Fibreline Workshop Consultant Session V3'2 July 02

1
Case StudyEncirq Protecting Privacy on the Web
Team 3Brian ChenClarence TsuiMonica
MakRaymond WongTommy Lo
2
Executive Summary

• Background
• This report outlines the evaluation of external
  environment of EBPP Market to Encirqs product
  Illuminated Statement
• EBPP (electronic bill presentment payment)
  allow user to view and pay bill online
• Illuminated Statement allows online payment with
  very targeted Ad but no leakage of personal
  information
• Analysis
• What marketing-oriented values?
• How Encirq to capitalize on social and
  technological changes?
• Legal factors affect the adoption acceptance?
• Encirq acts in socially responsible manner?

3

• Marketing-Oriented Value???

4
Encirq

• Company
• founded in March 1998
• online marketing services company delivering
  personalization and other electronic commerce
  services
• A provider of extremely compact, standards-based
  and modular database technology
• Investor GE Equity, Charter Ventures, Technology
  Partners, Access Technology Partners, an
  affiliate of JP Morgan Partners, Financial
  Technology Ventures and industry luminaries from
  technology, law, advertising, consumer packaged
  goods, and financial services

5
Encirq

• Product
• Illuminated Statement
• Improves typical online credit card statement
• Solve Internet privacy problem
• Technology
• By deploy mini-database on personal computer
• Create data-rich profile of each customer
• Merchant logos and links are added
• Use dynamic profile to request merchant message
  tailored to the consumers interests

6
Typical Online statement
Merchant logos
Targeted Ad
Detail statement
7
Tariff

• Free to corporate on getting up and running
• Free to End-user

8

• Market Profile

9
US Economy
War in Afghanistan
911 terrorist attacks
Enron accounting scandals
Global Crossing, WorldCom, Xerox Restatement of
earning

• Collapse in confidence
• Weaker consumer spending
• Slowdown economy recovery process

Sources Bureau of Economic Analysis
www.bea.doc.gov/bea/glance.htm
Corporate defer capital spending
10
U.S Retail E-commerce sales

• Still keep growing!!!

Sources U.S. Census Bureau
11
Regulatory on Privacy

• Legislative Protections in US
• Privacy of Communications
• Privacy of Financial information
• Privacy of government collections
• Privacy of other personal records
• Regulating online Privacy
• Federal Trade Commission (FTC)
• Office of Management and Budget (OMB)
• National Telecommunications information
  Administration (NTIA)

12
Regulatory on Privacy

• International
• Organization for Economic Cooperation
  Development (OECD)
• EU Data Protection Directive
• Industry Self-Regulation
• Web Site Design, Privacy policies, Seals of
  approval
• TRUe, BBBOnLine, Online Privacy Alliance, Network
  Advertisers Initiative (NAI)

13
Technology Development on Internet Privacy

• Internet Privacy
• New browser based on P3P
• New generation of Web-browsing software designed
  to give users more control over their personal
  information online.
• Third party proxies Anonymizer
• Allow you to browse the Internet using an
  intermediary.
• Firewalls
• A personal firewalls to block all cookies from
  certain domain.
• Boosting speed on Broadband service
• 3G/ Blue Tooth / 802.11a (WLAN)

14
Competitor Profile
15
Major Competitor in EBPP

• Checkfree
• Company background
• 20 years experience. Owned by Bank of America.
• A Market leader in EBPP.
• Bought its nearest competitor TransPoint.
• Customer Base
• 850 U.S. customers for electronic billing, 350
  with private-label home-banking services. E.g.
  ABN AMRO, ATT, State Farm Insurance, California
  Cities Water Company
• Deliver more than 260 electronic bills over the
  Internet at an amazing rate of 15 million e-bills
  per year
• Tariff
• Cost corporate about 50,000 to get up and
  running
• Revenue is generated through a fee for each bill
  paid
• Free of charge for end-user

16
Other Competitive Forces

• Group 1 - DOC1 Digital
• A leading provider of CRM software solution
• Charges Corporate for installation and each bill
  aggregator. The transaction fee is required
• PayMyBills
• No Ad in Bill
• Charge end-user of 12.95 or 4.95/month
• Strong financially backed
• Mobius
• Web based document solutions for more than 1200
  major organizations worldwide.

17
Potential Competitor

• Spectrum
• Joint venture between Wells Fargo, First Union,
  and Chase Manhattan
• Aims to supports an open system
• Implication
• Checkfree already has huge customer base
• More new entrants are expected
• Strong financial support and partnership

18
Customer Profile - Corporate Customer
19
Online billing major industries

• Finance
• Bank of America
• Wells Fargo Bank
• Bank of Hawaii (Encirq user)
• Telecommunications
• ATT Wireless
• SBC Communications Inc.
• Insurance
• State Farm
• American Family Mutual Insurance
• Utilities
• San Antonio Water Power
• Consolidated Edison (Checkfree user)

20
Number of Banks and Credit Unions Offering Online
Services
6
42
61.3
75
Source International Data Corporation
21
What are their expectations from E-billing?

• Cost reductions
• Customer retention tool
• Ability to up-sell and cross-sell
• Improve cash-flow
• Control over customer data
• Provide better service
• Reliable delivery mechanism for both presentment
  and payment
• Broad distribution
• Source 4Q/2001, Economic Perspectives

22
Why particular US banks offer or plan to offer
e-billing?
Source size 135 banks, source Gartner, Jan
2002 American Banker, Aug 2002
US consumers using an online bill payment service
Source size 1,000, source American
Banker/Gallup Organization, Jul 2002
23
Customer Profile - End User
24

• End user US consumers using the Internet for
  email, bill payments, online purchasing, etc

No of internet users is growing !!!
US online banking consumers (2000-2005)
Source eMarketer, December 2001
Source eMarket various, as noted, 2001
25

• US research agencies predict the wide adoption of
  EBPP by US consumers

• About 11 percent of all transaction lines
  traditional credit card statements result in a
  call to the bank because recipient could not
  figure out what the transaction was. (by Encirq)

26
What are their expectations from E-billing?

• Convenience
• Time/cost savings
• Control over payments
• Universal payment mechanisms
• Privacy and security
• Reliability

27
Why US consumers would consider paying bills
online?
Note based on 32 of respondents to survey who
said their vies about paying bills online had
changed since Sep 11 2001. Source Dove
Consulting, 2001 Bank Technology News, Jan 2002
28
What are the major consumers concerns towards
E-billing?

• Security of payments
• Afraid of leakage of personal information via
  online payment
• 71 of Internet purchasers are concerned with
  privacy of personal information (source
  Barriers and Inhibitors to the Widespread
  Adoption of Internet Commerce, CommerceNet, 1998)
• 66 of Web users fear sending personal
  information over the Web (source Electronic
  Commerce Barriers Survey, Ernst Young and The
  Information Technology Association of America,
  1999)
• Lack of privacy policy
• almost 60 of Internet users would be more
  likely to provide basic demographic information
  to a Web site if the site had both a privacy
  policy and a seal of approval (source Beyond
  Concern Understanding Net Users Attitudes About
  Online Privacy, ATT 1999)

29
What are the major consumers concerns towards
E-billing?

• Reliability of businesses
• Too many disreputable companies on the web
• Consumers will increasingly adopt EBPP through
  trusted sources, especially sites that
  consolidate multiple bills and statements at one
  location, e.g. bank sites. (source NARM
  Research, Jan 2002)
• recognition of companies on the Web by a
  reputable third party, such as Better Business
  Bureau, would definitely have a positive effect
  on online purchasing, (source BBB System
  Releases Online Shopping Survey Results, Jan 1998)

30
Customer Profile - Advertiser
31
US online Ad Spending of total Media Spending
Source eMarketer, February 2002 Interactive
Advertising Bureau/PricewaterhouseCoopers,2001
Source eMarketer, December 2001
32
Reasons for Online Ad Growth

• Number of Internet User is Growing.
• Increased Broadband Penetration.
• More People Shopping and Buying Online.
• (Sources End-user Analysis)
• Resolving Online Standards and Measurements.

33
Attractiveness effectiveness of online Ad?

• People spend relatively more time on Internet
  than other media.

Source Forrester Research, 2000

• More consumers click banner ads!! - Increase
  from Oct 02 to Jan 01 (Source Greenfield Online
  Inc. 2001)

34
Attractiveness effectiveness of online
Ad?(contd)

• Banner ads may lag behind TV and magazines for
  creating brand awareness, but they lead in
  increasing brand recall. (Sources Morgan Stanley
  Dean Witter, 24/7 Media, AdRelevance, ADVO, CAB,
  DMA Dynamic Logic, 2000)
• Cost effective

Online ad dollars will begin to flow from the
traditional advertisers
35
SWOT Analysis
36
SWOT Analysis
37
Strength

• Company
• A provider of extremely compact, standards-based
  and modular database technology.
• Strong investors and partners like J.P. Morgan ,
  GE Equity, Technology Partners
• Product and Service
• Win, win and win solution
• Comprehensive and evolving user profile gt On-line
  very targeted marketing
• Mini-database gt Minimize customer privacy concern
• A cost saving and customer retention tool
• Aggressive service offering - FREE of charge
  sharing the revenue from online Ad

38
Weakness

• Company
• Not a reputable brand name
• Product Service
• The behavioral data may not fully describe user
  portfolio
• There are things you can see from behavioral
  data that you cant see from transactions
• Personal profile only stick on one device
• Missed out those adopters who use wireless
  devices like PalmPilot, cell phone, etc as
  Illuminated Statement is stuck on a single
  computer (Fred Davis, CEO of Lumeria)
• No unanimity to tackle privacy issue
• Not an open standard solution

39
Opportunities

• Market Technology
• Economic downturn creates the ultimate need for
  enterprises to enhance productivity and create
  market by service innovation
• Rapid adoption of broadband service
• Customer
• Increasing penetration of online transaction
• Privacy is being emphasized among Internet users
• Effectiveness of online ad is being recognized
• Popularity of CRM
• Customers tendency to visit a limited number of
  sites
• Increasing awareness of being environmental
  friendly

40
Threats

• Competitor
• Anticipates keen competition
• Checkfree could rapidly enhance the system
• Customer
• Marketing to its customer is not banks core
  business
• Corporate could self-develop the system
• User may not want to be stereotyped

41
Value Proposition

• Corporate and Consumer Customer
• Cost reductions
• Enhance consumer care operations
• Capitalize on one-to-one marketing
• Environmental friendly
• Reliability gt provide a secure link between
  businesses and their consumers
• Convenient
• Time saving gt efficiently manage bill payment
• Control over payments
• Protection over personal information (privacy)
• Advertiser
• Very targeted marketing
• Increase successful online ad hit rate

42
Marketing Environment Analysis
43
Capitalization

• Analysis on how Illuminated Statement capitalize
  based on External Environment

Social Changes
Technology Change
External Environment
44
Social Change

• Public awareness of Online Privacy
• 40 of Americans were worried about corporate
  gathering marketing information by tracking
  customers' behavior online.(sourceHarrisInteracti
  ve)
• 91 Americans would do more business with a
  company that had its privacy policy independently
  verified. (sourceHarrisInteractive)
• View Bill Online
• US households viewed 643 million consumer bills
  online in 2001. (sourceJupiterReseach)
• Study estimates that 50 million households will
  view consumer bills online by 2006, up from 18
  million in 2001. (sourceJupiterReseach)

45
Social Change (Cont)

• Reduce Letter Usage
• Event - Anthrax contaminated letter
• InVision Tech Screening System
• Environmental Concerns
• 8 in 10 U.S. consumers regard themselves as
  environmentalist (Source Marketing, Lamb, Hair,
  McDaniel)

46
Technology Change

• Cost Reduction
• Transaction Cost Reduction
• Eliminate ongoing stationery and postage costs
• Reduce Customer Service Cost
• Convenience and ease to Use
• Efficient Online Marking
• Deliver relevant Ads to target customer
• U.S. Web Ad Spending Will Increase To 6 Billion
  (source eMarketer)

(Source IBM EBPPS)
47
Legal Factors Analysis
48
Legal factors affecting Encirqs Illuminated
Statement

• Personal privacy law
• Anti-Terrorism Law
• Advertising law
• Billing privacy law

49
Privacy Law in USA

• Federal Trade Commission
• Federal Trade Commission Act1
• Childrens Online Privacy Protection Act1
• State legislatures passed 140 new privacy laws in
  19992
• Nearly 1400 new bills on legislative agendas for
  20002

• From Federal Trade Commision http//www.ftc.gov/pr
  ivacy/index.html
• From privacy online fair information practices
  in the electronic marketplace

50
Privacy Survey
? Against privacy Action
? Concern user privacy
From Ernst Young, http//cyberatlas.internet.co
m/markets/advertising/article/0,,5941_1000931,00.h
tml
51
DoubleClick Case

• Online ad provider DoubleClick has agreed to
  adhere to stiff privacy restrictions and pay a
  US450,000 settlement, in order to ward off an
  investigation into its privacy practices (News
  23th Sept, 2002)

From http//australianit.news.com.au http//austra
lianit.news.com.au
52
Anti-Terrorism Law

• 26th Oct, 2001 President Bush signed anti-
  terrorism legislation USA Patriot Act, gives
  government powers to track wireless phone calls,
  intercept e-mail messages, monitor computer use
  and listen to voice mail
• In the UK, controversial legislation requires
  internet service providers to keep records of
  text messages, e-mails, user profile and websites

Bush you cant get my profile in before, I use
Encirq (Designed Dialogue)
From fcw.com 29th Oct, 2001 http//www.fcw.com/fcw
/articles/2001/1029/news-antiterror-10-29-01.asp F
rom bbc news 7th Sept, 2002 http//news.bbc.co.uk/
1/hi/technology/2237050.stm
53
Advertising Law

• The overview of laws of Federal Trade Commission
  (FTC) enforces is
• Advertising must tell the truth and not mislead
  consumers. In addition, claims must be
  substantiated.
• Section 5 of Federal Trade Commission Act

From Fereral Trade Commission www.ftc.gov/bcp/con
line/pubs/buspubs/ruleroad.htm
54
Legal Issue of Web Portal Advertising

• Electronic publishers, accept advertising, take
  additional legal responsibilities
• Illegal activity (e.g. Terrorism)
• Regulated businesses (e.g. Gambling)
• Medical advertising
• Non-misleading advertisement of legal products
  and so on

55
Privacy Billing Law in USA

• New Banking Bill Includes Privacy
• In March 2002, the House of Representatives
  Banking Committee awaited banking reform
  legislation, give financial institutions the
  ability to sell a broader set of services.
• Privacy advocates were successful in adding
  provisions which would restrict the use and
  dissemination of personal data shared among
  banks, and insurance and securities firms owned
  by the same company. 

From Ceoperspectives.net http//www.ceoperspective
s.net/privacy.htmBanking20Bill
56
Effects from the Law
57
Socially Responsibility

• Explain why you think Encirq acts or does not act
  in a socially responsible manner?
• Answer
• Encirq DOES NOT act in a social responsible
  manner because of the following reasons.

r
58
Pyramid of Corporate Social Responsibility
(Source Marketing, Lamb, Hair, McDaiel)
59
Economic Responsibility

• Societal Marketing Concept
• Profit is the foundation on which all other
  responsibilities rest.
• Encirq does not make profit or even in financial
  difficult status now.1
• Encirq does not have enough profit to act in
  social responsible manner.

From Encirq, no more investment after
26/9/00 http//archive.encirq.com/news/news_index.
html
60
Legal Responsibility

• Code of Conduct
• Code of Conduct is to ensure high standards of
  protection to the personal data and fair
  treatment of advertiser with Encirq in issues
  including fair competition, bribery, conflict of
  Interest and transparency.
• Encirq does not formalize the policies practice
  that Encirq has developed to deal responsibility
  with the consumer, advertiser and external
  information specialist.

61
Legal Responsibility (Cont)

• Code of Conduct (Cont)
• Encirq does not deliver Corporate wide staff
  training on the code of conduct.
• Encirq should publish the code of conduct on its
  website. That would allow public and staff to
  read and maintain the legal standard constantly.

62
Ethical Responsibility

• Dialogue with External Specialists
• The development of new software and operation of
  the Encirq Illuminated Statement requires
  on-going and extensive discussions with a wide
  range of external consumers, advertiser and
  information specialists.
• Encirq does not maintain regular seminars and
  meetings with consumer, marketer, information
  specialist throughout the year

63
Ethical Responsibility (Cont)

• Dialogue with External Specialists (Cont)
• Encirq should setup some open forum,
  demonstration and seminar to reveal public how
  Illuminated Statement could protect personal
  data and could allow advertiser to collect useful
  marketing information at the same time. To avoid
  improper use.
• Encirq does not join the regulation ordinance for
  the on-line privacy dialogue.1

From Online Privacy Alliance http//www.privacyall
iance.org/members/
64
Ethical Responsibility (Cont)

• Dialogue with External Specialists (Cont)
• Organization involve in online privacy
  dialogue1) Center for Democracy and
  Technology2) Direct Marketing Association3)
  Electronic Privacy Information Center4) Online
  Privacy Alliance5) Platform for Privacy
  Preferences6) Privacy Right Cleaning House.
• Encirq does not perceived by the consumer and
  advertiser as professional and as the leader in
  solving the on-line privacy issues.

From Online Privacy Alliance http//www.privacyall
iance.org/members/
65
Philanthropic Responsibility

• Community
• Without raise awareness to public about internet
  privacy importance. Encirq should launch more
  demonstration and exhibition to the public about
  the privacy issues.
• Encirq should organize an on-line computer
  privacy club formed by public to launch events
  for charity and social welfare.

66
Conclusion

• Encirq cannot archive successfully in the market
  although the product (Illuminated Statement) got
  those market-oriented values
• Wrong time
• (First Launch 22rd May, 2000 too early before
  public concern privacy too late for new economic
  storm)
• 911 incident (Anti-terrorism law)
• Price Strategy (How to get revenue, almost free)
• Promotion (Consumer no perception on pay for
  privacy)

67
Recommendations to Encirq

• Content filtering plug-in module of virus
  scanners or personal firewalls
• Franchises technology to virus-scanners or
  personal firewalls seller

About 40 percent grow each year
68
Recommendations to Encirq

• Transforms in technology and knowledge service
  provider of e-billing, content-filtering
  personal privacy system
• Being compatible to P3P (Platform for Privacy
  Preferences) browser next generation open standard

69
Thank YouQ ASection