As Taught by Prof. Tim Richardson School of Marketing and e-Business, Faculty of Business


Electronic Commerce and Banking (B2B), (B2C)

"E-technology has changed the way we all do business; the way we shop, the way we buy and sell, the way we close transactions. We seem to be reinventingoutselves continuously"

"... technology has created fundamental changes in the structure of Canadian banks"

What drives the banks?
Chisholm says , the questions of

  • does this move, build or extend the core capability
  • does it offer the opportunity to be a dominant player in a national market
  • does it have spin-off potential

Jeff Chisholm
Deputy Chairman
Bank of Montreal 
as quoted in a Financial Post special supplement "Online Finance" 27 April 2000



Chapter 7

the main required text


Chapter 7 - Electronic Commerce and Banking
p. 183 Changing Dynamics in the Banking Industry
Kalakota's 1997 book is a bit dated but the concepts he discusses still apply to understanding a general overview of the situations facing banks in the e-community.
Kalakota notes 5 distinct factors contributing to the new environment
- for this class, read, in advance, Chapter 7, and be prepared to discuss the main points
  1. changing customer needs driven by on-line commerce
  2. optimization of branch networks to reduce costs
  3. changing demographic trends and potential new customer markets
  4. cross-industry competition caused by deregulation
  5. new on-line financial products
The ppt created for this class is available at
. link to ppt menu
Chpt 5


page 173

Turban's book has 5 pages devoted to the subject of banking, with part of the discussion devoted to personal banking (B2C) and a little bit discussing corporate banking (B2B)

Turban concludes this section by quoting a Boston Consulting Group 1998 study on the future of banking. While this study may be interesting, 1998 is 2 years ago - which is a lifetime on the Net.

WTGR found an article on the Boston Consulting Group site titled
"Banking in Internet Time"
dated March 2000

"To develop enduring online businesses, however, banks need to move fast, invest capital, and experiment with new ventures, realizing that some may fail. Such an approach is an enormous cultural and organizational challenge for most bankers, who have built their careers on minimizing risk and  avoiding mistakes. But they have no choice: the opportunities are too great and the threats from  newcomers too palpable"

The authors point out an inherent weakness in the "culture" of the banking industry - that is their propensity to avoid risk - which will cause them to take too long to make decisions in the online world and therefore cause them to, perhaps, lose out on some of the new financial and payment situations being developed.

For years, financiers expected online banking to take off and become a highly profitable, low-cost channel. However, a growing skepticism has replaced those great expectations. Online banking has not caught on as quickly as anticipated, causing some bankers to question whether the big investments required to develop the businesses are worth it. In addition, other delivery channels that were expected to reduce costs and increase profits—such as automated teller machines, telephone banking, and in-store banking—have not lived up to their billing at many financial institutions."

"Growing Consumer Interest 

Some bankers question whether a sufficiently large number of consumers really want to bank online. They note that in many markets, the growth of the number of online accounts has lagged expectations. But there is ample evidence that droves of consumers are poised to embrace online banking. In the United States, more than 15 million consumers checked mortgage rates online in 1999. About the same number searched online for credit card information. And in the United Kingdom, more than 5 million consumers logged on to the Internet in 1999 to obtain financial information. This way of gathering financial information is the first step toward conducting transactions online. Once consumers start banking online, momentum can build rapidly. In Australia, there were barely 100,000 online banking    customers in early 1999. By the end of the year, there were 650,000."

Companies are not run by computers, they are run by individuals. Individuals use, or non-use of a product or service will effect how companies use a product. Cyberbanking can't develop in B2B situations until B2C has proven to work out to the satisfaction of those trying personal banking online.

The BCG article was written by Stuart Grief, a vice president in the Boston office of The Boston Consulting Group. Peter Wetenhall is a vice president in the firm’s Melbourne office. Bjørn Matre is a vice president in BCG’s Oslo office. 

Why would students of an E-commerce course at a college in Canada spend a particular amount of time discussing the Canadian banking industry?
1. The banking industry in Canada is more concentrated than in the U.S. with 5(6) major banks being responsible for a large majority of the financial transactions - whereas in the U.S. you also have some super large sized banks, but, also many small regional banks. 

2. The banking industry in Canada is extremely competitive because there are 5(6) players and they are all, relatively the same size - competition causes them to strive to have the most leading high-tech services (eg. e-commerce capabilities)

3. In the big picture of the whole Canadian economy, banks, as large companies, are bigger players than proportinately to the U.S. (where companies like G.M., I.B.M. and Microsoft are bigger players). That is to say, in lists of corporate profits, Canadian banks are all in the top 10 in overall rankings of Canadian business whereas in the U.S., the top 10 businesses are manufacturers like G.M. and I.B.M.

Our 2000 matrix describing E-commerce and the Canadian banks services to business Our 2000 matrix describing E-commerce and the Canadian banks services to individuals

Our 1999 matrix describing E-commerce and the Canadian banks services to business Our 1999 matrix describing E-commerce and the Canadian banks services to individuals

One of the annual stories in Canadian business is the growing profits of the Canadian banks. Some people think it is obscene that in a relatively modest sized economy like Canada, the banks are the ones at the top of the list in profits - it is seen to be greedy of them to make such excessive amounts of money at the expense of struggling businesses. Other people insist that a healthy bank oligopoly is good for business because it means they have the strength to allow them to lend to small and medium sized businesses because they can still count on making money from the transactions they do for large B2B situations. Which ever way you look at, it is interesting to compare our situation to the U.S. In the U.S. the leading companies in terms of profits are manufacturers of consumer products, like General Motors, IBM etc - American banks are not so prominent on the list of profit takers. In Canada, all the major banks are right up in the top 10, top 15 in any given year over the past decade which causes some critics to say it is not right that these financial institutions should gouge our profits at a higher rate than their business clients.

Tom Hirschmann wrote an article in The Financial Post this summer (02 June 2000) titled
"Profits at Canada's Big Six Banks Balloon to 2.6 $ billion"

Hirschmann's short article is useful in pointing out that in some cases (Scotiabank and CIBC) part of the massive profits these banks make is either from activities outside Canada, or from other types of activities such as selling real-estate. CIBC for instance made $128 million after-tax gains from the sale of seven real estate properties.

discussed in class #6, October 11th
Industry associations are one of the best sources of information about an industry as a whole. Often these associations produce discussion papers and PR material to explain to government and the public, the opinions and business positions of their members.
you will find several links on the CBA web site to pieces of information. Some of these are "backgrounders" which associations use to explain particular issues to the public and government, some of the other pieces are written about e-commercein general for the audiences that might be people wanting to know the CBA's position in the industry.
This article deals with the generalities of "buying and selling on the Net", and includes some bar chart images from the accounting firms. Most of the article is about how important e-commerce is and how fast it is growong and all the different things we can do with e-commerce.

The article is what we call a "catch all" covering things from the perspective of the business owner, as well as the customer. They even have a point form list of
"On-Line Shopping Tips"

This section is called by the CBA
"Glossary of Terms"
but as you will find, it is written for a very "junior" audience, meaning people who have only a introductory understanding of the Net. The fact that the list contains such simple terms illustrates that the CBA thinks most of the people using this portion of the web site are almost complete "newbies" to the web
WTGR This section is titled
"Consumer and Business Issues"
Not surprisingly, the CBA ranks security and privacy concerns at the top. The way this section is written is to convince the reader that although this is a concern, it is being dealt with and you should feel confidence in going online and buying lots of products with your credit card which will help make the banks and their credit card processing agents even richer!
(they also quote extensively from the Angus Reid Group)
WTGR One thing associations do often is hold events for members and non-members. Some of these events are educational oriented, such as seminars.
There is one event in Toronto, contact is
Gwen Bailey, 
Scarborough Chamber of Commerce 
ph: 416-439-4140 ext. 223

Since so many of these events are TBA and registration is relatively low, maybe the CBA might be interested in assistance from some e-commerce students!

October 11th
continued adding in, and updating

Our 2000 matrix describing E-commerce and the Canadian banks services to business Our 2000 matrix describing E-commerce and the Canadian banks services to individuals




The Canadian banks have  had many challenges dealing with the new demands of e-business. Part of the problem is that these demands require solutions which are not core strengths of the banks.
The banks have dealt with this inadequacy in two ways
1. creating new departments in their subsidiary companies to address the new e-business needs
2. buy, merge with, ally with other companies who have existing (or newly existing) capabilities which  the new e-business is using

In this section we will look at some of the alliances that have developed and also read about some of the acquisitions the banks made to add more capability.




It is hard to talk about banking services in North America in the year 2000, without mentioning the hype and enthusiasm that individual people have gained for taking control of their own investments and new found savings to be active in trading stocks.

All of the Canadian banks are active in facilitating stock trading to some degree. Although it may be disputed, TD's subsidiary TD Waterhouse has taken a leadership role especially with people that have modest amounts of money and want to do some day trading.

Although the banks are trying to also carve out a niche to provide information about business, with which people can use to trade - other companies in the private sector are being created that focus more directly on stock price information and it is worthwhile to mention some.

One of canada's busiest internet sites is
Vancouver based provides information to investors by having researchers cull thousands of internet sites looking for tips on company activity, then posting the information on StockHouse. People who use the service find it helpful to see "aggregated" information which they might not have time to find themselves.

StockHouse has 130 people and has sites and offices in Canada, United States, Australia, China and the U.K.

Stockhouse also acts like a portal by selling advertising to stock market related companies who are attracted to the many hits this site gets each day.

An annotated list of books on daytrading