Analysis of the Impact of the Internet on Competition

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514 International Journal of Management Vol. 21 No. 4 December 2004 An Analysis of the Impact of the Internet on Competition in the Banking Industry, using Porter's Five Forces Model Irene Siaw The Open University of Hong Kong, Hong Kong AlecYu Cisco Systems (HK) Ltd, Hong Kong The emergence of the Intemet has created both threats and opportunities for banking executives. Those who are able to leverage competitive benefits from the Intemet are confronted with significant business potential. The Internet has fundamentally changed traditional relationships and services within the banking industry. It shifts the overall competitive landscape, the technical and standards infrastructure, and the requirements of individuals and business…show more content…
al 2000). Intemet banking refers to the use of the Intemet as a channel in the delivery of banking products and services (Starita, 1999). Intemet banking and traditional PC banking differ with respect to the application software resident on the user's computer and hence the requirement for ongoing software upgrades and distributions. In most home banking ventures, the bank provides the customer with an application software program (or PFM by customer) that operates on a customer's designated PC. By contrast, with Intemet banking, potential customers already have the software they need to do their banking services as application software resides on the bank's server in the form of the home page. The Security First Network Bank (SFNB) in the United States inaugurated the world's first transactional Web site on October 18, 1995. Since then, the number of Intemet banks has increased significantly each year. In 1999, according to the Online Banking Report: The Tme US Intemet Batiks (, the United States alone saw over 200 new Web-based start-ups and/or spin-offs from existing conventional banks. Impact on the Competitive Landscape in the Banking Industry Many research studies cu-gue that Intemet banking will be the predominant trend in the future of the banking industry (Birch & Young, 1997; Humphreys, 1998; Crede, 1998; Franco & Klein, 1999; Brennand, 1999; Cisco, 1999). The FS Intemet Value Creation

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