Future Success Factors of Finance Portals

Diplomarbeit von Axel Täubert

Abstract:

The title of this thesis might lead the cursory reader to the assumption that this is another one of countless academic works whose authors have overestimated the prospects of the Internet. However, this paper lays claim to be one of the early few that take a more rational approach to the subject by analyzing the realistic profit potential of online business models. Furthermore, future success factors for finance portals will be discussed and their respective value proposition thoroughly examined. Since the fast moving Internet hype has had to give way to an almost equally swift consolidation of the market, this will prove to be crucial information for any company of the finance industry. Additionally, when taking into account that the oncoming ‘second wave of customers’ is to be divided amongst the remaining online players, the findings of this thesis will be of eminent relevance for any provider of a financial website.

Towards the end of my internship with AOL I was asked to research the required success factors for finance portals as a basis for AOL’s finance channel content strategy. Inexperienced Internet-users such as those of the Second Wave are likely to utilize the user-friendly and convenient service of AOL as an ISP. Therefore, it will be of vital importance for AOL to incorporate the above mentioned success factors within their service in order to increase the usage of its finance channel.

At this point I would like to thank AOL, not only for the financial, but especially for the professional support, which both have simplified my task to a substantial degree as well as all others who have been kind enough to let me benefit from their knowledge in the field.

Table of Contents:

1.	Incipience	1
1.1	Topic Introduction	1
1.2	The Second Wave of Customers	3
1.3	Methodology and Scope	4
2.	Definitions and Background Information	6
2.1	Definition of Finance Portals	6
2.2	Types of Finance Portals	6
2.2.1	Content Portals	7
2.2.2	Corporate Portals of Banks and Insurance Companies	7
2.2.3	Neutral Brokers and Intermediaries	8
2.3	Providers of Finance Portals	8
2.3.1	Providers from the Banking Sector	9
2.3.2	Providers from the Insurance Sector	9
2.3.3	Providers from the Near-Bank Sector	10
2.3.4	Providers from the Non-Bank Sector	10
2.4	Usage of Finance Portals	11
2.4.1	Technical Prerequisites	11
2.4.2	General User Information	11
2.4.3	Usage based upon Demographic Factors	12
2.4.4	Usage based upon Consumption Behavior and other Characteristics	14
3.	Analysis	17
3.1	Selected Market Characteristics	17
3.1.1	Online Finance Value Chain	17
3.1.2	Competitive Situation in Online Finance	18
3.1.3	Customers' Perception of Services	20
3.2	Service Areas of Finance Portals	22
3.2.1	Information and Content	22
3.2.2	Brokerage	24
3.2.3	Funds	26
3.2.4	Direct Banking	27
3.2.5	Insurances	29
3.2.6	Real Estate	32
3.3	Basic Prerequisites for successful Finance Portals	33
3.3.1	Branding	34
3.3.2	Content	34
3.3.3	Member Base and Traffic	36
4.	Future Success Factors	37
4.1	Advanced Prompt Facilities	38
4.1.1	Contextual Guidance	38
4.1.2	Intelligent Transaction	40
4.1.3	Pre-emptive Support	41
4.1.4	Implications for Finance Portals	41
4.2	Personalization	42
4.2.1	Types of Personalization	42
4.2.2	Sources for Customer Information	42
4.2.3	Customers' Demand and Privacy Issues	43
4.2.4	Implication for Finance Portals	44
4.3	Peers' Advice	44
4.3.1	Acceptance and Penetration of Peers' Advice	45
4.3.2	Types of Peers' Advice	46
4.3.3	Implications for Finance Portals	47
4.4	Mobile Services	47
4.4.1	Consumers and Mobile Services	48
4.4.2	Underlying Business Models	49
4.4.3	Barriers to Mobile Services	50
4.4.4	Implications for Finance Portals	51
4.5	Electronic Bill Payment and Presentment	51
4.5.1	Market Potential and Penetration	51
4.5.2	Delivery Models	53
4.5.3	Revenue Streams and Potentials	53
4.5.4	Implications for Finance Portals	54
4.6	Channel and Product Integration	54
4.6.1	Channel Integration	55
4.6.2	Product Integration	56
4.6.3	Implications for Finance Portals	57
4.7	New Marketing Ideas	58
4.7.1	Affinity Marketing	58
4.7.2	Affiliate Marketing	59
4.7.3	Performance based Deals	60
4.7.4	Implications for Finance Portals	61
4.8	Account Aggregation	61
4.8.1	Technology and Legal Issues	62
4.8.2	Current Market and Forecasts	62
4.8.3	Business Models and Returns on Investment	63
4.8.4	Requirements for Success in Account Aggregation	65
4.8.5	Implications for Finance Portals	65
5.	Profitable Business Models	66
5.1	Fundamentals of Internet Business Models	66
5.2	Pure-Play Portals	68
5.2.1	Revenue Potentials	68
5.2.2	Incurred Costs	69
5.2.3	Implications for Finance Portals	69
5.3	Multi-Channel Providers	70
5.3.1	Different Approaches and their Reasoning	70
5.3.2	Potentials and Incurred Costs	72
5.3.3	Implications for Finance Portals	73
5.4	Coopetition	74
5.4.1	Structure of Coopetition Partnerships	75
5.4.2	Potential of Coopetition for Finance Portals	76
5.4.3	Implications for Finance Portals	77
6.	Conclusion	79