IT Finance: Nets catching the big City fish

Financial institutions are radically changing the way they handle a deluge of data. By Mark Vernon

Computer-based messaging that builds into a complex matrix of information forms the lifeblood of the City. You have only to think of television images of dealing rooms and stacks of monitors toppling precariously over desk tops, pumping out information. But new Internet and intranet technologies are leading to radical ways of dealing with this deluge of data.

Previously, electronic data interchange (EDI) was a proprietary affair, with companies and institutions setting up networks to use an exclusive range of protocols and standards. But although many are concerned about whose technology will become dominant, by virtue of being platform-independent Internet technology is opening the systems up. Further, and unusually, the technology fits perfectly with a major business trend: globalisation. City institutions are beginning to see the Internet as a worldwide network waiting to be exploited.

So how are companies building the Internet and intranets as a distribution channel? Financials are shy of publicity over their internal activities, but a typical example can be found at NatWest Markets' Global Equities. It is one of several banks using a product from Blue Curve, called Research.Net, to publish data and research to analysts. The product can be seen as a kind of information hub, able to integrate with research production processes and internal forecast databases and thenpass data out to third-party distributors. But - and this is typical of the opportunities afforded by the new technology - it can also adapt to the requirements of individual users.

Paul Rinaldi, assistant director of NatWest Markets, explains: "Using Research.Net, we will provide our sales teams and clients with data from analysts around the world far more cheaply and more personally than before." A different facet of the technology is demonstrated by the market-maker Currency Management Corporation, which plans to bring foreign exchange prices to the floor via the Internet, using a product called Display.IT. It is significant that the channel is beginning to be seen as robust enough to support snap market decisions, where delayed information can cost millions.

Jill Veasey, Display.IT's business development manager, explains how the technology can be leveraged further. Subscription prices to traditional data delivery feeds often cost more than the hardware in a typical bank or dealing room. "When setting up offices in remote sites, such as India and Eastern Europe, it is cost-effective to wire them up over the Internet as processes get under way."

The World Insurance Network is another messaging initiative, owned by the world's five largest insurance brokers. Piloting has begun and WINconnect, the full-blown service, is due for release in midsummer. Alongside traditional messaging facilities, users will be able to search a worldwide directory for personal contacts, and attach comments.

Hurdles remain. The obvious one, security, is even more complex when it comes to the City. The processes that guarantee the authenticity of a message that could initiate a trade worth millions of pounds are subtle and sophisticated, and third parties are involved too, including settlements houses, exception offices and claims-handling. Financial institutions, used to the visible controls of written signatures, are wary of fast automation.

A second issue is legacy technology. Although the Internet offers great economies of ownership, concern is shown over the level of investment it demands, especially since this cannot easily be passed on to customers, and because of the desire to protect existing systems' investments. Also, traditional financial information services may suffer loss of revenue when proprietary data migrates from proprietary networks. Mark Robertson, managing director of Blue Curve, explains: "There is increasing pressure from banks to deliver data via intranets, coupled with issues around who owns that information anyway - it is often supplied by banks. They are beginning to question why they should pay so much."

Geoff Chapman, of TCA Consulting, suggests that another problem is found with Internet service providers. "The key demand here is quality of service," he says. There is also a need to consolidate data feeds, to supply usable information for the markets that these services also provide. But there seems little doubt that the Internet is to become a mainstream channel for business research and news. Wharton Information estimates that 71 per cent of the sector will use browser-based technology within two years. And Forrester Research has advised, "Look for all business information services to move to the Net ... the resulting competition will lower prices per desktop".