   |
|
|
SUMMARY PERAFACE
/ A TRIP TO HOPES By Ahmet Hamamcıoğlu/Editor When it sparks lights to around, when our eyes have shine
with joy, when we feel the happiness totally inside; hope is an action that we
feel happiness from it due to its existence. It’s trying to touch to light after dark space. Hope is the planned goal of people believe to be done. It’s the determination in reforming of a nation’s
future. It’s the one’s foresight of willing power based upon
self-confidence. What’s going to change tomorrow? Nothing, if we don’t
change ourselves but everything if we can do. We cannot catch the success unless we get the youth
agitated. Nations that would not make the structural transformation
unfortunately cannot get the youth agitated. Hope is not to believe in the future but it is fully to
recognize the past. Hope is itself the reality, not dream. Expectations create hopelessness for some people, but
always hope for me. Neither to win nor to lose depends on criterion. We should seek the key of our capabilities inside of us. We’re going to find a magic key hidden in somewhere,
undoubtedly. A
STORY / A TEST OF TRUE LOVE Prepared byKenneth Croft Six minutes to six said the clock above the information
desk in New York’s Grand Central Station. The tall young Army lieutenant
lifted his face, narrowed his eyes and noted the time. His heart was beating so
hard. In six minutes he would see the woman who had occupied much of his
thoughts for the past 13 months, the women he had never seen. Now he was going to hear her real voice. He was to
recognize his friend by a little red rose which she had promised to wear. His mind went back to the book he had read in training camp
– one of the many thousands of books donated to the Army during the first
months of World War II. He read a
little book, and throughout its pages there were notes in a women’s
handwriting. Her name was inside the cover of the book: Hollis Meynell. He had written a letter and she had answered.
The next day his Army group had started overseas but for 13 months she
had written to him regularly. But she had refused all his pleas for her
photograph. She had explained: “If your feeling for me has any reality, my
looks won’t matter. Suppose I’m beautiful” A young woman was coming toward him. Her figure was tall
and slender; her light hair lay back from her ears. Her eyes were as blue as
flowers; her lips and chin had a gentle firmness. In her pale-green suit she was
like springtime itself. He started toward her, forgetting to notice she did not
have a rose. He ttok one step closer, then he saw the woman with the rose. She was a women well past 40, her graying hair pulled under
a worn hat. She had thick legs and wore flat shoes. His attention was suddenly
divided between the women and the girl. And there he stood that he could see the
woman’s pale, plump face was gentle and kind; her gray eyes were warm and
friendly. His fingers held the worn copy of the book which was to show who he
was. This would not be love, but it would be something precious. It would be a
friendship for which he had been and would always be grateful. “I’m Lietuenant John Blandford, and you – you are
Miss Meynell. I’m so glad you could meet me. May I take you to dinner?” A smile appeared on the woman’s face. “I don’t know
who you are, young man,” she answered. “That young lady in the green suit
– she asked me to wear this rose on my coat. She said that if you asked me go
out with you I was tell you she’s waiting for you in that restaurant across
the street. She said it was a test of some kind.” CHECKING OUT E-PAYMENTS It would be easy for Andy Reeher to feel as though he's at the helm of a sinking ship. For most of his career, the vice president of marketing for paper payment systems at Deluxe Corp. has heard talk of the check's imminent demise at the hands of new, easier-to-use electronic payment systems. But his ship is proving surprisingly buoyant, which is why Reeher hasn't had to change careers. Indeed, since pundits first predicted the death of the check in the 1970s, annual check volumes have more than tripled. Some 65 billion checks were written last year, and that figure is expected to grow by as much as 2% annually through 2005 – hardly the profile of a dying industry. And yet, change is coming. Electronic payments are projected to grow sharply, rising from today's 25% share of non-cash transaction volume to between 45% and 58% by 2010. This gradual but irresistible shift to electronic payments presents banks with a thorny strategic dilemma. The industry's fortunes are sharply affected by consumer usage of the paper check. Banks walk away from such a lucrative business at their peril. But do they have any choice? To protect those valuable relationships, banks need to begin carving out a dominant role for themselves in electronic payments – even if it means nudging their customers away from reliance on the paper check. In an era when institutions are under great pressure to meet short-term earnings targets, the task of trying to wean customers away from a profitable product does not engender a lot of enthusiasm. Electronic payment technologies, in the short term at least, represent just another costly layer of service, similar to the startup phases of automated teller machines and Internet banking. That leaves strategists facing a series of troubling questions. Should they continue to bank on the check's staying power and the income it generates, while risking the gradual loss of customers to alternative electronic payments providers? Or should they give up lucrative near-term check profits and willingly facilitate customers' shift to debit cards, electronic bill payment and other mechanisms? If they choose the second course, should they try to develop their own technical solutions or turn to outside vendors? And how will they replace the checking-related revenues that comprise the bulk of fee income for some institutions? Each institution will have to look to its own strategies, resources and business mix to find answers to these questions. Large institutions, obviously, possess more options. Some consultants suggest that banks can hasten the transition by incentivizing their customers to move to electronics and imposing some penalties (which could generate more fee income) for continued check usage. While this may help to a point, it leaves banks with the risk of antitrust problems and customer flight to competitors who continue to offer low-cost checking accounts. The hard truth is that no approach is likely to be painless. Ultimately, strategists must weigh competing risks: the risk of moving their customers to electronics too soon versus the risk of moving too late. One way or another, those customers will begin moving, and the banks had better be ready to serve them electronically when they do. Compared with most other countries in the world, the paper check has established a bedrock position in American economic life. Green Sheet estimates that banks generate $60 billion in revenues annually from the float, fees and low-cost funds generated by checking accounts, including about $5.6 billion from bounced-check fees and an average of 16 cents per-check in overnight interest. Deluxe estimates that banks earn $1.5 billion simply by reselling checks to customers. And these numbers don't include many intangibles, such as the loan volume and other indirect revenues rooted in checking relationships. Consumer usage of electronic payments is expected to follow close behind. PSI Global projects that more than 20% of all bill payments will be executed electronically by 2005, up from just 7% last year. Bankers generally view electronic payments with apprehension because of the paper-based revenues at risk. But it's also possible that electronics might present some revenue opportunities that are not immediately apparent. TCF's Cooper notes that ATMs were viewed mainly as an incremental expense when they were introduced, but slowly began generating revenues from access and interchange fees. Similarly, financial institutions could benefit from offering consumers online financial management services and payment verification or fraud protection services to merchants. On the bill-payment side, however, banks receive scant revenue – just from small monthly charges that only antagonize customers. In theory, Humphrey says, banks should be able to use pricing to drive customers to alternative payment methods. In Canada and Europe, which feature much higher electronic payment usage than the U.S., banks have jointly introduced new checking fees to encourage the transition. "To move rapidly into the sphere of electronic payments, you need relative pricing of payment instruments, and everyone has to follow suit," Humphrey says. Ladd Willis, executive vice president at First Manhattan Consulting Group, sees one way out of this dilemma. He suggests that banks use the information in their customer databases to "precision price" products in a way that pushes only unprofitable checking customers to paperless payment mechanisms. By analyzing data to understand individual customers' usage of products, delivery channels and transaction types, Willis explains, bankers should be able to figure out how to solidify relationships with profitable customers by giving them a better deal, while forcing the unprofitable ones to either carry their own weight or leave. "If you implement pricing that impacts all customers the same way, regardless of their profitability or their transaction preference or usage, then clearly you'll shoot yourself in the foot," Willis says. On the other hand, "if a bank does its pricing right, the movement to electronic payments will cause it to lose customers – but only the ones it wants to lose." At the same time, bankers rightly fret over the revenue losses such automation could bring. Online customers who opt to have their credit-card bills paid electronically on the due date, for example, will never pay a late fee. Unsurprisingly, the innovators in this field so far have been technology companies such as Atlanta-based CheckFree Holdings Corp., which controls nearly 80% of the market for electronic bill presentment and payment. Even as electronic payments advance, efforts are underway to prolong the life of the paper check, which is both good news and bad news for banks. The National Automated Clearing House Association and Visa USA, for example, are both involved in pilot programs to provide merchants with electronic check conversion. This technology, also known as "electronic check truncation," enables retailers to scan a check into the ACH system at the point-of-sale. The purchase amount is then debited from the customer's checking account on a delayed rather than real-time basis. On the positive side, banks should gain from reduced check processing costs and a continued customer adherence to the paper check. The problem is that check truncation simply bridges the gap between paper-based and electronics-based payments, ultimately threatening banks' paper-based revenues. For example, instantaneous verification of truncated checks via the ATM network – the subject of another promising pilot – would dramatically slash the fees earned from bounced checks. It's no surprise, then, that banks have signed on to such pilots somewhat grudgingly. MOBILIZING
FOR E-STRATEGY By Kenneth Cline A major challenge facing top banking strategists is wringing optimal performance from traditional business lines while simultaneously transforming their companies to compete in e-commerce. Unlike the lavishly-funded dotcoms, traditional banks get clobbered by investors when they spend too heavily on their Web ventures. Banks also are held to a higher standard on earnings, while many of the newcomers have latitude to operate at a loss for extended periods of time. This dilemma is being played out at Chase Manhattan Corp. The nation's third largest bank is struggling to shed its decades-old image of a volatile money center bank while trying to stay at the forefront of developments in the emerging world of e-commerce. Chief executive William B. Harrison Jr. has publicly embraced e-commerce as one of Chase's highest strategic priorities since taking command in June 1999. Harrison is clear-eyed about the magnitude of the selling job before him. Insists the 57-year-old executive, "The new Chase is a very different organization, characterized by leadership in business lines, improved financial discipline and sharpened risk management. Market perceptions tend to lag the realities of changed performance, however, so the only way you change investor views is by delivering consistently." Harrison is devoting a quarter of a billion dollars annually to e-commerce initiatives. Well and good, analysts say, but he's got to muster these resources in a way that doesn't hurt near-term profitability – and deploy them wisely. Like his counterparts at other major U.S. banks, Harrison is wrestling with the issue of how to nurture an entrepreneurial approach to e-commerce without alienating traditional business lines. His answer is a new business unit, chase.com, which serves as the focal point for Internet-related initiatives. To coordinate the unit with the rest of the company, he also formed an Internet council comprised of senior executives from all of Chase's major business lines. No matter how the revenue debate plays out, Harrison has no choice but to look ahead. The competitive landscape of financial services is changing at a dizzying pace, and coping will require a series of organizational transformations that can only be accomplished by elevating e-commerce to a top strategic priority. The question then becomes how to approach e-commerce within the confines of a traditional business model. Within the past year, most of the major banks have appointed senior executives, or "e-commerce czars," to lead their Internet initiatives, and they have adopted a variety of structures to support those czars. Bank One Corp. and Citigroup carved out separate business units that operate with a great deal of autonomy. By contrast, FleetBoston Financial Corp. and Wells Fargo & Co. empowered their individual business lines to pursue Web ventures. Chase is somewhere in the middle.Executive vice president Denis O'Leary, the bank's designated e-commerce czar, runs chase.com as a separate unit. The explicit intent is to nurture a Silicon Valley-type entrepreneurial culture outside the normal bank bureaucracy. But O'Leary also remains within the Chase chain-of-command, reporting to vice chairman Neal S. Garonzik, and his unit is charged with facilitating "new economy" initiatives throughout the company. Along with Harrison and Garonzik, O'Leary co-chairs Chase's Internet council, which includes representatives of all the bank's major business lines. Harrison's catch-up strategy on the retail side includes an embrace of electronic bill presentment and payment, the process of delivering bills to a customer's PC. Last year, Chase announced its participation in Spectrum LLP, a joint venture with Wells Fargo and First Union Corp. Spectrum has designed a "switch," or network through which member banks can send and receive bills processed by the major technology vendors and other banks. Providing banks with the ability to aggregate most of their customers' bills at one site is expected to boost consumer acceptance of electronic bill payment, and therefore of online banking in general. Chase uses chase.com to manage its interest in Spectrum, as well as its equity stake in Seattle-based ShopNow.com, an online shopping portal that offers products and services from more than 40,000 merchants. Chase is positioning itself as the preferred credit card at this site, where its cardholders receive special discounts. If the arrangement works as expected, Chase will deliver value to its existing customers while opening up a channel for acquiring new ones. One of chase.com's most promising projects, in fact, is New York-based Intellysis Electronic Commerce Inc., which provides an Internet network for major corporations to purchase supplies. Chase acquired a 33% stake in this electronic procurement company back in 1996, an investment now overseen by O'Leary's group. Despite all the activity with Spectrum, ShopNow.com and Intellysis, some e-commerce consultants downplay chase.com as more public relations than substance. They point out that Spectrum remains in the formative stage while Intellysis is an ongoing relationship inserted into the Internet unit's portfolio. "Chase.com is great for public relations and makes Wall Street happy that Chase is going after the Internet. But the proof will come when chase.com introduces something that will fundamentally challenge the company's existing business model," says Jaime Punishill, with Forrester Research in Cambridge, Mass. Harrison's Internet strategy, in any case, does not depend solely on the success of chase.com. It also incorporates the activities of other units of the company, some of them much more visible. The two most important are Chase Capital Partners, a venture capital fund, and Chase H&Q, the investment banking unit formed after last year's acquisition of San Francisco-based Hambrecht & Quist Group Inc. When combined with chase.com, these units provide Harrison with a multi-faceted capability to launch and sustain e-commerce projects. CCP, for example, has invested in a wide range of Internet/e-commerce companies, such as StarMedia Network Inc., Cobalt Networks Inc., Digital Island Inc. and Triton PCS Holdings Inc. Such relationships allow Chase to monitor the technologies these firms are producing and then, where applicable, purchase them for its own needs. CCP, which has been around since 1984, helps Harrison in another way by offsetting outlays on other e-commerce projects. When CCP investments go public, as many have in the last two years, during the height of the market's dotcom frenzy, Chase is able to cash out big. Last year, CCP's $1.4 billion in profits contributed 26% of the bank's overall operating profit. "People ask how legacy companies can make money in this e-commerce space. Well, we're doing it, not in terms of operating revenue but as venture capitalists," Harrison says. Hambrecht & Quist, Chase's recently acquired brokerage firm, provides another critical strength. The San Francisco-based investment banking house specializes in small cap startups in media, telecommunications, information technology and health care – precisely the kinds of companies that are shaping the new economy. Harrison describes Chase H&Q as the bank's window into the e-commerce world. The unit's officers are able to monitor the latest developments from their vantage point, and then they share their reconnaissance with Chase's hierarchy. O'Leary, for example, says he meets frequently with Daniel H. Case, head of Chase H&Q, as well as Jeffrey C. Walker, who runs CCP. The way O'Leary describes it, Chase has developed a very nonbank-like culture at the highest levels where executives can share ideas and plot strategy without regard for formal titles and chains of command. This spirit of collegiality is institutionalized in Harrison's Internet council, which brings together representatives of all the company's major business lines. As part of his effort to prioritize e-commerce at Chase, the CEO had every business unit designate a senior line officer with responsibility for Web-enabling that particular unit. These line executives, about 15 in all, meet with Harrison, Garonzik and O'Leary once a month to discuss e-commerce initiatives throughout the company. Says Harrison, "You need some place where it all comes together, one group that is the central repository of information. This helps prioritize the use of what will always be limited investment dollars." Meanwhile, Harrison has to keep the profit engine humming. Ever since the 1996 Chase/Chemical merger, the "new" Chase has enjoyed steadily improving results. Returns on assets and equity reached 1.47% and 23.7% respectively last year, helped by tremendous gains from the company's capital markets units, which includes trading, investment banking and venture capital. Some core operations are sluggish, however. National consumer services revenue was flat during the second half of last year, for example, and credit card growth is slowing. Moreover, many on Wall Street are concerned about potential volatility, noting that capital markets revenues are tied to the performance of equity and debt markets around the world.
|
