"The Impact of E-Commerce on Financial Services"

Malta is making important steps in catching up with the rest of Europe and the United States in the areas of IT development and e-commerce - the launch of the E-Malta and E-Government initiatives are steps in the right direction. A recent initiative by MSFC on e-Money is a clear sign that we fully understand the importance of this phenomenon in the way we live and conduct business.

New technology is already having a profound impact on the financial services industry both internationally and locally. It is revolutionising the operation of, and access to, wholesale and retail markets; it is transforming local and cross border service provision; and it is acting as a catalyst for the creation of new financial services and new business models, often triggering new alliances involving telecommunications, information technology, retail and financial services providers.

In the last few years consumers in the United States and continental Europe have had the experience of having access to their bank account 24 hours seven days a week though automatic teller machines and in the comfort of their home through telephone, internet and television banking. In the case of Malta, customers have access to their bank account either the ATM’s or through telephone banking or PC banking. Nowadays both these services are gradually giving way to other forms of delivery channels from a technology point of view. In order to give the best to our customers the local banking sector has embarked on massive investments in the development of Internet banking products and services.

Wearing my other cap as chairman of BOV Group, I would like to announce that last April we signed an agreement with BROKAT, a German company internationally renowned for the development of e-commerce software, to develop for us multi-channel delivery software. We shall start off with an upgrading of our telebanking services but then move into internet banking and the setting up of a sophisticated call centre. We strongly believe that we need to be part of what is happening on the e-commerce front. This is a big investment, and like most investments one cannot easily measure the type of return one can get in the short-term. Yet, it is an investment that must be made at the right time. It is a fact that most young people spend up to two hours on the Internet every day and this means that having an internet banking facility will provide a practical, virtual delivery channel to this emerging market segment. This is a sphere specifically targeting the young people’s market and business. It seems that the best option is that of plugging in an internet portal into the traditional brick and mortar model.

By using the Internet as the main delivery channel a number of e banks are offering more competitive rates than the traditional banks because they do not have the large capital cost of running branches traditional banks have. Some of the main advantages of Internet Banking are for both the consumer and the bank are:

1. Lower transaction costs;
2. It is very convenient and customer friendly;
3. Twenty Four hour access from any where in the world;
4. Targeting international customers;

The Internet has brought about a revolution in the way business is done locally and internationally. Malta is taking part in this new experience of doing business. The environment needs to be supported by the necessary legal infrastructure. The works done on the e commerce bill specifically Computer Misuse, Data Protection and Electronic Signature is a step in the right direction. A very interesting document and eye opener in this respect is the European Union’s "Action Plan to establish a real Integrated European Market in Financial Services by 2005". This action plan covers three key policy issues being:

Policy Area I: to adapt present rules and regulations, notably to bring about convergence in consumer and investor protection rules for both contractual and non-contractual obligations;

Policy Area II: to develop measures to provide secure payments systems and out-of-court redress on a cross-border basis;

Policy Area III: to achieve enhanced supervisory cooperation that can meet the new cross-border challenges.

As a local financial services sector operator I believe that we need to give particular attention to the EU initiatives being taken so that we will face the challenges ahead with confidence and success.

Mr. Joseph FX Zahra, is Chairman of Financial Services Section, Malta

Chamber of Commerce and Chairman of the Bank of Valletta