The Role of the Internetin Finance Jinita Thakkar Brian Rockey Marko Hlibchuk Hasan Barodawala Jan Boeggering Marc Meissner Christine Burleson Guisela Gutierrez
The Power of Information in Finance • Finance and investing revolve around the retention and dissemination of information • Having information and not having information about market fluctuations and conditions is the determining factor between the winners and losers in the market. • The Internet allows investors to obtain, free of charge, information that would otherwise cost thousands of dollars. The Role of Internet In Finance and Investing, Tyrone Smith
Equity Research on the Internet • Internet allows any individual to gather information about security prices, company earnings, financial ratios, economic statistics, and general market information. • The availability of information allows individuals to make better decisions on what securities to purchase and sell. The Role of The Internet In Finance and Investing, Tyrone Smith
The Impact of the Internet • Has balanced the level between institutional and individual investors. • Has reduced the chances of individuals being cheated by brokers. • Has allows individuals to receive competitive commission fees and up-to-date and accurate information. The Role of The Internet In Finance and Investing, Tyrone Smith
Limitations of the Internet • Due to their size and financial resources, institutional investors will always have an advantage. • Institutional investors still: • have exclusive access to hot IPO’s • can execute transactions at lower prices due to large transaction sizes and off-exchange trades. • Have capacity to monitor several markets continually due to staff who can rapidly take advantage of market changes. The Role of The Internet In Finance and Investing, Tyrone Smith
Limitations of the Internet cont’d... • Their speed and timing give institutional investors a great advantage. • The need for financial advice from institutions will still exist. • Institutions can benefit from short-term trading while individuals will be harmed by it due to their lack of speed, timing, and resources. The Role of the Internet in Finance and Investing, Tyrone Smith
The Role of the Internet inEquity Research • Internet allows people to research companies before they invest online • Yahoo Finance: finance.yahoo.com • Ticker symbol for company • Symbol Lookup • Research: PEG, buy rating, covering brokers • Graphs: time ranges, Vs. S&P 500 Index • Profile: business summary, beta, market capitalization, financial ratios
The Role of the Internet inEquity Research • The Motley Fool: www.fool.com • Ticker Symbol or company name • has more qualitative information than yahoo • news articles and features • also has quantitative information
The Role of the Internet inEquity Research • The Wall Street Journal: www.wsj.com • Ticker symbol for company • Symbol Lookup • Financial Overview includes earnings charts • Company News: market reacts to good/bad news • SEC Filings
Changing from traditional to on-line investing • Traditional methods of investing are beginning to become outdated. • With on-line investing, one no longer has to look for stock quotes in the newspaper. • By going to sites such as yahoo finance, one can receive stock quotes simply by typing in the stock symbol. • www.yahoo.com
Methods of Investments • Many investors are utilizing the on-line capabilities of their current investment company such as schwab.com • Others are trading independently through sites such as e-trade or ameritrade. • Both provide means to get stock quotes, and to research a stock before making any investments. • With a private on-line investor, many times there are financial advisors monitoring transactions. This can help prevent foolish investments. • Independent investing sites charge a comparatively low rate per trade, but do not provide financial advisors.
The Success of On-line Investing • Fidelity Investments • In 1997, 7% of their clients were trading on-line. • By August of 1999, that number jumped to 79%. • So why are so many people turning to on-line investing? Computer Dealer News - Mitchell Brown
The Success of On-line Investingcont'd... • A new study by Deloitte Consulting LLC, found that the ROI (Return on Investment) reported by more than 200 survey respondents will average 300% over the first 2 to 3 years, based on an average project cost of $2 million to $4 million and annual savings of nearly 9% over the first 2 years. • The study also stated that of the companies that are extensively using e-procurements solutions, the vast majority, 85% reported that they were highly satisfied with the resulting benefits. Computer Dealer News - Mitchell Brown
Educating the Investor • The Internet has created an on-line trading revolution, offering investors the freedom to manage their own money and make their own investment decisions with greater autonomy and speed. • This new freedom has brought the need for increased investor education. • NASD has ongoing efforts to keep investors educated about all aspects of investing. They are doing so through electronic trading web pages. PR Newswire Association, Inc.
Educating the Investor cont'd... • These new web pages answer many basic questions about electronic trading, and they also provide information on other investment-related topics. • www.nasdr.com • Companies such as Ameritrade, Charles Schwab, Merrill Lynch, Morgan Stanley Dean Witter, and many others are looking to link their on-line trading web sites to the new NASD Regulations web pages in order to educate their own investors. PR Newswire Association, Inc.
The Bad Side of On-line Investing • You must be very careful who you get your information from. • A case in New Haven, Conn. stated that by posting a few tips on the Internet, a pair of brokers sold thousands of dollars in stocks to a great deal of unsuspecting investors. Tribune Business News - Joe Coombs
The Bad Side of On-line Investing cont'd... • They went by the name E.C. Capital. One member claimed to be a 34 year-old doctor from Boston, but he was really a 21 year-old living with his parents in Queens, New York. • They were eventually caught and fined $100,000 each, and they were both barred from selling stocks in Connecticut for a seven year period. Tribune Business News - Joe Coombs
How the Internet has changed, is changing, and will change the banking sector The Past (1996) “One theme coming through forcefully is that online banking is in for considerable additional growth.” • Kerr and Burnham of Booz Allen reckon that more than • 16 million U.S. households will be using online banking • by the year 2000. • Feldman of AT&T believes the online banking market may • climb to 25 million households by then. • Winkler of First Union predicts that fewer than 30 out of • every 100 consumers will go into a branch to conduct • business. Source: Bank Management, v72n4, Jul/Aug 1996, pages 34-35
How the Internet has changed, is changing, and will change the banking sector The Present “One step forward, two steps back” • In the 12 months ended in July 1999, 2.2 million new online banking • customers were gained but 2.1 million were lost.¹ • (Online banking customers: 6.3 million) • The expansion rate in the number of internet enabled U.S. households • that try online banking stands to drop to 12% in 2000, down from • 22% in 1998. • Today, out of 24,000 banks nationwide that handle retail deposits, • only 5% have Web sites with significant transaction capabilities. ¹ This survey was conducted by Cyber Dialogue, the first survey to measure defection of online banking customers industry wide. Source: US Banker, v109n10, Oct 1999, page24
How the Internet has changed, is changing, and will change the banking sector The Future --- Some Trends New Entrants Strategic Alliances Marketing Strategy Claritybank.com has only one physical location what used to be the First National Bank of Uvalde, Texas. Cost advantages eBay Inc.with enba plc eBay is interested merely in arrangements that might make it easier or cheaper for consumers to trade goods on web sites. Abington Savings Bank is going to become an Internet service provider (ISP) to solve 2 problems for banks: 1. Visibility and 2. Costs Source: Computerworld, v34n14, April 3, 2000, page 12 Source: USBanker, v110n3, March 2000, page26 Source: Bank Systems & Technology, v37n5, May 2000, page B6
Reasons for lack of success of banks on the Internet • Security concerns • High expectations that weren’t met • Privacy issues (What is done with my sensible financial data?) • World Wide Wait > slow loading times • Disappointment in services available online Vs. in brick and mortar • The different between online banks lies in service, while 85% of • online traders said they are happy with the service they get, the • people who gave up banking online did so because of complicated • service and poor customer support. • Too complicated processes • Fees too high Source: O’ Brien, Jeanne: Study: E-banking user base slipping, Bank Systems & technology, v37 n5, May 2000 Source: Credit Union Magazine, v66n2, Feb 2000, page 20 Source: Williams, Kathy: Are you ready for Internet Banking, Strategic Finance, v81 n10, Apr 2000, p. 23
Security Issues • Choose FDIC-insured Internet Bank to get your money • back, in the case of the bank’s bankruptcy. • Example of CompuBank. The security features include: • Several layers of technology to ensure confidentiality • of transactions • Highest level of bit encryption • Use of Secure Socket Layer (SSL) protocol of browser • Data-encoding method for secure transfer of • information • Automated log-off against unauthorized use of system • E-mail alerts for unusual events • Password protection Source: Lack, Jonathan: Banking goes virtual, Strategic Finance, v81 n10, Apr. 2000
Checklist for choosing a good online bank • A poorly designed or poorly executed Internet strategy can be a recipe • for destroying value by accelerating customer attrition. • Therefore the design and features of a good website are extremely critical • In June 1999, Cyber Dialogue, in conjunction with Booz-Allen Hamilton,released a report identifying the key features financial websites must have to attract customers. • Ability to view account information. • Ability to do research. • E mail and phone help services, especially during peak times. • Online bill payment. Source: Barfield, Richard: Don’t believe the hype, Banker, v150 n890, Apr. 2000, p.100-101
Example of successful bank • The finance and insurance industry performed worse than might • have been suspected in the London School of Economics 2000 • World Wide Web 100 Survey • Deutsche Bank’s website wins first prize in LSE2000 World • Wide Web 100 Survey (sponsored by Novell) but is only 7th on • overall list • http://www.deutsche-bank.com (Group Homepage) • http://www.comdirect.de (Commerzbank Group, market leader) • The retail arm of Deutsche Bank Group is an example of • cooperation between old economy (DB) and new economy • (Yahoo!) at http://www.deutschebank24.de Source: http://www.deutsche-bank.com Source: http://www.novell.com
Benefits for the Bank going online • Huge cost savings potential: it costs $1.10 for a teller to cash a check, • the electronic costs are dramatically less • Retain customers and market a broader package of products and • services • Build an online relationship through personalized and customized • interactions that engage customersIn order to attract customers, the online banking site has to offer content and service beyond company information and transactions • Example of Central Carolina Bank that offers doctors an online portal • where they can catch up on the latest medical information and • conferences. Source: Robinson, Teri: Internet Banking: Still not a perfect marriage, InformationWeek, n782, Apr, 2000
When the time came to embrace computer technology, the real estate industry very hesitant. • Now it is hurdling through cyberspace at light speed as it attempts to catch up. Mines, Cynthia. (2000 Mar. 15). No Longer in the dark ages. National Real Estate Investor, pp. 69-73.
In 1996, there were about 50 web sites where you could apply online for a residential home mortgage. Today there are an estimated 3,000 sites. MacDonald, Robert. (2000, Jan.) E-commerce reshaping commercial RE industry. National RealEstate Investor, pp. 96.
A growing number of Web sites are offering listings of homes for sale online. • Lenders and site developers are eyeing these high-traffic sites as potential ventures to pull in online mortgage business. • It’s part of the new thinking of online entrepreneurs who are staking out territory in residential real estate cyberspace. Bergsman, Steve. (2000 Mar). House Hunting Online. Mortgage Banking, pp.16-22.
Before the internet, the only option for large companies or ones with multiple office locations was a client server, which cost too much for a small owner or developer. • Within the past year, the real-estate industry finally began using the Internet to transact business, instead of simply using it for research or as an e-mail tool. Mines, Cynthia. (2000 Mar. 15). No Longer in the dark ages. National Real Estate Investor, pp. 69-73.
Real-estate web sites allow potential sellers to post a property online under the assumption that the more people who see it, the better the chance to get the best price. Frabotta, David. (2000, Jan 10). Technology finds a role in real-estate transactions. Hotel & MotelManagement, p. 40, 88.
Leading real-estate firms are now using Internet technologies to bring clients into the mix so they can: 1. Take virtual online tours of property they previously would never have known about. 2. Secure preliminary financing for loans within hours. 3. Speed the numerous and complicated steps of buying a property. 4. Check the status of their pending deals. 5. Communicate changes in their investment strategies that are instantly relayed to agents scouting for properties Mullich, Joe. (2000, Mar. 13). Commercial Realtors Look For An Internet Jump Start. Internetweek. P. 21-24.
Advantages • Web-sites enable potential buyers to search the market and take a virtual tour of the property. • The web allows a potential buyer to search for a property that fit their profile as far as location, price range, size, etc. • MonsterData.com • the nine-year-old firm licenses, reformats, integrates, and enhances national demographic lifestyle characteristics, culture, crime, and school data for clients. Frabotta, David. (2000, Jan 10). Technology finds a role in real-estate transactions. Hotel & MotelManagement, p. 40, 88. Bergsman, Steve. (2000 Mar). House Hunting Online. Mortgage Banking, pp.16-22.
Closing the Deal • Still, some believe that because it takes a technology-savvy broker for buyer and seller to get the most out of a deal, it will be some time before digital techniques completely take the place of traditional transactions, especially closings. Frabotta, David. (2000, Jan 10). Technology finds a role in real-estate transactions. Hotel & MotelManagement, p. 40, 88.
Closing the Deal cont’d... • Most analysts agree that closing the deal requires in-person contact. • People need to hear the other person’s tone of voice and there are things that people would like to explain about their logic in pricing. • It has to be done person-to-person, electronic media actually causes distortions. Frabotta, David. (2000, Jan 10). Technology finds a role in real-estate transactions. Hotel & MotelManagement, p. 40, 88.
Dot-com listings might not be the best trading post for some owners. Especially those that depend on pre-qualified buyers or whose owners want a quiet transaction. Frabotta, David. (2000, Jan 10). Technology finds a role in real-estate transactions. Hotel & MotelManagement, p. 40, 88.
Some Examples: • Homespace.com • CyberHomes.com • HomeServices.com • HomeSeekers.com • LoopNet.com • PropertyFirst.com • 2mkt.com
On-Line Real Estate Sites: WWW.HOMESTORE.COM WWW.ZIPREALTY.COM WWW.EHOME.COM
Homestore.com Has A Family Of Sites: REALTOR.COM- 1.3 MILLION HOME LISTINGS OVER 600 REGIONS IN U.S AND CANADA HOMEBUILDER.COM-THE WEB’S LEADING PROVIDER OF INFORMATION ON NEWLY BUILT HOMES (OVER 125,000 IN U.S) SPRINGSTREET.COM- OVER 6 MILLION APT. UNITS IN 6,000 CITIES NATIONWIDE
Benefits VIRTUAL TOURS -GIVES A PANORAMIC VIEW OF HOME DURING INTERNET VISIT -CAN SEE OUTSIDE AND SURROUNDING AREAS SAVES TIME -HELPS ELIMINATE HOMES THAT DON’T FIT THEIR NEEDS RESEARCH NEIGHBORHOODS, SCHOOLS, AND LOCAL REAL ESTATE PRICES HELPS BROKERS PUT TOGETHER MARKETING STUDIES Akron Beacon Journal, 5/13/00
Criticisms ANTI-COMPETITIVE CONDUCT INVOLVING ONLINE REALITY LISTINGS -HOMES ARE LIMITED TO ONLY 1 WEBSITE -HOMESTORE.COM HAS SECURED 95% OF NATIONS HOME LISTINGS(1.3 MILLION) The Daily Oklahoman, 4/27/00
Homestore’s Defense: “BUYERS BENEFIT BY HAVING 1 FREE SOURCE FOR THE HOME LISTINGS THAT WERE PREVIOUSLY RESTRICTED TO LOCAL” THE DAILY OKLAHOMAN, 4/27/2000
Additional Offers To Online Real Estate Brokerage: ON-LINE CHATS SEARCH FUNCTIONS EDITORIAL MARKETPLACE FOR RELATED PRODUCTS AND SERVICES TOOLS(CHECKLISTS AND CALCULATORS)
Online Tools: CALCULATE MY PROFIT: ENTER INPUT OF ESTIMATED HOME PRICE, AND GIVES OUTPUT OF CLOSING COSTS, COMMISIONS, ETC. HOW MUCH IS MY HOUSE WORTH? “HOME VALUE CALCULATOR” GIVES AN APPROXIMATE VALUE OF YOUR HOME -SELECT YOUR AREA (CITY, STATE, ZIP CODE) -DESCRIBE YOUR HOUSE(#OF BEDROOMS, BATH, ETC) HTTP://WWW.ZIPREALTY.COM
Costs to Buyer: NOTHING. YOU ACTUALLY GET A BONUS BY EITHER REDUCED CLOSING COSTS OR IN THE FORM OF A CHECK Coststo Seller: COMMISSION ON SELLING PRICE. COMMISSION IS COMPETITIVE WITH EXISTING MARKET RATE HTTP://WWW.HOMESTORE.COM
FAQ's Who are on-line agents? Each customer that registers to buy/sell a house is served by an online real estate agent who is responsible for entire transaction How is confidentiality of personal information protected? Using state of the art technology to protect personal data. (Privacy disclosure)
FAQ’S cont’d... Are online services offered for all phases of buying/selling a home? Yes-provided with r.e brokerage from beginning to end How often do are databases updated? On a daily basis How are you able to give bonuses to buyers? Because of the efficiency of the Internet, we are able to share the commission with our buyer HTTP://WWW.ZIPREALTY.COM
The End Any Questions or Comments???