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Asia buys into Internet banking

Asia buys into Internet banking

Singapore banks are excited about the potential benefits the Internet brings. At the First Interactive Retail Financial Services Conference for Asia held in Singapore in April, key executives of financial institutions in Asia caught a glimpse of the future of banking, and they liked what they saw - the Internet.

"It is exciting to find out how flexible and feasible Internet banking is," said Fred Yambao, marketing director of the Philippine Stock Exchange Centre. "We are looking to use advanced technology to advance the consumer banking franchise."

Yambao was not the only one to express enthusiasm at the conference.

"It is marvellous. It will change the banking industry," said Budi Sadikin, vice-president of retail banking at Bank Bali in Indonesia.

"We must embrace it or else we will be left behind. We are re-engineering the back office, and need to incorporate this idea in the process," added Abdul Murad Majid, head of Banking Operations at Kwong Yik Bank in Kuala Lumpur, Malaysia.

The main reason for their keen interest with Internet banking is the tremendous cost savings banks can realise.

"The cost of a transaction over the Internet is $S0.15 compared to $3 for a teller transaction," said Michael Killen, president of Killen & Associates, a research company specialising in electronic banking.

However, Internet banking in Asia is apparently still in its initial stages.

Referring to the Philippines, Yambao noted that "the Internet concept will succeed only if more customers get PCs and onto the Internet. Furthermore, the infrastructure is not there yet."

Even the Asian banks which have a Web presence, like the Development Bank of Singapore, Overseas Union Bank, and Citibank, are currently restricting themselves to just providing product and service information rather than on-line transactions.

That may all change soon, though.

"Internet banking will take off. The only question is when," said Jeffrey Goh, senior IT analyst for the National Computer Board.

"The lower cost of on-line banking is very attractive," he noted. "If a bank can improve its bottom line by such a substantial amount, it'd be silly not to."

Another benefit of the Internet is the potential increase in a bank's customer base.

"Everyone who has access to the Internet is now a potential customer," said Jamil Hassan, deputy general manager of Perwira Affin Bank in Kuala Lumpur, Malaysia. "The distribution channel is very cheap and it runs 24 hours a day worldwide."

The dramatic increase of host computers connected to the Internet in Asia should also help drive Internet banking's cause there.

According to Killen, the Philippines, Singapore, Malaysia, and Indonesia have all posted triple-digit growth over the past six months.

However, users and vendors alike agree that the move to Web-based transactions will not happen overnight.

"The biggest inhibitor right now is solving the security problem," said Gary O'Neall, R&D manager of Enterprise Solutions at Hewlett-Packard's General Systems Division. "Security is an issue. The Internet is open to anyone, so you need the best security. Now is the time to access the technology," said Hassan.

Kwong Yik Bank's Abdul Murad agrees.

"We are cautious because of hackers. Who is faster? The hackers or the security updates? Nothing is absolutely free of fraud."

Still, vendors and analysts are confident that the issue will be resolved.

"No matter what type of technology you use, it's always possible that someone can find a way to break it," said O'Neall. "What is more important is making the risk manageable.

"Look at credit card fraud today. It amounts to hundreds of millions of dollars, but if you look at the cost per cardholder, it is pretty small," he added. "The focus should be the security of the bank itself."

And banks can help themselves by taking things slowly.

"You don't have to get into money transfers straightaway," said Goh. "You can go for more straightforward things like account balances. Even if these were compromised, it would not be such a terrible thing."


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