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Online Trading
What does Charles Schwab, the well-known brokerage firm that pioneered electronic trading, that won numerous awards for its Web site, and grabbed the lion's share of online brokerage accounts, do for an encore?
"We are working to increase customised and personalised services for our customers. We'll be leveraging current technology to provide customers with the news and information they want," says Karen Askey, vice president of electronic brokerage marketing at the San Francisco-based firm.
This technology is part of continuing efforts to provide Schwab customers with products and services that help them become better investors and take control of their financial destiny. This tradition began in 1974 when Charles Schwab was the first firm to offer discount-trading services. Today, Charles Schwab is a $2.8 billion international brokerage with 261 branch offices nationwide and 4.6 million active customer accounts with assets totalling more than $344 billion.
Schwab started the online trading revolution in 1984, and now eSchwab has almost a million active online trading accounts representing $73 billion in assets. About 39 percent of Schwab's trades now occur digitally, either through the Internet or via direct access software called StreetSmart and eSchwab.
Recognised Leadership
Schwab's consistent, long-term efforts have legitimised a nascent industry and paid off with market leadership in an area experiencing buckle-up growth. According to the market research group Forrester Research, Schwab has one-third of the online brokerage accounts and 60 percent of the assets. Business Week named www.schwab.com one of the best Web sites while ComputerWorld ranked it among the top 100 sites. Schwab also received top honours for online trading in recent SmartMoney and Kiplinger articles analysing competitive offerings.
But these accolades did not come overnight. Since 1995, when Schwab posted a static Web site that was little more than "brochureware," Schwab has learned from its mistakes, adapted to new technologies, and sculpted its approach to match the demands of this revolutionary medium. "If nothing else, you have to be flexible. The Internet is so dynamic and the product lifecycle so short that you have to be able to move quickly as the environment changes around you," says Askey.
Complementing Its Capabilities
Currently, Schwab's Web site offers online trading and tracking capabilities for stocks as well as mutual funds through Mutual Fund OneSource. It also provides extensive research, historical data, and up-to-the-moment market news. Much of the information can be sorted by various criteria. Prospects and customers can fill out questionnaires and receive asset allocation profiles based on risk tolerances and time horizons.
"The ability to find information creates confidence, so customers feel more comfortable making online trades. Our low rate of $29.95 per trade lowers the cost to play associated with each trade. The features and capabilities are also leading customers to transfer accounts from other brokerages to Schwab," says Askey, noting that Internet trading is Schwab's lowest-cost medium. "It's not only a customer service tool, but it also works to generate leads. The site has also been a strong factor in developing our international business."
Askey notes that Schwab has a different business model than those brokerages who concentrate solely on Internet trades. "SchwabNow! is not meant to supplant our branch offices, but complement their capabilities. Customers like being able to either conduct transactions online or walk into a branch office to consult with a broker," says Askey. For example, Schwab offers two-hour online investing seminars at its branches for those not as comfortable with technology.
The Hallmark of Technology - Back to top
From the beginning, Schwab understood that it could not build an award-winning Web site without assistance. So, it entered into strategic partnerships with information providers like Standard & Poors, First Call, and Quote.com. It also has a strong technological partnership with IBM.
The engine running the Web site is an RS/6000 Scalable POWERParallel (SP) computer that accesses an IBM DB2 database that houses all of the electronic information. Backup is provided via High Availability Cluster Multi-Processing (HACMP) software in the AIX operating system software.
"We chose the RS/6000 as our distributed platform for its easy scalability and IBM to make sure that we could look to a single vendor for the solution to any problems that might arise," says James Chong, vice president, transaction processing technology.
To succeed with any e-commerce initiative, Askey recommends building a foundation of strong management support. At Schwab, in fact, it was chairman and founder Charles Schwab who first insisted on a strong Internet presence. "In many ways, technology is the driver and enabler of all we do, and it's been Schwab's hallmark to enable customers to interact directly with technology themselves. Schwab will continue to build additional electronic channels to enable more investors to self-direct their financial affairs," says Schwab.
Customer Value
It's also not enough to develop a Web site and expect it to continue to meet your requirements. "You need to plan for ongoing maintenance and management while committing the resources required to handle growth. Many companies put a lot of time and resources into development without realising that the dynamic nature of the Web makes ongoing maintenance critical to drive traffic to your site, as well as managing the interactivity in order to continue to create value for your customer," says Askey, adding that Schwab continually creates awareness of the site through advertising, public relations, and other promotional efforts.
Customer value -- not technology or graphic appeal -- should be the driving force behind all Web development.
"The customer wants timely information and control reinforced by functionality and reliability, " says Askey. "As long as you remain focused on doing the right thing for the customer, the business will grow."
Schwab understands that the Internet has the potential to revolutionise its business just as it transformed the brokerage industry nearly a quarter century ago. As a result, it is continuing to devote substantial efforts to its award-winning Web presence and grow its electronic business with help from its strategic partners. "We believe the Internet is the future of Schwab, so we will continue to put the appropriate resources and talent behind our dominance in this arena," concludes Askey.
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