ROME (03/22/2000) - Italian financial institutions are aggressively rolling out new Internet services, to judge by the volume of advertising in the media in recent weeks, but the country has a long way to go before it catches up with its most advanced competitors, industry analysts say.
"Italy starts from a low base and we forecast that it will remain considerably behind its rivals in terms of online trading and banking," said Wendy Kane, online financial services program manager for market research company IDC (International Data Corp.) in Milan.
"Internet penetration has not yet boomed in Italy, due to the high costs of telecommunications and the relatively conservative approach of Italians," she said. "Probably the greatest inhibitor of Internet banking expansion is Italians' strong reliance on personal relationships, especially with their local banks."
However, that situation is beginning to change. By 2003, 28.7 million Italians, or roughly half the population, will have surfed on the Internet at least once, according to an IDC study presented in Venice recently.
At the end of last year, Italy had 973 online banks and a total of 450,000 online bank accounts, IDC's Kane said. Those figures compare with Britain, who had 1,304 online banks and over 2 million online accounts at the end of 1999, and Germany, with 3,233 online banks and 8.3 million online accounts, she said.
So far, Italians have shown little interest in online credit facilities, mortgages and low interest credit cards, but there has been a more enthusiastic uptake of online stock trading facilities, Kane said. "There were some 20 online stockbrokers in Italy as of December 1999, some of them offshoots of the banks, and a total of 50,000 online trading accounts, which we forecast will rise to 1.01 million in 2003," she said.
In France at the end of last year, there were 160,000 online trading accounts, expected to rise to 1.5 million in 2003, in Britain there were 180,000, set to reach 2.6 million in three years time, while in Germany, there were 785,000 accounts, expected to reach just over 6 million in 2003, according to a recent IDC study.
For Giorgio Introvigne, a partner at the research and consultancy group Solving International Projecta SpA, Italy has made considerable progress in e-banking, but many financial institutions have failed to take on board the strategic implications of the new technology.
A study by Solving of 84 Italian banks, presented recently in Milan, found that just over half of them offered Internet banking services. Of the 37 insurance companies examined in the study, only those who operated exclusively on the Web made their services available online.
"Both banks and insurance companies devote very little attention either to search engines or to interactive operations, providing little help to non-expert customers and renouncing the opportunity to use the Web to gather valuable information on current and potential clients," Introvigne told the Milan conference.
"What has been missing is a strategic reflection on how e-commerce will change banking activities," he said in a telephone interview. "So far, groups of variables have been considered separately, as part of a tactical approach to the problem."
The boom in Internet banking in Scandinavia and Britain has been stimulated by the greater mobility of the northern banks' customer base, Introvigne said. And Italians are by no means ready to abandon face-to-face contact with their trusted financial advisors. But there is a strong demand for basic banking information to be made available over the Net. Those financial institutions who fail to provide such data as, for example, online access to current account details, risk seeing their customers migrate to banks that do, Introvigne said.
Italian banks have begun to make major investments in Internet technology, which will enable them to seize market share from those banks who prove slower in adapting to the new technological environment, he said. "In the short term, though, I don't see established banks losing out to complete new entries because of the Internet."
The Milan-based consultant cited a number of factors that could help Italy to steal a march on some of its more advanced competitors. "Italy is the European country with the greatest propensity for personal saving," he said. "There is now a huge amount of money that used to be tied up in government bonds, which today yield almost nothing in real terms, and which are being transferred into other forms of investment such as shares, investment funds and life insurance policies. This phenomenon is likely to boost the current process of technological change."
Another factor is the wide availability of mobile phones. Italy has the largest mobile phone subscriber population in Europe, currently standing at 33.7 million and expected to reach 42 million in 2003, according to IDC. The advent of mobile banking could therefore give the country's financial sector a significant boost, Introvigne and IDC's Kane agreed.
"There's no generation gap as regards mobile phone use. Italians are not technophobic, and that may be reflected in the number of future online users," said Kane.
"Italians are very open to technological innovation," Introvigne concurred.
"Fashion is enormously influential here, and an online bank account could soon become a status symbol, just as a mobile phone was in the recent past."
Introvigne sees mobile commerce as an ideal instrument for online share trading. "It's perfect for time sensitive operations. Buying a life insurance policy or checking your bank account is normally less urgent, so the speed of m-commerce (mobile commerce) is less relevant," he said.
Alliances between banks and telecommunications and technology providers will be the key to success in e-banking, according to Kane. Major partnerships to emerge in recent weeks include the tie-up between the Telecom Italia Group and the Banca di Roma, as well as the alliance between the Banca Nazionale del Lavoro and Italy's fourth mobile phone operator Blu SpA, who are due to begin offering both mobile and fixed online share trading in May.
The first Italian stockbroker to offer wireless online trading was Milan-based Directa SIM in June 1999. Fineco SpA began offering a similar service in December, and IMIWeb SpA, the online stockbroking arm of the San Paolo-IMI banking group, has been one of the most active promoters of mobile e-trading services through press and television advertisements. IMIWeb intends to offer integrated Internet, phone and mobile banking and has signed an agreement with the mobile operator Wind SpA and Nokia Corp. for the necessary technological platform, according to published reports.
"Staff in the banks' branch networks generally have difficulty in getting to grips with the technology that is on offer, so striking alliances with the right technology suppliers will be crucial to success," said IDC's Kane. "Banks as a sector have invested heavily in technology, but until now it has been mainly focused on the back office."