October 03, 2002

Web services have the potential to alter the competitive business environment between financial services institutions and change how these firms serve their clients, according to a new TowerGroup report.

The survey, entitled "The Networked Financial Institution: Connections for a Successful Business Strategy" says that Web services will change the way customers conduct their business and how institutions deliver their services. The growth of Web services is important to banks because it complements the movement toward a more standards-based open IT environment. In the long run, Web services will also help financial institutions operate more efficiently.

For these reasons, TowerGroup projects 80% of all financial institutions will utilize some form of Web services by 2005.

But TowerGroup believes the adoption of Web services technology will start slowly in the bank arena. Financial institutions are more wary of technology risk then many other industries, which will delay commitment to Web services. In addition, progress is necessary in many areas before Web services can become more available throughout financial institutions. For example, TCP/IP networks are essential for developing an enterprise-wide mesh of information and functionality needed to take advantage of Web services. Banks will have to upgrade these networks before widescale adoption of Web services can occur.

Until these issues are resolved, Web services will likely be used internally to simplify the development and implementation of systems and business products. Still, some banks are beginning to use Web services developed outside of the banking world to attract an online consumer base.

For more information and a copy of the report, contact TowerGroup at www.towergroup.com