Appendix
D 13.2.3: Market
D
13.2.3.Market
Overview
End
Users
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Buyers
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Distributors
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Prescriptors
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Competitors
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Suppliers
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Internet
community at large
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Financial
community
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Registrars
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Registrars
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.com
registrars
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Network
infrastructure
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Registrant
market definitions
The SO is designed to serve the
Financial community at large. The Internet has dramatically changed the
definition of the financial world. New entrants, new delivery channel, new
services have all contributed to outdate the old definition. There is a need
for a new definition.
This definition must be large enough to take into
account the new convergence of the financial industry especially the many overlapping areas
of insurance and banking.
This definition must be strict
enough to clearly distinguish the financial community from the commercial
world.
Our survey proves this distinction
to be important to most of our potential registrants. Finance potential
registrants emphasized the importance of trust and security in this intangible
industry.
Moreover the financial world is nowadays highly segmented. Our new definition of the registrant market will allow new financial intermediaries to be recognized as members of the global finance community.
Old
definitions
To describe our registrant market
with today’s segmentation we have used the international standard codes for
financial institutions (see appendix). This market can be divided into 5 main
categories:
Banking
Credit agencies other than banks,
Security commodity brokers dealers
and exchange services
Insurance and other financial service
Public regulation
This definition does not include the
new financial intermediaries that appeared on the Internet or will appear in
the foreseeable future.
New
definition
The new definition of the finance
communities will encompass the old definition and will offer new intermediaries
such as price comparators, new financial products and sites that exclusively
deals with the financial issues, e-brokers, e-insurance…
Registrar
market definition
Potential registrars are the already ICANN
certified registrars (operational or about to be operational) and will be
expanded by the arrival of country code registrars (members of CORE). According
to the TLD policies only certain registrars presenting sufficient credentials,
will be accredited to be .fin registrars. They will have to comply with a set
of procedures that will be annually audited by the sponsoring organization.
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The market for the regular TLD is
growing exponentially. Between September 5th and 21st 2000, 1
million new domain names have been registered. The biggest part of the domain
name market is the .com that accounts for nearly 80% of the market.
Registrant
market size
Financial institutions worldwide are evaluated to be at least 1 million. Statistics from Dun and Bradstreet show that 700 000 of them are located in North America, Japan and Europe :
§ 460 000 in the United States
§ 170 000 in Europe
§ 40 000 in Japan
§ 30 000 in Canada
Financial community may be split into 5 main activities: banking, securities and brokers, insurance, combined real estate in the private sector and regulation in public sector. The number of transactions related to these activities has surged for the past twenty years.
Registrar
market size
They are currently 128 ICANN
registrars all over the world. The creation of new TLD and the filing of currently
operating country code registrars will drive this number to an estimated market
size of 250 by the end of 2003 (see table XX below)
|
|
USA+Canada |
Fr,
Ger, Swi, Ita, Spa, UK |
Japan |
Total
main countries |
Estimated
total world demand 2000 |
Estimated
total world demand 2003 |
|
number
of potential registrants |
493209 |
170868 |
41159 |
705236 |
1007480 |
1340956 |
|
number
of potential registrars |
81 |
24 |
3 |
108 |
128 |
250 |
Registrant
demand
Financial
activities and the net[1]
: the number of Internet users of online financial sites should grow by 100% in
the next five years.
Financial sites include online
banking, mortgage, insurance and investment sites.
Financial
activity is one of the “natural” uses of the Internet.
Along with e-mail, investment is one
of the “natural” uses of the Internet.
The Internet provides, potentially,
what is most important for financial dealings: the ability to deliver rapid and
efficient execution of trades, direct link between investors and the market
(financial disintermediation), perfect information for all the dealers (online
financial news services are now the leading news source for active financial
investors looking for share prices and investment advice).
Last but not least, the expansion of
online financial activities lowers the cost of individual transaction by
enhancing market competition.
After
a slow start, the number of customers of online financial sites is showing
spectacular growth: projected figures by 2004
Except for one activity, share
trading, and one part of the word, Scandinavia, Internet-based financial retailing has been slow to catch on for many reasons, but now they are expected to develop faster
-
Concerns
about the security of online transaction are gradually being eased.
-
Technology
liberates the Internet from the confines of the PC.
-
Traditional
financial institutions especially banks have resisted the move online because
they had invested heavily in their own systems and were reluctant to throw them
for web-based replacement. But they will have to offer Internet services shortly
because they face pressure from their customers who expect an online service.
After a slow
start the market is now soaring. Online
banking users in the world are estimated to be 50 million persons and financial
services users close to 30 million. Both markets should grow by more than 100%
in the next five year. We have to
distinguish two different markets: +
ü The United States:
§ Only 3% of American households are using online banking services but they will be between 30% and 40% by 2004 that would represent almost 100 million bank accounts (IDC Research).
§ Around 15 million (10%) of US home Internet users are using online investment services nowadays. The growth by 2004 is expected to be at least 100%.
ü Europe: The number of visitors to online financial sites in Europe has soared since the start of 2000. Between one third and one half of home Internet users in France, Germany and the United Kingdom now use online financial services.
§ The number of online banking customers in Europe should grow by 30% in the next five years, reaching more than 20 million at the end of 2004. Germany and UK make up for almost half of this figure: Internet banking customers in Germany are forecasted to reach almost 5 million by 2004 and 5.5 million in the UK.
§ There will be around 17 million online share trading accounts (IDC Research) in Europe in 2003 from 4 million now. JP Morgan expects 40% of European consumers use some online financial services by then. The largest growth in online trading will also occur in Germany where the number of clients for online brokerage transactions should grow from 1 million now to 4 million by 2004. Swedish Internet users are heavy online traders just before the UK. France, Italy, and Switzerland are the other major online trading places in Europe.
Market
study
Willingness
to pay
According to our survey, most registrants are very likely to become .fin registrants even if they already have .com or country TLD registrants.
Size of the market of
second and third level names
The market size of second level name is close to the size of financial institutions that is 1 million by now and 1.25 million by 2004.
Many financial institutions with more than one financial activity are expected to buy at least two third level names. They represent around 40% of the financial institutions in the world. We can assert that half of these institutions are likely to become registrants for each of their activity, so a cautious estimate for the size of the market of third level names is 1.4 times the size of the financial institutions market that is to say 1.4 million by now and 1.7 million by 2004.
Why
would financial institutions become .fin registrants instead of becoming or
staying .com registrants?
ü The growth of the online financial
market will lead traditional financial institutions to develop online services.
Financial institutions will be compelled to buy :fin domain since the spectacular expected growth of the online financial market will create a strong competition between them..
They will have to offer Internet services shortly because they will face pressure from their customers who expect state-of-the-art secured online services. If not, they will be at a competitive disadvantage with online traditional financial services and with pure Internet players.
ü .fin will ease the research and the
knowledge of financial services on the web.
The survey below shows that most of Internet users can name a website related to books or auctions but very few of them can name a website for insurance or financial services. Since .fin is a restricted domain name, it is likely to help users to find and memorize the websites for financial products and services.
ü A new restricted TLD such as
.finance will probably not compete with .com market.
.fin TLD is a restricted domain that clearly singles out from other existing domains especially not restricted domains. We have looked at past experience of restricted TLD introduction to study if there had been competition between existing TLD domains and new ones. The evolution of the market of .fr provides such an example.
On the chart below the evolution of the market is compared to
the evolution of French market of .com. The growth of the two markets is
similar. It appears that the existence of .com market did not prevent the
expansion of the .fr market.
ü
Price
elasticity close to zero
The price elasticity is the variation of the
demand for .fin domain names caused by a variation of the price. It should be
very close to zero.
Registrant
demand drives registrar demand
Survey
on registrar panel
According to our survey, registrars
are likely to join any new program for new TLD. The more interesting population
for our offer will be the .com, .net, .org registrars.
Willingness
to pay
Their willingness to pay is a trade
off between the cost of implementing the new registry policy and the price the
end user can pay. Since the price elasticity of demand is close to zero the end
user selling price of .fin is not a problem.
Adhesion
to SO regulation
The ability of currently certified
ICANN registrants to handle change of ownership upon domain names with manual
checking enable them to do the manual checking requested by .fin registration. The simplicity of the registration
rules will not impact their current way of doing business. We can expect a
large adhesion to .fin registration process.
5
reasons for being a .fin registrar
·
“I
must be in or I will be out of the market”
·
“It
provides an idea of quality and seriousness to my business”
·
“I can
charge a good price on .fin where as .com offer poor margin”
·
“Having
financial institutions as customers can allow me to offer other high value
products to them”
·
“I can
largely used my current infrastructure and know-how to address this new market”