Extranets Benefit the Financial Services Industry

Extranet Benefits in
Financial Services
Special to Intranet Design Magazine

by Dennis Passovoy, Amicus Networks, Inc.

[print version of this page]

If you're selling consumer goods, it's easy to see how the Internet can broaden the scope of your marketing efforts. But how about for a financial services company whose principal focus is business-to-business commerce? The resounding answer is "Yes!" as more and more financial services companies are discovering extranets and the advantages this secure Internet technology can provide.

Business drivers

The financial services industry is characterized by a number of business requirements that can be cost-effectively met with an extranet. For example, it is a highly regulated industry, requiring that transactions and communications be closely tracked and documented. Everything from opening a new account to advertising requires specific procedures and must be rigorously monitored.

A by-product of this regulated environment is that practitioners must routinely deal with mountains of paper forms and documents. It is not unusual for a bank or insurance company to have anywhere from 50 to 200 forms which are regularly used to transact business. At the same time, day-to-day operations depend on the timely distribution of massive amounts of quickly changing information to a geographically dispersed sales force. The drivers of regulatory mandates, global opportunity and competition stress paper-based processes to the breaking point.

Enter the extranet, which can serve as a communication tool, distribution network and transaction tracking mechanism, all rolled into one. Extranets can be deployed quickly at costs far lower than other communications systems, such as wide-area networks or dedicated lines.

Extranets also give financial services companies - especially the early adopters - a competitive advantage by providing a differentiator. In most segments of financial services (broker/dealers, insurance, banking and commodities markets) competitors are essentially selling the same products. The edge that any one company has over another consists primarily of the services it provides to its field representatives. Extranets allow a company to provide higher levels of service with 24-hour, location-independent support. [For more on the competitive advantage of extranets, see the article, "Interactive Banking & Customer Retention," also in this issue.]

Securing the Site

The first feature that most financial services companies will define for their extranet is security. There are several approaches that can provide reasonable precautionary measures. Typically, most extranets will implement some combination of secure technologies to optimize cost, complexity and overall security.

Security solutions can be constructed in software or hardware. Software-based options have the advantage of being highly flexible and cost-effective. Hardware solutions tend to be more expensive to install and maintain, as they involve purchasing a special device for each computer that will access the extranet.

This article explores several software-based security options, including:

Encryption - the process of coding and unscrambling data as it flies over the Internet. Many firms take advantage of the new 128-bit encryption that is supported by the latest versions of Netscape and Microsoft.
Password security - which requires that each user have a username and password. More sophisticated systems require passwords to be changed on a monthly basis without the ability to reuse passwords.
Group level security - along with password security, this defines a user's access rights. This means that what users are allowed to do or see once they log into the site is determined by their "membership" in one or more groups.
IP address authentication - provides an additional safeguard by identifying a given computer IP address with a specific username. By doing this dynamically, the user is unable to email another individual a URL inside the extranet for access.
Dynamic rendering and key generation - dynamic rendering forces the user to always enter the site through the "front door." Each user login creates a "session" which is tracked by the site; and the content shown the user is specific to that particular user. Most dynamic rendering security schemes also incorporate random key generators, which cause pages to expire within a preset time limit.

Given the open nature of extranets, it is vital that financial service companies have a comprehensive scheme to protect and defend the confidential information on their extranet. Unlike intranets, which can use extensive and time-proven firewall technology, extranets by their very nature are open to the Internet. A judicious combination of industry standard technologies such as those listed above can provide an effective barrier to most forms of intrusion - without hampering qualified users from entering and conducting business.

To give these concepts a practical shape, consider the following scenario which illustrates how extranets can benefit the broker/dealer and the registered representative. Keep in mind, however, that virtually any financial services business can enjoy similar benefits.

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