’s sub-sectors, namely, banking, insurance, Capital markets, accounting and corporate finance as the main sub-sectors. Among these, our treatment of the financial sector in terms of B2B e-commerce ingress, would exclude any of the areas that are regulated by the SEC or the Commodities regulators thus excluding many of the Capital markets activities, such as Investment Management, brokerage, advisory services and so forth.

 If we look at the banking sector, it has two main segments namely transactions and credit extension or Lending, which is essentially the asset side of the banking system. For the time being we would ignore the liability side of the banking system which includes deposits and Capital.

 The two areas where B2B e-commerce has made significant inroads are in the transactions area where Payment Processing is rapidly expanding to accommodate the growth in B2B e-commerce and in the area of credit extension where the expansion has been primarily in Trade Credit and to some extent in business Lending through entities such as biz2credit and others. The liability side of the banking system we shall deal with more, when we discuss corporate finance.

 Now let's take the second subsector which is Insurance. In the area of insurance, Group and Commercial lines insurance for P&C has not really made any significant e commerce progress although some insurers like AXA Asia, AIG and AoN, etc are making some inroads. However, Marine insurance is rapidly beginning to offer instruments and coverages of a B2B nature to accommodate the B2B e-commerce growth. In addition to Marine insurance, Trade Credit Insurance is also growing rapidly mostly for cross-border transactions and this is an area which directly impacts the growth of B2B e-commerce across borders. Incidence of B2B e-commerce in the reinsurance side of the insurance industry both Treaty and Facultative, has not been significant, partly due to the nature and the culture of the industry, and partly due to some false starts suffered by some of the re-insurers in the past e.g., Munich Re. Although the London market is ahead of the New York market and some initiatives have been taken by ACORD to automate data, e commerce transactions are as yet not too ubiquitous. However, it is really an ideal candidate for B2B e commerce..

 On the liability side of the banking sector, coming back to that, the growth in terms of Internet deposits and internet banking after an initial first spurt in the middle of this decade, many of the start ups seem to have fizzled out and are being replaced by some of the middle sized players like Capital One Bank through their Spark operations and some others to try and make Ingress into the B2B e-commerce market.

 So by and large the main area of intersection between the financial sector and B2B e-commerce can be summarized as being in two broad areas (1) payment systems and transactions and (2) Trade Credit. Both are offered and link to B2B e-commerce platforms and the next stage of development is going to be further integration into the operational aspect of the corporations through their ERP, accounting and other enterprise systems.

 I hope this gives you a quick picture of B2B e-commerce as it pertains to the financial sector.

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  2. Financial Services
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