Journal of Internet Banking and Commerce

Vol 2 no 2, March 1997 (Part 1 of 2)

Table of Contents:

1. Editorial: The Internet and a Standard Language
(By Gordon Jenkins)
http://www.arraydev.com/commerce/jibc/9702-ed.htm

2. The Publisher's Corner (by Nahum Goldmann)
http://www.arraydev.com/commerce/jibc/9702-pub.htm


3. Articles Posted Since email Vol 2 No 1 dated January, 1997

*Complete texts of all articles are in the "Current Edition" on
the JIBC Web site at http://www.arraydev.com/commerce/jibc/

Feature Articles

==================
*Selected U.S. Legal Issues in Issuance of Electronic Money
(By John D. Muller)
http://www.arraydev.com/commerce/jibc/9702-17.htm

=================
*The Role of Check Images in Internet Banking: An Introduction
(By Madeleine Tausk)
http://www.arraydev.com/commerce/jibc/9702-16.htm

=================
* The Internet Will Shake Banking's Medieval Foundations
(By Claus Nehmzow)
http://www.arraydev.com/commerce/jibc/9702-01.htm

==============
* Taxing the Internet: The Proposal for a Bit Tax
(By Arthur J. Cordell)
http://www.arraydev.com/commerce/jibc/9702-05.htm

==============
* Critique on the 1994 EU Report on Prepaid Cards (By Ian Grigg)
http://www.arraydev.com/commerce/jibc/9701-16.htm

=================
* The Internet: A Challenging Competitive Weapon for Improving
Industrial Companies' Performance is Emerging
(By George J. Avlonitis and Despina A. Karayanni)
http://www.arraydev.com/commerce/jibc/9702-10.htm

===============
* Wholesale Finance, A Model for Electronic Commerce
(By Davide Khalil)
http://www.arraydev.com/commerce/jibc/9702-13.htm

================
* From Cyberbucks to Cyberpunk: Tomorrow's Electronic
Commerce on Today's Mean Streets (By Walter A. Effross)
http://www.arraydev.com/commerce/jibc/9702-12.htm

================
*Data Warehousing, Electronic Commerce and Technological Learning:
Successes and Failures from Government and Private Industry and
Lessons Learned for 21st Century Electronic Government
(By Elias G. Carayannis)
http://www.arraydev.com/commerce/jibc/9702-14.htm

================


From JIBC Contributing Editors

===============
*Over the Water -- The View from the UK
(By Contributing Editor David G.W. Birch)
http://www.arraydev.com/commerce/jibc/9702-18.htm

===============
*The Consequences of Electronic Delivery Channels
on The Retail Banking Industry
(By Contributing Editor Mauro Cipparone)
http://www.arraydev.com/commerce/jibc/9702-15.htm

================
* Excerpts from INNOVATION
(from Contributing Editor John Gehl)
http://www.arraydev.com/commerce/jibc/9702-04.htm

==============
*Electronic Commerce for Small to Medium Sized Enterprises
(From Contributing Editor Mary-Anne Goldsworthy)
http://www.arraydev.com/commerce/jibc/9702-19.htm

==============
* Hettinga's Best of the Month
(from Contributing Editor Robert Hettinga)
http://www.arraydev.com/commerce/jibc/9702-03.htm

===============
* The GTPNET Phase II - Moving Contacts to Contracts
(By Contributing Editor Carlos Moreira)
http://www.arraydev.com/commerce/jibc/9702-01.htm

==============

!!!NEW!!! Case Studies

===============
* Canada Investment and Savings Lays Groundwork for Online
Savings Bond Sales
http://www.arraydev.com/commerce/jibc/9702-09.htm

===============


Conference Advertising

================
*Purchasing on the Internet -- International Quality and
Productivity Center http://www.arraydev.com/commerce/jibc/9702-07.htm

*Symposium on The Electronic Future of Cash -- The Washington
College of Law and The American University Law Review
http://www.arraydev.com/commerce/jibc/9702-07.htm#law
================


4. Administrative Notices

==========
END OF TOC
==========
***************************


1. Editorial: The Internet and a Standard Language

by Gordon Jenkins
Email jenkins@...
URL: http://www.gordjenkins.com

The first thing you will notice is our new logo. I would be
interested in your comments on the logo, the contents of the JIBC
and if you feel strongly about an article (or an editorial!), a
letter -- excuse me!! -- an Email to the editor would be
appreciated and published. Let a 1000 flowers grow. If you agree
with everything we publish, then we will have to reassess our
position!

I am commuting to Sweden and working in Canada and Nordic. Three
weeks Sweden and area, two weeks Canada/U.S, three weeks Sweden
and so on. This has been extremely helpful in my understanding of
different cultures and different approaches to technology in
commerce and banking.

The technology is the same (well, that's another story) but we
always forget about the people. Sabotage is not a military term.
Rather the root of the word is from when workers put their wooden
shoes or sabots into the gears of the machines that were
replacing them.

A common language is good also. The common language of the
internet is English. Is this good because it is a standard way of
communicating or is it bad because it threatens our national
identity with not only a foreign language English but also the
baggage this language brings?

Business culture, music, movies , video, violence..

Will there be a reaction to the Anglo-Saxon Internet?

Answer: Yes.

Can the Internet be stopped? Answer: No.

Check out the Web pages for the European countries, for Japan,
China and Cuba even. A lot of English there! The common language
of the Internet is quickly becoming English.

What do you think?

A good or a bad development or trend?

Excuse me. I have to go now. I have to make some more room in my
"Email to the Editor" column.

Gordon Jenkins
Editor, JIBC

P.S. Please take a look at our new "Case Studies" Section and let
me know what you think. -GJ

* * * * * * *


2. Publisher's Corner

I am please to announce that later this month, the Journal of Internet
Purchasing will make its inaugural appearance. ARRAY Development is the
sponsor, as it is with our other successful publication, the Journal of
Internet Banking and Commerce.

The JIP Editor is William Christensen. In his other life Bill is a doctoral
candidate at Oklahoma State University in Marketing. He brings with him an
impressive background that includes five years of doctoral studies at
Michigan State University in Purchasing and International Business. Bill
also manages and operates The Purchasing Station at
http://management.bus.okstate.edu/faculty/christensen/

JIP is envisioned as a leading edge publication which informs purchasing
professionals and executives on principal developments, benchmark practices
and future trends in the Internet purchasing practices of government and
business. We invite purchasing professionals, academicians and publishers
to submit important announcements, original articles, guest columns and
significant feature presentations. JIP will also welcome surveys, book
reviews and letters to the Editor.

JIP articles will be published on the Web at
http://www.arraydev.com/commerce/jip/ and abstracts/excerpts will be
distributed to email subscribers every two months. On the Web site you will
also find a Compendium for posting notices of innovative products and
services, and the IP-Forum for discussions of Internet purchasing issues. We
will
appreciate your assistance in identifying potential advertisers and sponsors
whose
support will allow us to maintain JIP as a free service for purchasing
professionals.

To subscribe, send email to jip-request@... with the word
"Subscribe" in the BODY of the message. An online subscription utility is
available through the JIP home page at http://www.arraydev.com/commerce/jip/

I believe JIP will provide an interesting and valuable service to
purchasing professionals who are exploring and developing effective ways to
use the Internet and Web-based tools. I look forward to your comments when
the first JIP rolls off the presses -- figuratively if not literally!

Nahum Goldmann
Publisher

* * * * * * *


3. ARTICLES: vol 2 no 2


==================
Selected U.S. Legal Issues in Issuance of Electronic Money
http://www.arraydev.com/commerce/jibc/9702-17.htm
==================
By John Muller
John Muller is Of Counsel with the law firm of Brobeck,
Phleger & Harrison LLP in San Francisco. His
practice focuses on bank mergers and acquisitions, new bank powers,
electronic commerce, corporate governance and general regulatory
advice. For more information on Brobeck, Phleger &
Harrison LLP, please see http://www. brobeck.com
********

TWO PRELIMINARY POINTS

A. Electronic Money is Not Cash
Electronic money functions as a medium of exchange, but it differs in two
very important respects from "cash" (i.e., Federal Reserve notes and
coins): it is not legal tender that must be accepted for the payment of
debts, and it is an obligation of a private company rather than of the
central bank. Many electronic money products are also, unlike cash,
traceable to the payor. For a comprehensive overview of e-money issues, see:

gopher://gopher.cbo.gov:7100/11/reports/online
(Emerging Methods for Making Electronic Payments)
http://www.occ.treas.gov/emoney/papinf.htm


B. Money is Already Electronic
Large-value payments in the U.S. are already predominantly made by
electronic payment systems, developed by banks and the Fed at significant
expense and with well-established operating rules and legal frameworks.
According to the National Automated Clearing House Association, in 1995
$533 trillion was transferred by wire, $11 trillion by Automated Clearing
House and $800 billion by credit card, compared to $73 trillion by check
and $2.2 trillion in cash transactions. Electronic money is clearly
attractive as a substitute for cash and checks, but it is unclear whether
there are business reasons to develop new electronic money systems for
large-value payments rather than adapting the existing systems to stored
value card and Internet transactions.

[With this as a launching point, John Muller proceeds to discuss
various associated legal issues in the full article which is posted
on the JIBC Web site.]


=================
The Role of Check Images in Internet Banking: An Introduction
http://www.arraydev.com/commerce/jibc/9702-16.htm
=================
By Madeleine Tausk
Madeleine Tausk is employed at Bank of America, NT&SA in San Francisco,
California as Assistant Vice President/ Project Manager. Her projects focus
on check image technology implementations. Ms. Tausk is also a candidate
for Doctorate of Business Administration at Golden Gate University in San
Francisco, California. Her focus is in the area of alternative delivery
mechanisms in Banking.
*****************

ABSTRACT:

In the JIBC, there is considerable discussion and articles that address
Electronic Banking and Commerce in general, but very few that present
information relative to specific products that may be available for consumers
and businesses over the Internet. The purpose of this article is to address
specifically one of those products, checks.

Statistics indicate that check volume is at a peak and continues to grow.
This trend is attributed to many factors. The question is, given that we will
have to continue to deal with paper checks, at least in the near future, how
might we integrate them into the non-traditional forms of banking? This
article suggests transforming the paper checks into electronic information,
or digitize them. Digital technology will not only offer integration of this
traditional payment form with alternative delivery systems, but it will also
enable more efficient processing of checks.

The future of alternative forms of banking looks promising and checks appear
to be in the equation for some time to come. Image technology provides the
opportunity to integrate these two in a harmonious relationship for the
banking customer.

***The information represented in the article does not reflect the opinions or
views of BankAmerica Corporation.***


================
The Internet Will Shake Banking's Medieval Foundations
http://www.arraydev.com/commerce/jibc/9702-01.htm
================
By Claus Nehmzow
Claus Nehmzow is a Principal in the Information Technology Group
in London at Booz Allen & Hamilton, the international management
and technology consulting firm. For further information on Booz
Allen, please e-mail Claus Nehmzow at Nehmzow_Claus@....
*******

...In 1996 the financial services group within Booz Allen
conducted two surveys of Internet banking - one in the USA and
one in Europe.

We conducted these surveys because our industry experience
indicated that banks were increasingly viewing the Internet as a
key alternative delivery channel. And because there was
insufficient information about current usage, growth projections
and the attendant strategic implications for the industry.

...The Survey Findings
What we found is that Internet banking will almost certainly
become a major fully-fledged distribution channel of banking
services and products in Europe within the next three years.
While current functionality is limited, 80 per cent of European
survey respondents said that they planned to upgrade their web
sites to facilitate most traditional banking transactions within
that period.

...our survey in Europe found annualised growth running at 90 per
cent, with a projection for more than 2000 European banking
institutions being on line by the end of the millennium.
Ultimately, we believe, all banks will have a web presence as the
cost advantages are so huge that there is no reason not to try it
out.

The cost of the average payment transaction on the Internet is
just 13 cents or less. This compares with 26 cents for a personal
computer banking service using the bank's own software, 54 cents
for a telephone banking service and one dollar eight cents for a
bank branch.

For the traditional players in the banking sector the technology
offers the opportunity to add a low cost distribution channel for
their myriad services. But it also poses a much more serious
threat to their market share, as it neutralises so many of their
competitive advantages of having a traditional branch network.

...It is inevitable, therefore that the banks' relationship with
its customers is going to have to be redefined, if their most
valued clients are not to be cherry picked by the new entrants.

=============
Taxing the Internet: The Proposal for a Bit Tax
http://www.arraydev.com/commerce/jibc/9702-05.htm
=============
By Arthur J. Cordell
Arthur Cordell is Special Advisor in the Information Technology
Policy Branch of the Canadian Department of Industry in Ottawa.
The Web article is the text of a speech delivered to the
International Tax Program at the Harvard Law School on February
14, 1997. The following excerpts suggest his reasons for
considering a Bit Tax and some of the likely impacts/responses.

* The views expressed are those of the author alone and are not
necessarily those of any department or agency of the Canadian
government.
***************
...Over two hundred years ago Adam Smith wrote his famous and
classic book-- the Wealth of Nations. He concluded that wealth
was based on division of labour and the extent of the market.
Today we can add something else to society's production function:
knowledge, information and communications.

The new wealth of nations is to be found in the trillions of
digital bits of information pulsing through global networks.
These are the physical/electronic manifestation of the many
transactions, conversations, voice and video messages and
programs that, taken together record the process of production,
distribution and consumption in the new economy.

In this new wealth, in this new productivity is a new source of
revenues for governments. I believe that the digital information
that is providing so much of the new wealth also provides a way
for us, through our governments, to get at some of the productive
potential of the emerging knowledge-based economy.

What happens to the productivity gains created by global digital
networks? Some gains show up in profits, some show up in lowered
prices, some goes to domestic labour and some to domestic
capital--some is 'lost' in the networks. In some cases off-shore
capital benefits from productivity advances.

While part of the increased productivity may show up in earnings
to firms adopting the technology, to banks, to telecom firms or
other network operators, it appears that some of the productivity
gains just disappear. It is either a non-monetary item (eg., time
saved in using ATMs for banking) or the productivity is diffused
over so many domestic and foreign players that it is not
appropriated effectively, if at all.

The challenge is to access the new productivity. There is a
strong case to be made that government has not yet accessed the
new wealth. That government has not yet realized where and how
wealth creation is taking place. That government has not yet
figured out a way to tax and re-distribute some of the new wealth
created by global digital networks. That government has not
figured out a way to stop the tax haemorrhaging taking place as
more and more transactions take place on global networks, as more
and more wealth is created on global networks.

It is important that the new wealth, the new productivity be
accessible by governments, so that government can perform its
traditional functions. So that the advanced countries can
maintain hard-won standards of living. So that the less-
developed countries can advance and grow as well.

(He describes elements of a possible Bit Tax.)
...Experts tell me that the proposed bit tax can be implemented
in a relatively simple way. Automatic collection of taxes,
distributed automatically to the appropriate government--all put
in place by building on the software already being operated by
the carriers. A well-defined tax base, one that is growing. A tax
that can be collected cheaply and simply. A system that will have
built in security and auditing--safeguards to ensure system
integrity.

...Those who argue most strongly against the bit tax are those
who would like to lessen the powers of the state. They would like
to 'wrestle the state to the ground.' They see the bit tax as a
sort of stealth tax. To this group I can only offer the quote of
US Supreme Court Justice Oliver Wendell Holmes, Jr., who wrote in
a decision in 1904 that 'Taxes are what we pay for civilized
society.'

...The thorny issues of income, jobs and taxation are all part of
the major changes underway as we move to a New Economy or
Information Economy or Knowledge Economy. Call it what you will.
By whatever name, it is clear that we are facing a major change
in our economies. The change will not be easy or smooth. An
orderly transition to the new economy will take discussion,
dialogue, good-will and new ways of measuring and understanding
economic activities.

So the bit tax itself is just a modest beginning. But as a modest
beginning, the bit tax can help provide the new fiscal framework
to distribute the productivity of the new economy. How the new
revenues might be spent is, of course, to be determined by the
government of the day. But in my view new sources of revenues can
be used for schools, parks, and health care. New revenues can
re-train some for new jobs and, for those who can not be
retrained the revenue can provide a continuing flow of income
that allows displaced workers to maintain their dignity-- and
their purchasing power--in the new economy. One way to maintain
effective demand in our economies, one way to avoid economic
collapse is to capture some of the productive capacity and
re-direct it back to consumers.

However governments decide to use the new revenues, it is clear
that the bit tax offers one way for the productive power of
information technology to bring with it a New Wealth of Nations.

I know that I may not have convinced all of you of the concept of
a bit tax. To those who are sceptical of the bit tax, I hope that
I have least convinced you of the need to begin a discussion on
the need for new taxes that are appropriate for a new economy, a
global knowledge-based economy based on digital networks.

==============
Critique on the 1994 EU Report on Prepaid Cards
http://www.arraydev.com/commerce/jibc/9701-16.htm
==============
By Ian Grigg
Email: iang@...

(Editor's Note: This abstract was posted in Volume 2 No 1 and
inadvertantly omitted from the January email edition. We remind
readers and authors that articles are published on the Web site
immediately on approval, and the email edition provides brief
abstracts or excerpts of articles published in the preceeding two
months.)

Contributing Editor Robert Hettinga asked Mr. Grigg for a brief
summary of his critique of the 1994 EU report on Prepaid Cards.
Ian took this as a sign that the critique needed an abstract,
which he submitted as follows. The entire critique is at
http://www.systemics.com/docs/papers/1994_critique.html
***********
Abstract: The European Union report of 1994 reserves the issuance
of Prepaid Cards to banks. Comments have indicated that the
conclusions of this report should be expanded to include Internet
cash, and it is believed that a committee under the auspices of
the EMI has been given that mission.

This approach would be valid if the conclusions in the 1994
report were valid, and there was sufficient relationship between
the prepaid card and Internet cash to support this extension. It
is argued that neither is the case, and thus there is little
validity in simply extending the 1994 report. Rather, a fresh
approach is called for with respect to Internet cash.

With due consideration given to the pressures upon the
institution of central banking, it is argued that only a policy
of minimal regulation is likely to be structurally practical.
Thus the imperative is on establishing a dialogue with the new
financial intermediaries, and encouraging the development of
simple, open and transparent structures suitable for public
monitoring.

In the event of attempts to stifle financial innovation for the
sake of control, authorities will be ignoring the changing face
of the intermediation industries, and rightly or wrongly, are
likely to build a structure at odds with the future. It is argued
that, whilst there is little chance of this structure surviving
in the long term, its construction and downfall is likely to have
negative effects in the medium term for Europe and European
industry.

=================
The Internet: A Challenging Competitive Weapon for Improving
Industrial Companies' Performance is Emerging
http://www.arraydev.com/commerce/jibc/9702-10.htm
=================

By George J. Avlonitis
Email: avlonitis@...
URL: http://www.aueb.gr/marketing/avlonitis.htm

and Despina A. Karayanni
Email: karayanni@...
URL: http://www.aueb.gr/karayanni/resume.htm

George J. Avlonitis is Professor of Marketing in the Department
of Management Science and Marketing in the Athens University of
Economics and Business.

Despina A. Karayanni is a Doctoral Researcher in the Department
of Management Science and Marketing in the Athens University of
Economics and Business.

This article discusses a report on "Work in Progress" which can
be found at http://www.aueb.gr/karayanni

************************
...A study being carried out at the Athens University of
Economics and Business ... aims to investigate the new strategies
followed by the industrial companies that have already included
(Internet) technology in their development, as well as to
evaluate the effectiveness of these strategies.

The data were collected from 78 industrial goods companies,
mainly from the USA (10.4% response rate). Analysis of the data
have resulted in the following important findings and
implications:

Findings

1) The top management of the industrial companies of our sample
use Internet in all the activities related to the successful
commercialisation of their products, regardless of the company
size or the product complexity.

2) The company size doesn't constitute a decisive factor for the
differentiation of the business strategies. However, it appears
that the smaller companies tend to pursue the Market Expansion
Strategy at a higher degree, showing a more aggressive use of
Internet, through a more aggressive promotion strategy that
places emphasis on product benefits.

3) As far as the product complexity is concerned, companies with
simple or relatively simple products show a greater inclination
to the strategic goal of Market Share Increase through the use of
Internet. It appears that Internet favours the simple products,
or the simple buying processes. Nevertheless, the complexity
doesn't seem to affect the Internet Strategies that refer to both
the successful product commercialisation and the sales force task
that relates the customer needs with the companies' products. The
research verified that companies with complex products tend to
use Internet for the development of new products via
collaboration with other actors of the market (suppliers,
clients, universities, organisations, institutes, etc.).

4) Through the use of Internet the functional integration within
the marketing department is facilitated, namely the co-ordination
of the sales, promotion and logistics departments. In addition,
the interdepartmental (marketing, production, finance)
co-operation is facilitated, with the aim to:
* enhance the customers' loyalty,
* accelerate the development of innovations and
* enhance the effectiveness of the sales force.

5) Strategies involving Internet in the Marketing function
favour:
* the application of the value added chain concept, both
upstream to the customers and downstream to the suppliers,
* the pursuit of the strategic goal of market expansion via
the institution of strategic alliances and the
* integration of the whole spectrum of companies' functions,
in an effort to enhance the quality service offered to the
customers, thus applying the concept of the Total Quality
Marketing.

6) According to the results, the contribution of Internet to the
companies' sales force is translated to increasing responsibility
in the execution of the strategic marketing plan. The new
generation of salesmen should be more educated and qualified, in
order to use this new technology, for gaining market knowledge,
which combined with their experience will allow them to:
* increase customers' loyalty
* monitor new market segments and new markets
* successfully relate the customer needs to the companies'
capabilities.


7) In the present phase of the Internet diffusion among the
industrial companies, the intensity of its use is highly related
with the companies' performance. More specifically, the use of
Internet improves the companies' efficiency, due to :
* more efficient customers' prospecting
* more efficient customer portfolio management
* reduction of the advertisement budgets

Implications

The above findings have some useful implications for both the
providers and the state:
a) The encouragement of the Internet adoption via the
establishment of a carefully set designed pricing policy by the
Internet providers would accelerate the diffusion of this new
technology to theritical mass of industrial companies. Indeed, so
long as thesuppliers' strategy affects the diffusion of
innovations in theindustrial markets, the providers should deploy
an appropriate pricing strategy, based on algorithms, that will
encourage the use of Internet. Nevertheless, as many researchers
suggest, in the long run, which coincides with the maturity stage
of the Internet life-cycle, a pricing system that is based on the
frequency of use, is more appropriate, in order to avoid the
network overloading and traffic jams.

b) Being in alignment with other numerous reports about Internet,
we should stress the need for improvement of the network lines,
on the ground that this would improve the information bandwidth
of the companies. At the same time, the formation of special
international commercial and privacy standards to guide the
electronic commercial behaviour, coupled with the application of
encryption methods (public key encryption and electronic
signatures), that would solve much of the Internet security
problems, are essential, in order for the diffusion of the
commercial use of Internet to be accelerated. However, the
research have shown that the above "defects" of Internet do not
constitute essential factors that restrict its use. The vast
majority of the companies reported that the greatest disadvantage
of Internet was its limited commercial use, since, by definition,
the diffusion of the interactive technologies is on a par with
the creation of the critical mass of the users.


=====================
Wholesale Finance, A Model for Electronic Commerce
http://www.arraydev.com/commerce/jibc/9702-13.htm
=====================
By Davide Khalil
Discrete Arbitrage Nine LLC
Email: <nine@...>
Davide Khalil isa Partner in Discrete Arbitrage Nine; Financial Systems
architect for transaction automation in over 30 global banking and
financial institutions including: (NYSE, SIAC, NASDAQ, Merrill Lynch,
Salomon Brothers, Chase Bank, Scotia Bank, Royal Bank of Canada,
Reuters, Mitsubishi, SSangYong Korea, Westpac Bank, SunGard & BondNet).
***************
A paper published at http://www.discretearb.com/paper.html
outlines a wholesale financial protocol and how it will impact
global banking and financial automation. The study is based on
FIX, (Financial Information Exchange) which is currently used for
trading, risk management and reporting for a variety of financial
instruments by 150 global financial institutions. Since the
standard includes trading and settlement of Foreign Exchange, it
is also an existing "electronic cash" format which
is accepted by some of the largest banks in the world. The paper
looks at the future of such wholesale financial protocols for
electronic commerce and how they re-define global finance. For
this it uses projections from when finance evolved from telegraph
transactions to the telephone 100 years ago and how this impacted
liquidity and complexity in the financial markets.



(END OF JIBC Vol 2 No 2, Part 1 of 2, March, 1997)