Information Technology Reference
In-Depth Information
INFORMATION
SYSTEMS @ WORK
E-commerce has shaken up traditional forms of commerce, and
in some cases turned them completely upside down. Consider the
consumer's ability to comparison shop online, sampling prices
from businesses of all sizes located around the world. Consider
how easy it is to find rare items, out-of-print books, and
collectibles. Online auction houses such as eBay have created an
entirely new kind of marketplace.
While e-commerce has dramatically affected retail sales,
other types of transactions have remained relatively stable. For
example, consider choosing a bank for financial services. In the
days before the popularity of the Internet, if you wanted to invest in
a high-yield savings account or a certificate of deposit (CD), you
would visit a number of local banks and find the best interest
rate for the amount of money you planned to invest. The banks
simply advertised their rates, and the customer did the work of
collecting the data and making the decision based on value and
bank reputation.
The Web has simplified this task, making thousands of bank
quotes available online, though the process is still time consuming,
and when you're done, it's hard to know if you've really found the
best deal. Web sites such as LendingTree.com and Bankrate.com
aggregate quotes from numerous banks, reducing the customer's
research time, but the rates are still inflexible and the banks are in
control.
MoneyAisle.com is working to change these factors by
providing a service that puts the consumer in charge. At
MoneyAisle.com, more than 100 reputable banks compete for your
business. Unlike other services that merely give the impression of
competition between banks, at MoneyAisle.com the banks actually
work to outbid each other for your business in a live, real-time auc-
tion. Customers use the form at MoneyAisle.com to provide the
amount they want to invest and their state of residence, and then
click the Start Auction button. After a few minutes, the customer
watches banks bid in real time, round after round, until all but one
bank has dropped out, offering the best interest rate.
MoneyAisle.com chief executive, Mukesh Chatter, thought
of the idea for the business after noticing that prices for high-
definition TVs varied significantly depending on the vendor. He saw
similar variations in pricing elsewhere as well, including in banks.
Chatter worked with partners to develop the algorithms to allow
banks to place their bids for investor dollars, which is how
MoneyAisle works. The site now earns revenue from charging
participating banks a small fee. This provides a benefit to investors
by finding the best return on investment with the lowest amount of
effort. It also provides benefits to smaller banks with less advertis-
ing capital. It is ordinarily difficult for smaller banks to compete
with big banks with big advertising budgets. MoneyAisle.com levels
the playing field giving banks of all sizes an equal opportunity.
The service offered by MoneyAisle.com meets the needs of
smaller banks looking to increase business through online tools.
The challenge for MoneyAisle.com will be to generate enough
traffic to let banks know that using the service is worth the effort.
So far, the idea seems to be catching on. In its first week of
business, MoneyAisle.com was used as a tool for investing over
$1 million at small and mid-size banks.
Discussion Questions
1.
How does MoneyAisle.com turn the process of investing
upside down?
2.
Who benefits from the service offered by MoneyAisle.com?
Who is negatively affected?
Critical Thinking Questions
1.
For what other types of products might reverse bidding be
useful? What makes a product a good subject for reverse
bidding?
2.
How does reverse bidding impact the way that a bank operates
and its budget and profit margins?
SOURCES:
Rosencrance, Linda, “MoneyAisle launches 'reverse' consumer
auction Web site for banks,” Computerworld, June 9, 2008,
MoneyAisle.com Web site,
https://www.moneyaisle.com,
accessed June 21,
2008; Rosencrance, Linda, “$1M deposited in banks via MoneyAisle in first
week,” Computerworld, June 17, 2008,
www.computerworld.com/action/
article.do?command=viewArticleBasic&articleId=90994 58;
Johnson, Carolyn,
“Website lets banks bid for customers,” Boston Globe, June 9, 2008,
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