E-Finance

Debut New Era

E-Finance:
How Businesses and Consumers Are Capitalizing on the Digital Revolution

E-finance-including investing, banking, mortgage lending, and insurance-will grow at a dazzling rate in the coming years. It's a reflection of the spectacular growth of the Internet. In just five years, the World Wide Web has gone from being terra incognita to becoming a ubiquitous medium for transacting business, sharing information, and communicating with people all over the world.

E-finance will empower both consumers and businesses, enabling them to reduce transaction costs, speedily process documents online, and have instantaneous access to information. For businesses, online finance can dramatically improve efficiency and decrease the costs of internal business functions such as expense reporting, contract labor management, and time-and-billing procedures. Plus, by providing personalized information about consumers, the Internet lets companies engage in "one-to-one marketing," allowing them to tailor the online experience to fit unique individual needs. Moreover, Congress has just passed an electronic signature and record-keeping bill that will make it easier for both companies and consumers to do business online. The bill will give new technologies such as electronically transmitted fingerprint scans and encryption keys the legal weight of ink-on-paper signatures.

Companies can now shop for loans on the Web, lease a building, or purchase health insurance for their employees. Procedures that used to take weeks-and that required seemingly endless phone calls, paperwork, and manpower-can now be handled in days or hours, electronically. In world financial markets, traders and money managers have access to cutting-edge data about the markets 24 hours a day, all over the world.

For consumers, the Internet is becoming part of daily life. About 44.4 million American households will be online by the end of this year, up from 12.7 million in 1995, according to IDC. That represents an increase of nearly 250 percent in five years. According to industry experts, traffic on the Internet doubles every 100 days.

A New Breed of Investor

The Internet has emerged as a powerful tool for people to manage their money and get financial news. As a result, there's been a boom in online brokerage firms and financial news Web sites. According to Jupiter Communications, the number of households trading stocks online will jump fivefold-from 4 million in 1998 to more than 20 million by 2003. This means that more than 40 percent of all U.S. households will own stock in some form using an online trading account by 2003. Currently, 16 percent of all stock trades are executed online, up from almost none five years ago.

Individual investors rank the Internet as their No. 1 source for investment research, according to the National Association of Investors Corp. (NAIC), a leading organization of investment clubs around the country. By visiting various Web sites, individuals can read corporate annual reports, scan Wall Street analyst research, get stock quotes, and engage in 24-hour trading. The new era has brought with it longer trading hours, lower costs, and greater transparency and pricing information.

Online brokerages offer ease of use, lower commissions than traditional brokerage houses, and the ability to monitor individual accounts. As traditional ways of doing business have been transformed by technology, many large-scale, traditional brokerage houses have entered online investing.

Arthur Levitt, chairman of the Securities and Exchange Commission, said in a recent speech: "A new breed of investor-more informed and more inquisitive-is emerging from the information age....Never before have Americans had so much available to them at the click of a button."

Far from being passive spectators, these new investors are proactive; they're directly involved in making their own investment decisions, managing their assets, and researching investments. Many financial Web sites offer personal portfolio-tracking features, which enable customers to instantaneously see the performance of their holdings online.

The listing below shows the 15 most-visited financial sites in May 2000, according to Nielsen//NetRatings, ranked according to time spent on these sites. This data was gathered from a sample of more than 57,000 U.S. panelists who have home access to the Internet.

TOP 15 FINANCIAL SITES, MAY 2000

Site

Time Spent (min:sec)

Audience

schwab.com

49:48

 790,443

etrade.com

41:17

1,476,672

fidelity.com

25:34

1,319,540

wellsfargo.com

25:02

1,207,558

quicken.com

21:06

1,339,086

finance.yahoo.com

19:36

2,943,138

moneycentral.msn.com

19:20

1,941,080

fool.com

16:34

1,182,838

citibank.com

14:16

 834,892

americanexpress.com

14:10

 977,326

capitalone.com

10:57

 982,896

firstusa.com

10:24

1,039,326

marketwatch.com

09:45

2,195,185

money.com

05:59

 837,844

nextcard.com

02:09

4,056,306

Source: Nielsen//NetRatings

Retail investors are using financial Web sites to help them with their retirement planning. In addition, more and more corporations are offering employees online access to information about their 401(k) retirement plans. There are also "calculators" on various financial Web sites that enable visitors to the site to figure out how much to save for retirement, as well as what type of investment vehicles would make the most economic sense for retirement planning.

Online Banking-Poised to Take Off

According to consulting firm Dataquest Inc., online banking accounts will more than triple over the next five years, to 24.2 million households by 2004 from 7 million at the end of 1998. Such services will make financial tasks like checking balances, paying bills, and transferring funds cheap and hassle-free. More than a third of the country's big retail banks are set up for online banking, and millions of people have begun using electronic banking.

Many traditional brick-and-mortar banks offer online accounts, but there are also Web-only banks, such as NetBank. Besides convenience, these banks offer superior rates and lower fees. Surveys have shown that these banks have the best deals on interest checking, CDs, and money-market accounts. One recent comparison found that the average Web-only bank paid 3.4 percent on interest checking-five times better than the 0.7 percent at traditional banks; the average interest on CDs from Web banks was 6.35 percent vs. 4.9 percent for traditional institutions; and the average money market rate from e-banks was twice that of the traditionals. It's also possible to apply for a credit card online and make electronic payments to your card account.

In the next few years, bills will be delivered to customers electronically and paid for online without a single scrap of paper coming into play. It currently costs about 30 cents per transaction to process a traditional bill-but electronic billing should halve those costs by 2003, thus saving businesses and consumers substantial amounts of money, predicts Jupiter Communications.

Real Estate and Insurance Go "E"

The process of buying a house has gone digital. Prospective homeowners can find properties and get information about the best mortgage rates by surfing the Web. At www.hsh.com -run by HSH Associates, America's largest publisher of mortgage-rate information-you can read weekly updates of interest rates offered by some 2,000 lenders. Home buyers can make sure they're getting the best deal by comparing online mortgage rates with terms offered by lenders in their area. Plus, with just a few clicks of a mouse, people can get data about new houses in almost every market in the country.

"E-commerce and financial deregulation are giving consumers more power and more choices at a lower cost," says Franklin Raines, chairman and CEO of the Fannie Mae Corporation, the nation's largest provider of home mortgage financing. Those who want to refinance their home can also get plenty of information online about how to go about it. By visiting the Web site of the Consumer Information Center, at www.pueblo.gsa.gov you can get a free brochure online entitled "A Consumer's Guide to Mortgage Refinancings." It will help you determine the costs of refinancing and whether or not it makes sense for you.

Insurance companies are entering the online market-albeit gradually. Forrester Research predicts that by 2004, $13.5 billion of insurance will be sold online-a fraction of the annual total of about $900 billion. There are technological hurdles still to be surmounted, as well as structural impediments in the industry. Insurance is primarily sold through agents, who have a vested interest in maintaining the current system. Nonetheless, according to industry experts, all the major carriers are expected to go online in the next year and offer quotes to consumers.

Some online insurance sellers, benefiting from the reduced operational costs of doing business over the Internet, are offering consumers policies at lower prices than their brick-and-mortar competitors. They can do so because they don't need a sales force and can process transactions much more cheaply online than through traditional techniques.

Besides the foot-dragging of vested interests, there are other challenges that exist for businesses and consumers operating in the world of e-finance. Companies that gather data about consumers online-including personal financial information-need to be aware of privacy issues. Under new federal legislation, organizations that collect data online about consumers will have to adhere to strict policies and publicly disclose how they will use this information. In addition, there are security issues that haunt online finance.

But as e-commerce becomes more and more inseparable from the brick-and-mortar type, those concerns will fade. Technology is evolving so quickly that ever-more-sophisticated security solutions are being devised. A number of software companies have sprouted up to furnish security solutions, and experts say that the financial services industry, which handles billions of dollars a year in transactions and thus has tremendous assets riding on e-finance, has been at the forefront of implementing such systems.

Indeed, innovations in technology are unleashing the full potential of e-finance. Technological breakthroughs have enabled huge sums of money to flow through the world's financial markets every day, at a very low cost. These cost savings and efficiencies are, in turn, filtering down and benefiting both consumers and businesses around the world.

Leadership Privacy Policy

PricewaterhouseCoopers: Creating Global Risk Management Strategies in the Era of E-finance

Chris Larsen, CEO of E-LOAN Inc., took an unusual tack when it came to winning customers for his Dublin, California-based company, which furnishes auto, mortgage, and credit card loans online.

He knew people would be reluctant to reveal personal financial information online, and he realized that the success of his three-year-old business hung on ensuring confidentiality. For example, customers had to divulge Social Security numbers, salaries, e-mail addresses, assets and liabilities, and the names of employers, among other information, to qualify for mortgage loans. In addition, regulatory laws require that E-LOAN maintain all this data for at least two years, regardless of whether or not the loan is made.

So a year ago, Larsen took the unusual step of spending $250,000 on a comprehensive privacy audit from PricewaterhouseCoopers Then, he posted their results on his Web site ( www.e-loan.com ) -which gave E-LOAN top marks-and assured customers that their privacy would be safeguarded.

"We took a proactive stance, relative to other firms involved in e-finance," says Larsen. "We realized that corporate self-regulation wasn't working. Online privacy organizations simply weren't doing enough to ensure their corporate members were in compliance with their privacy policies, so we decided we needed to take a real hard line on this issue. We came to the conclusion that we needed a trusted, objective third party to put teeth into our privacy policy and practices by providing counsel and enforcement. Without this kind of enforcement, a privacy policy would be meaningless to consumers."

PricewaterhouseCoopers furnished the independent audit and endorsement that E-LOAN needed to assure consumers that its Web site was operating in a manner that conformed to the highest standards, when it came to privacy. By taking this approach, E-LOAN hoped to distinguish itself as a market leader in this arena and, in so doing, build its brand.

Lawrence Ponemon, senior partner and global leader of Compliance Risk Management at PricewaterhouseCoopers, worked with Larsen on the project. Ponemon says, "E-LOAN wanted to be known as the best in the business for protecting personally identifiable information. Chris wanted to use great privacy risk management as a selling feature, to build customer loyalty."

Meanwhile, other companies were taking a completely opposite approach. They were trying to surreptitiously gather even more information about customers online, via the use of "cookies," the computer codes that secretly track which Web sites Internet users visit, report what they look at, and indicate when they return. Larsen forbade his technicians from using these devices, and informed customers as such on E-LOAN's Web site.

In July of last year, PricewaterhouseCoopers performed its risk management audit of E-LOAN and posted its opinion on the online lender's Web site. "The ability to post an audit opinion online was revolutionary," recalls Ponemon. "Up until that point, it wasn't in the public domain. It was a limited-use report."

The result paid off handsomely in building goodwill among consumer groups. Junkbusters-a leading consumer privacy watchdog group ( www.junkbusters.org ) -has given E-LOAN an award for accountability. Responses have been pouring in from consumers, who tell E-LOAN that, in Larsen's words, "They love our stance on privacy." He adds: "This becomes very much a characteristic of your brand." Long-term, Larsen believes these efforts will translate into positive results for E-LOAN's bottom line. Thus far, E-LOAN has grown into a company with 350 employees and revenue of $22.1 million for 1999.

Larsen has become an outspoken advocate on Capitol Hill regarding this issue, and he has given talks on ethics and privacy issues to members of Congress. "We continue to work with legislators to find a balance between self-regulation and government rulemaking," he says. "Privacy in America is not so much a legal issue as an ethical issue," says Larsen. "If you're building a brand on the Internet, you need to be on the ethical side of this issue."

A Welter of Privacy Issues

Consumers worry about how personal information-especially data gathered by the health and financial services industry-will be used. Could they be denied health insurance, based on information about their past medical history? Will they be hounded by sales calls from marketers who obtain their name and critical financial data? Concerns such as these must be put to rest if consumers are going to have the trust and confidence to do business in the new world of e-commerce.

New regulations and legislation regarding these matters are in the offing. Numerous bills concerning privacy have been proposed, both in the U.S. House of Representatives and in the Senate; meanwhile, Europe has already taken a stance with the 1995 European Directive on Data Protection.

A Cutting-Edge Approach to Privacy Issues

To help corporations meet the challenge of dealing with privacy, PricewaterhouseCoopers has a division called Global Risk Management Solutions. The division has nearly 5,000 professionals worldwide, many of them industry specialists who can identify all the risks involved in this new era of e-business, whether they be strategic, financial, or operational.

In the information economy, there is a wide range of business activities that can spell trouble for companies. These include human resource systems management; employee monitoring; e-mail, Internet and Web use; electronic commerce; consumer transaction processes that collect personal data; direct marketing; data warehousing and data mining; and international data transfers.

PricewaterhouseCoopers has taken a leadership role in the area of privacy issues, and was the first major accounting firm to set up a privacy practice specialty more than three years ago. Says Ponemon: "We set it up, based on the belief that we'd be looking at ethics-related crises on the Internet. The Internet seemed like cowboy-land, without any controls, and we saw the potential for a lot of problems in this area."

At the request of the Federal Trade Commission, PricewaterhouseCoopers wrote the auditing standards for the first industrywide privacy lawsuit settlement in 1998. In that same year, the FTC began requiring companies to have a privacy policy, as well as an ongoing compliance program with training, and an independent audit and verification.

In so doing, federal regulators established tough new standards for privacy that companies must abide by. But to date, "we're seeing a low level of compliance," says Ponemon. "A lot of companies are still in the clouds."

In addition, there are many instances that crop up in which organizations could-even unwittingly-be in violation of the law. For example, if a company simply posts a privacy policy to its Web site, but inadvertently fails to adhere to it, that would be evidence of fraud, under prevailing government regulations. And in the e-finance arena, companies that run afoul of these regulations risk reducing their reputation in their market, warns Ponemon.

Charting the Course Ahead

To help companies navigate these treacherous waters, PricewaterhouseCoopers helps companies identify and manage complex risk issues and find solutions that resolve uncertainty and maximize opportunity. Their services include the following:

Ponemon says that demand for these services is "exploding" among corporate clients. "We've exceeded 200 engagements in the privacy area since the E-LOAN project," he says. Financial services firms are particularly eager clients. "It's a reputation issue right now," Ponemon adds. "All of financial services is a reputation business. This industry only works online if you have a reputation for integrity."

PricewaterhouseCoopers recently did an internal study about the cost of compliance programs for financial services firms and estimates that the average medium-sized firm will spend between $5 million and $12 million within the next year to get ready for privacy requirements.

"It's very expensive to comply," says Ponemon. Companies must adhere to the requirements of the Gramm-Leach-Bliley Act-passed in February 1999 and taking effect in November this year. This new law requires companies to develop a privacy policy and post a public notice about it on all their e-commerce sites as well as at their traditional brick-and-mortar operations. Moreover, corporations have a responsibility not only for their privacy policies but for those of the companies they partner with.

"You need to provide reasonable access to consumers to check what personal information you have on them, online or off," says Ponemon. "It becomes a database nightmare, and creates a new level of security risk."

Failure to Comply Will Be Costly

This is an especially serious issue for large financial services firms such as credit card companies, insurance firms, and retail banks, which might maintain separate databases in different divisions. A company may be in compliance with the new laws in some divisions, but in violation elsewhere. "Because this is a federal law, there could be criminal sanctions," says Ponemon.

Individual states are also looking at this as a violation of their own law, and are likely to figure out fines for violations of fair data handling under the Graham Leach legislation. It's also possible that class action lawsuits could be brought on behalf of large groups of consumers who charge that their privacy has been violated by companies engaging in e-commerce or related areas. Moreover, such lawsuits are complex, time-consuming affairs that can drag on for years. Many class-action litigators have an eye on this field as a potential bonanza.

"There's a cost to each piece of information that has real value," concludes Ponemon. In the world of e-business, corporations must be exquisitely careful in how they use information about consumers, so as not to violate their rights or break the law.

Secure Web Sites

NCR: Providing Computer Hardware and Software for E-finance

Founded in October 1996, NetBank®, is one of the largest FDIC-insured banks operating solely on the Internet and the first to achieve profitability. Already boasting more than 100,000 accounts and $1.5 billion in assets, it serves customers in all 50 states and more than 20 countries. Plus, it's still growing rapidly. Last year accounts increased by more than 300 percent-an extraordinary number for the banking industry.

NetBank relies on state-of-the-art technology to pass along operating cost savings to customers. When it came to building its technological infrastructure-including the complete systems to offer customers anytime, anywhere banking-NetBank turned to NCR for secure, high-availability e-commerce outsourcing. NCR hosts the Internet banking software and provides the network and computer hardware that lets customers of NetBank and other financial institutions dial up and conduct their banking business over the Internet. NCR runs and maintains the software and is responsible for upgrades and custom integration.

"We've worked with a number of other vendors," says D.R. Grimes, vice chairman and CEO of NetBank. "But we outgrew the people we were using. We needed someone big enough to help us grow-and that was NCR. They have a worldwide presence and a significant amount of technology that they've developed themselves and with their partners."

Thanks to the technological backbone and outsourcing services provided by NCR, NetBank's Web site can handle thousands of successful log-ins each day from customers. It can deliver speedy, reliable online transactions, which is crucial to attracting and retaining customers. Plus, the flexibility of the NCR system allows NetBank to offer a variety of new products and services online-such as wireless account access-through other business partners. Through different interfaces, the NCR infrastructure behind NetBank lets customers interact exclusively with the NetBank brand name online, helping the bank build brand loyalty.

"In addition to NetBank, we now help over 100 financial institutions with their Internet banking operations," says Greg Hanson, NCR's vice president and general manager of eCommerce solutions. "Our secure data centers support all types of customers, from the Internet-only banks to the largest financial institutions. Customers benefit from having NCR provide complete operational management for their e-commerce needs." NCR also provides high-level security such as intrusion detection and firewall protection, which guards against hack attempts and other security risks. Uninterrupted power supply, diesel power generators, redundant systems, and other features eliminate single points of failure and are key factors in providing consumer access to their banking information 24 hours a day, 365 days a year.

Later this year, NetBank plans to introduce account aggregation services that will allow customers to manage all of their financial accounts, including ones at other institutions, through the NetBank site. NCR will then help the bank capture valuable customer information in a data warehouse so the bank may identify opportunities to cross-sell other services.

Capturing this data is a vital feature in the era of e-commerce. Companies must understand consumer trends and generate answers to complex marketing questions. Consequently, data warehouses have evolved from passively cataloging batches of data to actively serving as tools for managing customer relationships on a one-to-one level.

NCR's E-Business Teradata Active Warehouse lets companies capture and analyze data collected from thousands of daily online transactions. These robust systems are used by the world's biggest companies, as well as cutting-edge Web-based firms such as Travelocity.com, MatchLogic, and E*TRADE.

In addition, NCR is No.1 in automatic teller machines (ATMs) worldwide. Financial institutions can capture information from all of the consumer touch points and put that data into its data warehouses. By mining information on customer patterns and preferences-and revamping marketing strategies accordingly-companies can turn information into profits.

Changing Financial Landscape

AnnuityNet.com: Making Annuities More Affordable and Available Online

Rosemary Ostmann is a 28-year-old public relations professional who works in New York City. She had maxed out her annual contributions both to her company's 401(k) plan and to her IRA, and was looking for other ways to save for retirement on a tax-deferred basis.

While surfing the Web, she found a solution: an annuity, purchased electronically through AnnuityNet.com the first company to sell annuities entirely online. AnnuityNet enables investors to become completely engaged in their retirement planning process and save on traditionally high commissions and fees. What was once considered a complex, expensive product is now simplified; it's convenient for investors to purchase anytime, anywhere on their computers; and they can do so at a cost comparable to that of mutual funds.

By harnessing the power of e-commerce, AnnuityNet has made annuities attractive to younger purchasers like Ostmann, in contrast to the older clientele who traditionally purchased these products. "I'm very pleased with the performance of the funds I bought within my e-annuity," says Ostmann. "The fund choice was very flexible, as compared to other annuities. I view the annuity as another pillar of my retirement strategy." She added that many of her peers are buying these products, as well.

The annuities offered by AnnuityNet are from established companies in the industry. What's new is the online medium through which they're sold and the resulting affordability. That's what enticed Ostmann.

AnnuityNet offers access to annuity products directly to online consumers through its AnnuityNet.com retail site, as well as through partnerships with other Web sites, such as those of Bank One, OnMoney, Gay Financial Network, and TD Waterhouse.

AnnuityNet was founded in 1997 by Shane A. Chalke, a 20-year veteran of the financial services industry. Chalke, age 42, developed asset/liability management software for the insurance industry while in his twenties. The majority of today's insurance leaders have used the software he invented. He is also a certified actuary, elected to the Board of the Society of Actuaries in 1990, as the youngest board member in its history. "The modern annuity is more related to mutual funds than insurance," says Chalke. "With annuities today, you invest money in a basket of funds. It's not much different from buying mutual funds online." But a variable annuity offers the added advantage of providing an insurance policy wrapped around a set of mutual funds, along with tax-deferred savings. In addition, most offer some type of death benefits to your survivors.

Thanks to vast improvements in technology during the last four years, these transactions can be done in a secure environment online. In fact, the technology exists to make online transactions more secure than those done by credit card or phone. From the consumer standpoint, the hesitation about doing major financial transactions online has lessened enormously.

Headquartered in a remodeled, 200-year-old barn in the center of Leesburg, Virginia, AnnuityNet has a varied clientele. The typical customer tends to be a married individual in his or her early forties, with $100,000 in household income and about $250,000 in total assets-most of which is in a 401(k). Spurred on by its success in the U.S., AnnuityNet now has its eye on international markets-France, South America, and Great Britain among them.

"Our customers typically are high-income, but not asset-wealthy," says Chalke. "They have an upper-middle-class or better lifestyle. They've made the maximum annual contribution that they can to their 401(k)s. And they have a goal of reaching financial independence in their fifties or sixties. Annuities can help them accumulate wealth, while also deferring taxes for 10 or 20 years." These individuals are thinking about financial independence, rather than retirement, and they are using annuities purchased through AnnuityNet.com as a key tool to help them achieve that objective.

Marketing Digital World

Calico Commerce: Creating Innovative Web-based Selling Vehicles for E-finance

GE Capital, a division of General Electric, has been providing financing to small businesses for the past 60 years. With the advent of the Internet, however, the company decided to take this program to a new level. So nine months ago it launched GE Small Business Solutions with the goal of integrating its Web site, sales force, and fulfillment center to better serve the needs of companies with annual revenues of between $1 million and $20 million. "This is designed to be the leading global financial solutions provider to small business," says James Calver, senior vice president of GE Small Business Solutions.

The Web site provides a comprehensive array of financial products and services to small businesses. This includes loans, leases, credit cards, equipment financing, electronic payroll systems, and vehicle fleet services. The division currently has a sales force of 500 in the U.S.; $5 billion of assets under management, primarily in America; and plans to expand to Europe and Japan.

Last year, GE Small Business Solutions chose Calico Commerce Inc a Silicon Valley-based e-commerce company, to build the technological infrastructure for its Web site. "It has been a terrific experience," says Calver. Through its configuration and recommendation application, Calico embedded a financial advisor component into the Web site, which allows customers to type their business needs directly into the system. They are then guided through a four-step process in which they answer a series of eight or nine questions. The financial advisor ultimately guides them to the GE Small Business Solutions product or service that best meets their requirements.

"Using the Calico Advisor, small business customers can take a very complex business problem and quickly narrow their options and get specific product recommendations," says Calver. "The system educates them along the way. Calico helped GE Small Business Solutions build an excellent customer experience on the Web." This has resulted in cost savings, as well as shortened sales cycles for the company. Plus, customer feedback about the new system has been very favorable. For example, one small business owner-seeking a loan-typed in a request on a Tuesday for a sales representative to call him. Just 40 minutes later, the GE salesperson called him back. In contrast, the customer said it would have taken his bank a week to get back to him just to set up an appointment.

"Under the old model," says Calver, "a customer looking for financing might have phoned a salesperson and made an appointment. Then it would take a few visits to get the customer comfortable with the financing arrangement. But with Calico's new system, GE Small Business Solutions customers can browse and get information about products and services online, and are often ready to close the deal once the salesperson calls on them."

Don MacLennan, Calico's global account manager for GE, says, "We have a track record of delivery at GE Capital. In addition, Calico has financial service industry expertise, with clients like Merrill Lynch and CitiGroup."

Using Calico software, companies are able to design sales programs that evolve beyond basic transactions and focus on enhanced interactions with their customers. This enables companies to customize the appearance and function of their Web sites, thereby transforming the way they market goods and services. The software can tailor product selections to match the customers' requests, quote prices for the products, recommend additional or related product offerings, and enhance order accuracy. "Calico provides an agent of change in terms of how companies go to market," says MacLennan.

Management Intellectual Capital

NetDocuments: Changing the Way People Live and Work with Documents on the Web

In the new economy, documents are valuable intellectual property: They should be treated like money, and easily accessible via "ATM document machines" on the Web. Such is the vision behind NetDocuments, a seasoned company based in Orem, Utah, that provides a safe, reliable, and easy means of storing and working with documents on the Web.

"Documents are objects of currency in the new economy. These electronic objects contain intellectual capital," says Ken Duncan, CEO of NetDocuments. "So documents of FORTUNE 500® companies should be treated and serviced with the same care as fiscal capital."

Historically, documents that underpinned economic transactions, such as mortgages, insurance policies, legal agreements, and business documents, were squirreled away in safe-deposit boxes at banks or on somebody's hard drive or local area network (LAN). In the past, banks have learned how to make money from currency stored in bank repositories, but never considered documents as "objects of commerce," says Duncan. But now, in the information economy and with the help of the Web infrastructure, documents, like currency, can generate a stream of revenue, and need to be handled accordingly. Processing documents on the Web should be a revenue-producing service.

The idea for NetDocuments sprang out of a previous technology company founded by Duncan and others at NetDocuments. The predecessor firm, SoftSolutions, was the pioneer in LAN-based document management, which enabled people to share documents on servers in organizations. That firm captured 54 percent of this market and was sold to Novell in 1994.

From that venture, Duncan and his colleagues saw the shortfalls of current document management within organizations. "It was limited to the boundaries of the corporation. People couldn't share documents without e-mail or faxes," he points out. But then along came the Internet, and with it, the opportunity to share documents with everyone. No longer did people have to adhere to the rigidities of traditional document management.

"We service the life span of documents, from their creation to the final printing, publishing, and distribution," says Duncan. NetDocuments provides a secure "virtual file cabinet" on the Web, in which companies can store their documents.

E-mail is not meant for documents, cautions the CEO. Rather, it's simply a tool for "chit-chat and bidirectional messaging," and is very limited. Nor does e-mail provide adequate security, so sending important business documents electronically could be risky and is always confusing-as in the case of managing multiple versions.

Legislative changes are also speeding the way toward widespread usage of electronic documents. The new legislation that Congress recently passed making e-signatures legal promises to catapult electronic commerce to a whole new dimension. It will allow people to perform an array of commercial transactions-such as obtaining a mortgage and buying insurance-right from their computers without ever leaving home or mailing documents off to companies. NetDocuments makes this capability a reality.

Not only will this be convenient, it will also save time. And it is a "green" business that helps the environment by reducing the use of paper, thereby saving trees and potentially decreasing the number of express mail trucks transporting documents on the nation's highways, contends the CEO. "There are immediate cost savings that are incurred just by automating your document processing and eliminating paper," Duncan says. "But long-term, there are dramatic productivity increases that come about from leveraging the technology." On average, when companies put their documents online, it makes processing them four times more efficient.

NetDocuments numbers among its clients large financial institutions as well as real estate and insurance companies who have moved many of their business processes to the Web. There are various levels of pricing, ranging from a modest monthly service fee for the small business user, on up to premium service for huge corporations. Duncan views FORTUNE 500 companies seeking to automate their document-handling process-and link their customers to them via e-commerce transactions-as prime candidates for this service.

Trading Advice

American Express: Launching Online Brokerage

"Online trading shouldn't be an end unto itself," says Barry Murphy, senior vice president of American Express Brokerage. "But it can be a powerful tool in executing a financial plan." To meet clients' varied needs, the American Express Company launched an online brokerage service last November.

Besides allowing clients to trade online, the new service, known as American Express Brokerage www.americanexpress.com/trade, enables clients to get as much advice as they want, whenever they want it. Clients benefit from attractive online pricing, innovative online financial planning tools, and access to American Express' 10,000 financial advisors. You can, for example, type in your own personal financial data on the Web site and get customized answers on such issues as retirement planning or capital gains taxes. Customers also have access to almost 2,000 mutual funds, including well-known fund families.

In addition, clients with an account balance of $100,000 or more in investable assets can do any online equity trading for free. If you have at least $25,000 in assets, online buys are free and sales are just $14.95. Plus, you can get free electronic bill payment, unlimited check writing, and an American Express gold card. With an account balance of less than $25,000, both buying and selling securities online costs $14.95 per trade.

For the do-it-yourselfer, it's possible to do trades without ever talking to a broker. Clients can choose to work with an American Express financial advisor to get whatever level of advice and help they need. Fees are negotiable, based on the level of service.

"We charge where we truly add value-and that's in planning and advice," says Murphy. "That's why we offer securities trading for free. The trade execution part of the equation is becoming a commodity. We're in the advice business. How we deliver advice to you is key. We give customers the choice to get advice from us when, where, and how they want it."

This represents a new and fundamentally different model for the delivery of brokerage services. No longer are brokers paid for generating trades in a customer's account; rather, the new focus is on adding value. To date, American Express Brokerage has attracted a wide array of investors, ranging from those with $2,000 to invest, to people with multimillions. Thus far, Murphy says, most clients tend to want some advice with their investments.

It was the Internet, which has brought about a revolution in the way securities are traded, that made it necessary to develop this new model. American Express says its research found that 90 percent of trades by its high-end clients-those with $100,000 or more to invest-are being done online. They also decided to target American Express cardholders as likely customers for the new service. And they've partnered with Motley Fool, the successful online personal-finance site, to generate interest in American Express Brokerage.

"We've had a tremendous response from the marketplace to American Express Brokerage," says Murphy. "Our combination of low-cost trading and comprehensive advice is obviously appealing to a lot of people. We think there is a huge market out there for what we're offering."

The more assets clients have, the more complex their financial affairs become, of course, and the more they need the skills of top financial advisors. Estate planning, business succession, charitable giving, and tax issues can all be worked out with the expertise of American Express financial advisors. "Pure online tools alone don't get you very far," Murphy says, "when it comes to this level of sophisticated financial analysis."

Expertise Web Testing

Segue Software: Keeping E-business Up and Running

Thomson & Thomson, the world's largest trademark, domain name, and copyright research company, has millions of online records from the United States and nearly 200 other countries. With such a vast amount of valuable online data-and customers logging on to its award-winning SAEGIS e-business site all over the world to do transactions involving this data-the company needed a way to automate the work of its Interactive Media Group so it could thoroughly test its e-business Web applications and make sure they were running smoothly.

After evaluating various products, Thomson & Thomson chose Segue Software for this e-business testing. Segue could handle a variety of Web technologies across multiple platforms; it could be used for a wide range of functions; and it offered ease-of-maintenance and top-notch support by phone and through training and consulting.

"In the end, Segue simply offered the more comprehensive product for e-business testing, and Segue's track record as the industry leader substantiated this," says Brian Chase, quality assurance manager for the Interactive Media Group, which supports, develops, and enhances www.saegis.com.

Before employing Segue's SilkPerformer solution, Thomson & Thomson staff relied heavily on guesswork to troubleshoot pesky computer bottlenecks that would occur from time to time. "Now," says Chase, "we can uncover and quantify bottlenecks with real metrics and measurements. That's given us a big boost in productivity." Chase also found that Segue personnel helped his staff come quickly up to speed on the SilkPerformer products and found the Segue training to be excellent.

Thomson & Thomson also uses SilkPerformer to monitor online business transactions as well as other online activities, including training and marketing seminars. SilkPerformer enables the Interactive Media Group to simulate these activities, ensuring that the system will perform properly in a live environment. In so doing, Thomson & Thomson has been able to verify that the system can handle all transactions, minimizing the risk of failing with actual customers. "We can solve a lot of issues with our realistic simulation solutions," says Steve Butler, CEO of Segue. "The more accurate the simulation, the more you can trust the results."

Butler says a lot of e-commerce sites have not been developed properly to handle the growing volume of Internet traffic, so online reliability looms as a major concern. Another issue involves "uptime." Continuous usage of software can cause sites to degrade in quality and performance to suffer. "All software has 'memory leakage' factors that degrade," he explains. "Unless you take it down and do 'uptime tests,' your database performance will begin to suffer. It can eventually freeze up or fail, or have unacceptably slow response time." Thus, regular testing and maintenance must be done to ensure that the software is performing to its fullest capability.

Transaction verification is one more crucial area in e-commerce. Many disparate components are required to perform transactions on a Web site. "The typical financial site today has more than 100 different applications," says Butler. "How they integrate with new things must be thoroughly tested. If your existing legacy computer system gets out of sync with your new stuff, you may grab the wrong value and put it into someone's portfolio." For a truly successful e-commerce site, there needs to be a network, software components, and integration with the existing computer system.

"Automating with Segue products has improved our quality assurance process," says Chase. "Their products greatly reduce the cost of bad releases or bad software-both of which carry a high monetary cost to the company, and an even higher negative perception in the eyes of your users. Segue is the best in the marketplace for Web testing."

Technical Virtuosity

Silverline Technologies: Building Software Solutions for Global Business

First Data Merchant Services, a subsidiary of First Data Corp. (NYSE: FDC), is the leading credit card processing company in America, handling $328 billion in U.S. Visa and MasterCard payments last year. The company also leads in processing online transactions for e-commerce. The dollar volume of these transactions is immense. During last year's holiday season alone, First Data settled over a billion dollars a day of online transactions.

The company needed a technology provider that would help it manage this huge and complex stream of online transactions. So they did due diligence on over three offshore companies over a period of four to six months, and ultimately settled on Silverline Technologies, Inc. (NYSE: SLT), headquartered in Bombay, India, with U.S. headquarters in Piscataway, New Jersey and offices in Hong Kong, the U.K., and key U.S. cities.

Why Silverline? It boiled down to several key factors, according to a First Data Merchant Services executive. For one thing, Silverline conforms to the very highest technical standards, maintains an ISO 9001 certificate, and has a top rating (SEI CMM Level 4) from an industry group called the Software Engineers Institute ( www.sei.cmu.edu ).

Secondly, First Data Merchant Services was impressed by the way Silverline recruited and made available their people and the high caliber of the staff. "They were able to get people to the U.S. or offshore for us," says the executive. Silverline has more than 1,200 technical people located throughout the world-of which 400 are in the U.S.-and has a total global staff of about 1,400. The firm has global development centers that match experts in their field with the needs of specific projects.

Then there was the attractive pricing. Using an offshore software developer proved to be about 50 percent cheaper than using a U.S.-based firm because of the difference in labor costs. Thus, not only was the work very high quality, it was also half as expensive as a similar American-based effort.

First Data Merchant Services also wanted to outsource maintenance and application development instead of running it in-house, so it chose Silverline because the firm is a leading international provider of IT solutions. Silverline specializes in customer relationship management (CRM), legacy conversion, application maintenance outsourcing, and complex e-commerce projects. Thus, First Data Merchant Services was not faced with major staffing needs on the project, and could focus on its core business. The company simply needed to have a project manager and one or two other professionals to communicate with Silverline.

First Data Merchant Services began working with Silverline in 1998, when Silverline helped prepare the credit card processing firm to deal with the Y2K situation. Silverline did an independent audit of 7 million lines of computer code on First Data Merchant Services' mainframe computer system, then made changes to the code to make it Y2K-compliant.

First Data Merchant Services was exceptionally pleased with the results, and has since used Silverline for many other projects, as well as recommending them to other companies. "We've outsourced systems to them on a number of occasions," says a First Data executive. "They provide full end-to-end development efforts on our projects. I let them bid on our projects, and out of three bidders, Silverline ends up winning a fair share of transactions."

Silverline has been "very, very responsive," says the executive, recalling one situation in which they had to get 90 programmers in a month to update a computer system in just 30 days. "It was a big job, and Silverline came through with flying colors. Silverline is very customer-oriented," he says. "Ninety-nine percent of my problem is that I need resources to accomplish a job-and they get you the people."

Global Powerhouse

First Call: Facilitating the Worldwide Flow of Financial Information

First Call Corp keeps key financial information flowing all around the world. Each day, 700 brokers and 40,000 institutional money managers use First Call's Web portal to gain access to essential financial information, including equity research, earnings estimates, ownership data, insider trading activity, and bond reports. First Call's Web-based solutions enable financial services firms to spur sales, forge closer ties with customers, and increase their investment returns.

First Call-part of the $6 billion Thomson Corporation-is the global financial community's leading Internet provider of real-time financial information. More than 6 million documents from over 700 brokerage firms worldwide are now available online at www.firstcall.com FIRST CALL Interactive clients have integrated access to content from Thomson Financial companies, their own internal information, and select content from the Web via their intranet, extranet, or password-protected sites on the Internet. The display of this data can be customized for each individual user.

"Everybody wants more customization of their computer interface and data segmentation," says Brent Delehey, president and CEO of First Call. "At the lower end of the Web portal, people want to set their own news alerts. At the higher end, they want complete customization and integration." First Call enables them to achieve this, on an outsourced basis. "There's a very large opportunity in the high end of this marketplace," continues Delehey, "and we are in an excellent position to serve them."

CIBC World Markets in Toronto-a leader in Canada's financial services industry-recently chose to use First Call's customized intranet offering. "FIRST CALL Interactive developed our customized solution in a very timely and cost-effective manner," says Faye Falcao, business analyst at Wood Gundy Private Client Investments, a division of CIBC World Markets. "They worked closely with us to ensure that their offering addressed all of our needs. We are very pleased with the results."

Web Directory

American Express
www.americanexpress.com/trade

AnnuityNet.com
www.annuitynet.com

Calico Commerce
www.calico.com

First Call
www.firstcall.com

NCR
www.ncr.com

NetDocuments
www.netdocuments.com

PricewaterhouseCoopers
ebusinessisbusiness.com

Segue Software
www.segue.com

Silverline Technologies
www.silverline.com

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