Diffusion of Electronic Banking Solutions for Financial Inclusion

A major pain point of the banking industry is the challenge of how to penetrate the Bottom of the Pyramid (BoP), a concept which was popularized by Prahlad [3]. This indeed is a sizeable market, consisting of 2.5 billion people who live on less than US$2.50 per day. Technology is being heralded as a major enabler for the diffusion of banking solutions in this segment, and the same is being brought about by different types of electronic payment systems.

It is interesting to note how in emerging economies, diffusion of these technologies are creating benefits for this segment [4]. No wonder technology vendors and service providers are rallying to get a big pie of this cake and research in this topic has increased significantly [1,2]. However, the risks of fraud and perceived usefulness of these technology are slowing down the diffusion of the same in these economies. Another major barrier is internet penetration, which is significantly low, in developing economies, especially in the rural segments.

However, the development of banking solutions which can be used through Mobile based technologies, can significantly eradicate these problems. The adoption and penetration of mobile phones is significantly larger than internet based technologies. Hence technology giants like IBM and Microsoft are investigating significantly on research, so that mobile payment solutions can be made available to this segment. Some of the major technological advancements which are attempting to address this gap are speech technologies like the spoken web. It would indeed be interesting to see how such technologies can bring about inclusive development in the banking and financial services industry. Indeed the adoption of these technologies can bring about financial inclusion for the general masses by enabling banking solutions for this segment.

References

1. Kar, A. (2009). eBusiness Enablement: Implications for Business Strategy. Available at SSRN 1432433.
2. Kar, A. (2009). The Past, Present and Future of Information Systems Research. Available at SSRN 1366962
3. Prahalad, C. K., & Hart, S. L. (2002). The Fortune at the Bottom of the Pyramid. Strategy and Business, 54-54.
4. Simpson, J. (2002). The impact of the Internet in banking: observations and evidence from developed and emerging markets. Telematics and Informatics, 19(4), 315-330.

How Technology will change Small & Medium sized Business

And here come 2012. The era of computing has seen some dramatic improvements in 2011. But what is interesting is the evolving focus of technology majors from large enterprises to small and medium sized businesses. So what could be the major movers and shakers for the next two years as we gear ourselves to ride this wave of technological evolution, more in terms of focus and perspective?

1. Small and Medium Enterprises (Popularly called SMEs) will ride the wave on e-business offerings. The time has come when even the smallest service provider will leverage m-commerce to advertise his service range for the customer in serviceable range, with the growing popularity of location based services. Everyone with a mobile is potentially reachable through this technology, which is fast increasing in popularity. The fact that Forrester Research predicts m-commerce will grow at a compound annual growth rate of 39% through 2016, and that tablet adoption will grow at a compound annual growth rate of 56% per year through 2015, indicates Location Based Services have a really bright future.
2. With the increased popularity of SaaS models in Information Technology offerings, small business can today harness the power of costly powerful technological resources, shared by multiple users, without shelving off millions of dollars. I foresee more and more focus of offerings in the domain of Business Intelligence, which are in a cloud model, for SMEs from the technology service providers. With the resources moved to a cloud, it would be possible to harness the power of ever improving processing capabilities to the available data and then leverage the information and knowledge and gain competitive advantage. The offerings of Business Intelligence on the cloud, should be of the greatest boon to the SMEs and should have a great rate of technology adoption.
3. With the increasing access and penetration of the internet, the years to come may witness a growing proliferation of web based start-up ventures, which may operate purely on a click first e-business model. There may be a splurge of knowledge disseminating service providers or web-based internet marketers leveraging the power of affiliate marketing. However, it would remain to be seen whether this time the wave survives longer than the last wave which crumbled during the dotcom burst of the late 1990s. These pure-click e-business models may be further boosted by the integration of such business with the social networking sites like Facebook and Twitter, the likes of which have seen a faster adoption amongst the consumers than any other technology.
4. With a greater focus on web-based offerings, very soon SMEs will start harnessing the power of open source resources and applications, in the regular operations and transactions. Job monitoring, scheduling, live meeting and communications in general will start being more accessible to the SMEs without deep pockets. This may see a fast growth amongst businesses who are able to assimilate the benefits of the increasingly accessible technological offerings.
5. Last, but not the least, technology may again be leveraged in providing social services. With the increasing focus on social marketing, and the issues centered on triple bottom line, sustainable governance structures may evolve amongst the SMEs which would be heavily leverage on the power of technological advances in general, and e-Business models in particular.

In short the next few years promises to deliver a lot to us. But to what extent the technology evolution and revolution will witness an adoption and assimilation in the SMEs will be interesting to monitor. What do you feel about this era of technological evolution and its impact on SMEs? Write to us.

e-Commerce and e-Business Strategies

While there are many e-commerce and e-business models which one needs to be aware of, the dynamics of business strategies change overnight with the adoption of e-commerce and m-commerce business models. The limitations of the more popular strategic frameworks like that of the Porter’s 5 forces model was realized very soon by the researchers in e-business strategy. The generic strategy framework was also somewhat limited in its applicability in pure e-business models.

In view of these changes, there began a serious contemplation of sustainable e-commerce and e-business models for business giants. What would be the mantra for success was long deliberated and various e-business and e-commerce models started getting wider acceptance.

With increased adoption of E-commerce, firms adopted Pure-Click and Brick and Click Business Models.

• Pure-Click companies are those that have launched a website without any previous existence as a firm. Ex: AMAZON.com
• Brick and Click companies are those existing companies that have added an online site for e-commerce but still maintains an offline business model.  Ex: futurebazaar.com

However it was noticed that many (as high as 84%) of the business models met with disastrous results and the companies blew up (bubble burst) within a couple of years of its inception. It was at this juncture that the value proposition of e-commerce models started getting scrutinized and the importance of the complete value chain for e-business models got its due importance.

It was realized that the complete value chain needs to be analyzed before a firm selects a business model for its operations.

 

The analysis of the core of a firm is crucial for success in this increasingly information age, where business models are attempting a quick fly off the sly to generate revenue and most of which are falling flat.

By the way, have you read our article on the Growth Strategies of Web Based New Generation Firms?

 

e-Commerce and e-Business Models

Electronic commerce, which is abbreviated popularly as e-commerce or eCommerce, is defined as the buying and selling of products or services over electronic media like the Internet or other Information Technology dependent networks. Sometimes e-commerce is also interchangeably used with the terminology e-business.

The amount of transactions and the volume of trade conducted via electronic commerce has grown exponentially with widespread adoption of the Internet and Internet based technologies. The use electronic commerce is done in applications related to electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems and automated data collection systems. Traditional electronic commerce used the World Wide Web or the internet and now is transcending the utilization of mobile platforms to optimize the application of ubiquitous computing. Very recently an emergent trend is foreseen that the Spoken Web will be the future media for electronic commerce.

The transaction wise representation of the various models of e-commerce or e-business is denoted by the following diagram.

The most singular uniform way the various e-business models can be viewed under is as follows:

It is crucial to note that the dynamics of business strategy is vastly affected by the application and adoption of web based technologies in the e-commerce domain.

Do read

Social Schooling

Today we are much more connected as a society and more and more schools are using online networks to manage classes at schools and educational institutions.  It is the time to capitalize on the popularity of social networking rather than fighting the inevitable?

A recent research (Source: Pew Internet & American Life Project) found that 73 % of online teenagers use social-networking sites. They are regularly updating their Facebook / Twitter / MySpace accounts and use social networking to keep up with the latest news from their peers.  Currently most social networking activity takes place off work schedule officially (or behind the back) and not in the classroom but a change to harness the power of social media is welcome and institutions are hoping to incorporate social networking into lesson plans. B-Schools like Harvard and Carneggie Mellon are already doing it. Its up to the rest to follow.

Today, thus it makes sense to have specialized social networking tools within the classroom, enabling educationally relevant academic matter for all students.  This is not for students to communicate with classmates but to communicate with other students from within the school, or state or country or even internationally throughout the world.  In essence, creating a broader network where students can learn from each other.

“The Web 2.0 evolution has enabled educational institutions to connect in transparent and impactful ways, achieving a greater competitive edge. However not all institutions have taken the full advantage of this movement. While over half of students report using social networking tools for educational purposes, faculty are not exploiting these tools to connect with students, instead preferring traditional methods of communication.” Next Generation Education Committee.

e-Business solution providers are now in the process of developing social networking aademics tools for usage in the schools.  The trend towards a more collaborative and open learning / open source environment has been fueled by the explosive adoption of mobile devices among both students and faculty.  This has made colleges and universities some of the most intensive adopters of wireless technologies and hence is well positioned to adopt social networking technologies for e-learning.  The aim of providing seamless and secure access to data to students is so they are able to share knowledge, manage and build content while build their social network is the goal of the future netizens. This surely looks geared to position them to make better informed decisions while they are on campus or at school.

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This Article is authored by Jake Mazan, who is a guest author at Business Fundas. He is a Senior Research Analyst cum Manager at NG-Online News.

E-governance – The way ahead

A new way to the new economy is on the cards.

E-government, in short, allows the private sector to operate in areas that used to fall strictly within the public domain. The challenge for policy makers is to recognize that what is good for business is consistent with good government.

In many countries, particularly in emerging markets, e-government efforts can benefit private start-ups. E-government, for instance, involves investments in the public Internet infrastructure that would be too costly for individual companies. These investments finance gateways for electronic payments (in coordination with financial institutions) as well as encryption-and-decryption technology that ensures the security of electronic transactions.

Furthermore, e-government forces policy makers to establish a regulatory and legal framework to protect privacy and intellectual property insofar as they are involved in e-commerce. Examples of such frameworks include the Electronics Transactions Ordinance, in Hong Kong; the Electronics Transactions Act, in Singapore; and the Digital Signatures Act, in Malaysia.E-government also gets global information technology companies involved in everything from the design of systems to the development of applications. In the course of building the necessary infrastructure, those companies make significant investments in the local economy. Their local presence makes it easier for nearby companies to utilize their services or to partner with them.

Finally, e-government benefits private Internet ventures by increasing the number of World Wide Web–savvy locals. For this electronic new regime to succeed, government workers must have sufficient IT skills to maintain the system, and the general public must have the knowledge to take advantage of it. To ensure the diffusion of the required expertise, Malaysia has joined forces with world-class IT companies, such as Hewlett-Packard, Microsoft, and Electronic Data Systems, to employ and train local people. Hong Kong offered computer training in community centers and blitzed the territory with television advertisements promoting Internet usage and with home videos on how e-government efforts work. Most governments in emerging markets also encourage Internet use by offering access through kiosks and computers in libraries and other public places.

Growth Strategies of Web Based New Generation Firms

The cyber world has really come alive with the onslaught of WEB 2.0 technologies. Today, many start ups are being formed by students and entrepreneurs across the world. The web based firms with often no brick and mortar presence have been generating enviable returns, considering the low investments made on them. No wonder, students and young entrepreneurs have started viewing these businesses as endless oceans of opportunities. These firms share some very common characteristics, which are as follows:

• Being led by young leaders, their culture is essentially fun. The job nature often is based on interactions with others (say for instance in the numerous SEOs springing up).
• The concept of flexi-work or work from anywhere, anytime has really caught up. Most of the start ups consists of students in their engineering and graduation level.
• The need of initial investments being very low,  savings from pocket money is often sufficient to start these ventures. ROI, if properly strategized is often very high. In fact, being web-based only, these start-ups do not have the burden of making huge investments on physical infrastructure.
• A major trend in such start ups is their dynamism of defining their business. Often the fixed costs or investments are such that they would apply to various businesses. So if one business flops, there is always a backup plan easily available. So many web based businesses which may start as sites to sell software may end up doing affiliate marketing for some other products.
• These firms also have the benefits of having the ability to take small risks which can generate huge rewards, in terms of returns on investments. The very nature of defining their business according to changing needs and trends, makes the business risky, yet provides a great opportunity to generate a huge return.

A major problem for these firms is how to decide upon a proper growth strategy. Most such endeavours begin with a lot of enthusiasm, but the same dies out, when the owners fail to generate the expected income from the same. A few generic points which could be kept in mind while trying to build upon the business are given below:

• Being essentially web-based, you must have visibility on the web. To ensure that, the first thing you must ensure is a decent traffic to get a decent alexa rank. Now here, many start ups thrive on exchanging links for promotion. While this ensures some traffic to your website, one should remember that you are not actually reaching out to your target segment.
• After some degree of visibility on the web is obtained, it is required to ensure that there is visibility amongst search engines. Most depend on the umpteen so called SEO companies (Search Engine Optimization) to do this job for them. Problem is these SEO firms ensure a decent alexa rank for your site by exchanging links and promotions amongst themselves only. So depending overtly on them is suicide. The only thing that creates visibility among search engines is quality content. In the WEB 2.0 era, content is the mantra to success.
• Use of content management sites help in the promotion and visibility of your site. But always remember, not all content management site is suitable for all needs. Expending effort and resources on the correct content management site is crucial for your visibility amongst your potential customers.
• Try reaching out to your targeted customers. Use a sustainable advertising means for that, like a facebook fan page or twitter. Always remember, it is better to reach out to 100 customers really interested in your product that to 10,000 people who don’t care about your existence. Segmentation, Targeting and Positioning are your success mantra.
• WEB 2.0 is all about differentiation from your competitors. Are you simply doing things differently or are you able to present yourself as doing different things too?
• Use videos and pictures to make the site as interactive as possible. Your customers may not always have the time or patience to go through textual content.

These are just few pointers on the few aspects the new generation web based firms must look into for success. These aspects form the core of all the businesses yet when one launches his own business, these very simple yet much needed points are often forgotten.

By the way, have you read our article on Value Creation Strategy and Business Models?

Also you can check out our article on the Business Strategies while setting up an e-Commerce Portal.

How the internet affects Porter’s generic strategy models

In the emerging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. Michael Porter (1980) has argued that a firm’s strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent.

Research has indicated how Porter’s generic strategies would work in the light of ICT enablement of businesses. By applying cluster analysis, researchers were able to differentiate 5 strategy types, which would be significant in e-businesses.

1. The first strategy, which they call the “Hybrid Strategy”, was pursued by firms which were engaged in diverse market domains with diverse products, take advantage of online specific differentiation factors, and at the same time, pursue cost advantage.
2. The second strategy that firms focused on had a positive and distinctive value only on the cost leadership dimension.
3. The third strategy type occupies a less than even mediocre position on every strategic dimension and these firms have only a poor focus on internet specific differentiation. This may reflect lack of clear strategic direction and resource commitment.
4. The fourth strategy type resembles Porter’s differentiation strategy. This type scores high on market leadership and product proliferation dimensions, indicating an emphasis on staying sensitive to customer needs through diverse products with short life cycle.
5. The last strategy type is high on both the focus and Internet-specific differentiation dimensions, while also ranking very low on the other dimensions.

These firms do not appear to be concerned with price competition or overall market leadership. Instead, they appear to aim at a small segment of online customers, emphasizing Internet-specific factors such as transaction security and payment convenience. This strategy type is labeled “Online Focus.”  Based on their study, they concluded that, among e-business firms, a hybrid, integrated strategy is a must, and that a traditional cost leadership strategy is unlikely to be associated with success. They also suggest that focused strategies – those that are either narrowly defined differentiation strategies or those that focus on Internet-specific characteristics such as security and convenience of transaction – may have a better chance of success than cost leadership strategies.

How the internet affects Porter’s 5 forces model

In the emerging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development.

Porter, the strategy guru, used concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. This model describes the attributes of an attractive industry and thus suggests that opportunities will be greater, and threats less, in these kinds of industries. Attractiveness in this context refers to the overall industry profitability. An “unattractive” industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching “pure competition”.

Porter’s industrial organization competitive analysis framework (five-forces model) is challenged in resource-based critiques. Resource based views were argued to be more suitable than the 5 forces model as a tool for analysis in the wake of web enablement of businesses. Research has established that the rate of unique visitors, the e-business-specific measure, showed significant correlations with market value, net income growth, and employee growth. This implies that cyberspace-specific indicators, such as page views, stickiness, click-through rate, and conversion rate, may not be unreliable as performance measures. In the study, these were added as indicators of industry specific profitability indicators besides those in the Porter’s framework. Porter’s model is also challenged in view of the static nature of the industry which it analyzes. Web enablement increases the dynamic nature of industry structure.

In the light of technology enablement of business to e-business, the five forces, as depicted by Porter are significantly affected. The bargaining power of both suppliers and customers increase as the information accessibility is increased and the information gap is narrowed. This leads to lower bargaining power for the firm, and may transcend into lower profits. Again as e-business enablement increases customer reach, the bargaining power of the customers are negatively impacted by this change. Also, e-business models will enable easier entry into the industry, as now, companies may only look to perform very few activities in-house, and outsource the rest to other firms in the value chain. This decreases the management complexity among new entrants, and thus the threat of new entrants may go up.

Can you Digg it?

Digg.com is still a relatively lesser known name among many people but is one name that is growing astronomically, especially in the United States and more recently India, where people live on the news provided on Digg.

Digg is a place for users to share content from anywhere on the web, be it one’s own blog or content from someone else. From the biggest online destinations to the most obscure blog, Digg users today share the most popular posts on the web and it has become a major single point to share content. Content gets popular, if more and more people likes it, and it gets more Dugg with increase of popularity.

Today, Digg is only 5 years old, and has a global traffic rank of 104, and is one of the top 50 visited sites in USA and many other countries.

Founded by Kevin Rose and launched in November 2004, Digg has grown to be one of the most popular sources of information on the Web. The team is led by CEO Jay Adelson, founder of the billion-dollar company Equinix (EQIX).

Following are the rank of Digg amongst all websites among few countries.

Majority of Digg users come from the following countries:

From a business perspective, Digg shows us how business models can evolve over time and how companies can create a niche out of evolving needs of consumers. A company whose revenue model thrives solely by engaging the users to add content to its site, and increase its hits, Digg is one of the wonders of this e-business era. Thus, all the users, provide  and manage content, and also vote (by Digging) which content they like better, and all this, the users do for FREE.

While this reminds us of Google and Wikipedia, whose success stories banked on the ability to manage and provide content to its users, Digg is unique. It actually helps to develop a taste of reading amongst its users as well. The user is guided on what is the hot topic that he should know about in the domain of  technology, business, science , gaming, lifestyle, entertainment and sports.

Today, Digg is positioned to be another success story on whom case studies would be made by students of business management, as one of the wonders of the internet business models, who changed the dynamic of the game.

If you were Digg’s competitors, what would you do? Should companies like Wikipedia and Google look carefully at Digg’s business model?