The Impact on Information Provision
In his popular book 'Being Digital' Nicholas Negroponte,
Director of the Media Labs at MIT, defined the new technologies
as having four basic characteristics; decentralising, globalising,
harmonising, empowering.
Each one of these characteristics holds wide-ranging
implications for service providers in the financial markets. Distributed
network technologies are providing the facility to move away from
centralised models where it is appropriate to do so. The emergence
of ubiquitous global network provision, through both terrestrial
and satellite links, mean that even smaller financial businesses
can adopt a global position. Technological development, and the
changes in cost models for information and communication technologies,
is to some extent 'changing the playing field' for financial service
providers. A level of 'harmonisation' is occurring in the market,
increased by the need to adopt sets of global standards within
the technologies themselves. As for Negroponte's 'empowerment',
it could be argued that through access to this new wave of standards-based
lower cost technologies, financial institutions, and their employees,
are being empowered to widen their strategic approach information
services.
From the financial service providers' point-of-view,
these core developments provide a range of opportunities that
were, to a large extent, unavailable before. The new technological
infrastructure will serve as a basis for strategic partnerships
between financial institutions and the financial service providers
in the marketplace.
An Audience of One
A key change for the information services industry
generally is being brought about by the current communications
revolution. This is a move from the dominant model of broadcasting
common content a large audience to a model of providing content
to an audience of one. The customisation of information
and services to specific client requirements will become a crucial
requirement. Additionally, a high level of integration of services
will need to be achieved so that maximum leverage can be obtained
from the data services. Real-time market data, historical data
resources, transactional services, risk management systems, and
analytics tools need to be tailored initially to market segments,
but ultimately to single user needs, to the audience of one.
The Delivery of Services: First Class/Second Class
The emergence of the Internet over the past four
years has been nothing if not spectacular. Internet is no longer
the preserve of academic research. Currently, about three new
businesses debut their presence on the World Wide Web every 75
seconds. Internet is offering itself up as a network of choice
for a wide range of business activities. However, there are some
significant issues that need to be addressed in order for Public
Internet to provide core financial services effectively; issues
such as reliability, timeliness of delivery, and security.
One model that seems appropriate until such time
that the network of public Internet can offer the performance
and security is the model which has been operating in the world
of transportation for some time, a First Class/Second Class system.
The First Class/Second Class IP network model offers,
at one end, high speed secure connectivity over global private
extranets and, at the other end, global connectivity
over the public Internet. The extranets being put into place by
the major market providers are, in essence, private Internets
that use standard Internet technology and overcome current public
Internet restrictions through bypassing that network. They will
provide appropriate connectivity for clients who require high
levels of reliability, security, and performance. Where high-speed
performance and the highest levels of security are not essential,
public Internet already offers a global infrastructure. As these
issues are addressed on public Internet it is likely that more
business activity will reside there.
Interoperability
Internet technology has provided a major push towards
the uptake of a standards approach and, subsequently, of interoperability
of applications and services. The sheer scale of recent Internet
development has resulted in the emergence of standards for email,
security models, directory services and a range of other elements.
The effect of this push upon service providers in the financial
markets is being seen in two ways. Firstly, they are responding
to the move towards Internet standards by rapidly embracing these
standards in their own products and services. All the major vendors
are bringing Internet-standards services to market. Secondly,
the service providers are addressing the problems that have arisen
with the speed of development of Internet technologies. These
'problems' include the integration of secure closed networks with
the currently less secure open environment of public Internet.
Rapid uptake of the Java language and environment on public Internet
can also be seen as a 'problem'. Java offers a range of advantages
such as networkcentricity of applications and services, rapid
development cycles, and cross-platform support. At the same time,
some financial institutions see problems with Java's maturity,
robustness and bandwidth requirements. There is no doubt, however,
that Java will have a significant part to play in the applications
and services of the future.
The Outlook
The rate of change in Internet technologies looks
likely to increase in the short term. The global financial market
sector will move with these changes. It may be that this move
is along parallel tracks initially, using Extranets and private
Intranets. There will, however, be convergence in places, if not
total convergence. Even as a yardstick, the Internet is highly
relevant to this market sector.
The views expressed in this paper are the personal
views of the author, and do not necessarily represent Dow Jones
Telerate's policy.
