1. 1 Online Banking and Investing Kazan State University Non-Commercial Fund of Corporate and Cultural Development “FORRA”

2. 2 Outline Online Banking Services Hybrid banks Internet-only banks Online loans Investment industry Electronic Communication Networks (ECNs) Online trading Online bond trading Merging financial services Financial aggregation services Wireless banking and trading Financial planning online

3. 3 Online Banking Services Traditional banks have established online services Internet-only banks lack recognition and brand awareness Internet banking can reduce expenses float Online payment decreases the float The time it takes for checks to clear after they have been sent for payment or deposited Payments delivered faster than by mail accounts receivable Frees up cash and decreases accounts receivable

4. 4 Benefits and Risks to Customers Benefits No need to buy stamps No need to send out bills early Account information available at all times Risks Security breaches Office of the Currency Office of the Currency (OCC) has warned people that sites mimicking bank sites can scam them for account information

5. 5 Hybrid Banks Hybrid bank model Traditional banks offering online services Prominence of brand names increases customers’ trust Customers can still visit a physical branch Large network of automatic teller machines (ATMs) Monthly fees to use online bill paying services Important to survival and growth of small local banks Can offer competitive services and attract national customers

6. 6 Internet-Only Banks Convenience and lower fees, higher interest rates Can lower building and equipment costs, decrease payroll Must accept deposits by mail Little brand recognition Insured by the Federal Deposit Insurance Corporation, but customer may still not be comfortable Some are attempting to establish a physical presence

7. 7 Online Loans Traditionally, companies and individuals dealt with several different lenders filling out documents and comparing options was time consuming Online Process can be more efficient; approvals within minutes Access to many lenders, shopping for best deals E-LOAN, LiveCapital, companyfinance.com E-LOANLiveCapitalcompanyfinance.com Small Business Administration Office of Advocacy

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9. 9 Online Mortgage Services Decrease time to find a mortgage Digital signatures make documents legally binding Ditech.com, MortgageRamp.com and LoopNet Ditech.comMortgageRamp.comLoopNet Some sites provide mortgages directly from lenders Other sites act as brokers, search for best mortgage Internet may reduce number of broker jobs Stability of the lender is an issue

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11. 11 Electronic Communication Networks (ECNs) Facilitate electronic trading by: listing securities order sizes and prices connecting buyers and sellers processing digital orders Transactions are completed faster Helps to lock in a buy or sell price Before and after hours trading Increased price transparency by listing prices from more than one exchange Loss of the middlemen and the trading floors Instinet, Island, REDIBook and Archipelago InstinetIslandREDIBookArchipelago

12. 12 Online Trading Full-service brokers Offer speed and convenience of online trading with the advice of a broker Discount brokerage service Requires self-sufficiency, investor responsible Internet-only brokerages and hybrid brokerages Factors to consider for investing online Type of investments Quality of site navigation and customer service Cost of transaction vs. number of trades per year

13. 13 Online Trading Online companies charge a fee for every purchase or sale Internet serves as a valuable learning tool for new and experienced investors The Motley Fool, MoneyCentral and Money.com The Motley FoolMoneyCentralMoney.com Companies offering online services Have made investing in stocks and options accessible to a larger audience Provide real-time market information

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15. 15 Online Trading Trading on margin Trading on margin When an investor buys stock and borrows money from the broker to invest in the stock Opening a margin account online requires low minimum balance, answering a questionnaire and being qualified electronically (no assessment is made by a human broker) A stock’s value may fall below the loan value margin call The broker can issue a margin call The broker requires that the investor invests more cash or securities or sell the stock to pay back the loan

16. 16 Online Trading Day trading Short-term trades to profit on market inefficiencies market inefficiencies (e.g. news affecting the market) arbitrage arbitrage (converting from one currency to another) Easier on Internet Transactions limited by communication and server speed Fees can be expensive Day traders bear the same risks as other traders CareerDayTrader.com, DayTradingOnline.com and OnlineTradingAcademy.com CareerDayTrader.comDayTradingOnline.com OnlineTradingAcademy.com Internet facilitates trading commodities globally EnronOnline

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18. 18 Online Bond Trading Bond Bond A written promise that an entity will repay a debt that is sold to an investor (investor receives original investments and a dividend for a certain period of time) Online companies offer bond trading; claim that process is easier and cheaper Tradebonds.com, bondsonline and MuniDirect Tradebonds.combondsonlineMuniDirect Internet can cut the cost of issuing bonds Need for a standard system for bond sales process

19. 19 Merging Financial Services Glass-Steagle Act Since the appeal of the Glass-Steagle Act, banks, brokerages and insurance companies are permitted to offer a wide range of financial services Most online financial services offer electronic bill presentment and payment It is crucial for financial institutions to offer a wide variety of services to remain competitive Prudential is just one example - offers a wide variety of online and offline services Prudential Insurance, banking, brokerage, real-estate, B2B and financial planning

21. 21 Financial Aggregation Services Give users option of keeping all their financial information in one location on the Internet screen scraping Services use screen scraping The aggregator visits sites with financial information and services, uses username and passwords to log in, downloads the information and stores it in one place Many banks do not authorize screen scraping Examples: Yodlee, 1View Network and GainsKeeper Yodlee1View NetworkGainsKeeper Privacy and security concerns; not regulated

22. 22 Wireless Banking Wireless technology offers customers a value-added service Wireless banking Paying bills from anywhere Transferring funds between accounts Checking account activity Examples: TD Bank Financial Group and Netbank TD Bank Financial GroupNetbank

23. 23 Wireless Hesitation

24. 24 Wireless Trading Wireless security trading is growing rapidly Traders can receive important news and other information and make trades immediately Companies offering wireless trading services Ameritrade, CSFBdirect, Quick & Reilly, Morgan Stanley Dean Witter Online and Fidelity Investments AmeritradeCSFBdirect Quick & ReillyMorgan Stanley Dean Witter OnlineFidelity Investments Wireless access to financial information may grow faster in Europe and Asia than in U.S. U.S. has not agreed on a single standard or wireless device

25. 25 Financial Planning Online Internet made it easier for providers and customers People can learn on their own about financial planning services Companies can offer online applications, account histories, new products, investment tracking, etc. 401(k) plans 401kafe offers information regarding 401(k) plans - investing vehicles for employee retirement 401kafe mPower offers retirement-planning advice to employees of member companies that subscribe mPower ihatefinancialplanning.com provides information on all financial-planning topics ihatefinancialplanning.com

26. 26 Summary One of the fastest growing online service industries Many established banks added electronic services Internet-only banks lack brand awareness Money is transferred quicker freing cash and decreasing accounts receivable Using Internet to offer banking can lower costs, but there are risks Companies can use Internet as another way to service customers