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Function-Packed Products Overtake



                                                                          The Asian Banker Gilboa Report:
                                                           Function-Packed Products
                                                               Overtake Competition
                                   This race knows no track or speed limit; only the pulse
                      of the customer and anticipating demand before someone else does.
       E-banks pedal to the metal with product functionalities that expand and transform
            to reflect customer sophistication and demand. The Gilboa Report clocks the
                                                         winners with its latest findings.

          This quarter‘s retail e-banking          function that enjoys anything near             • Viewing loan balances
     rankings provide dramatic illustration of     prevalence is that of fund transfer            • Transferring funds to credit card
     the low barriers to entry on the Internet.    between the customer‘s own chequing            balances (53 percent)
     Overtaking competitors from scratch by        and savings accounts. Own account fund             There are five other heterogeneous
     the number of bank branches, for              transfer is present in 94 percent of the       functions in addition, offered by less than
     example, is a slow and expensive process.     products. The Taiwanese government             half of online banking products.
     Overtaking competitors online is much         currently forbids Internet fund transfers.         This information is about retail online
     easier: in Hong Kong, neither Shanghai        If this were not so, the functionality         banking as it exists today, but we can also
     Commercial Bank nor Wing Lung Bank            would be universal.                            discern developing trends by examining
     even had online banking products at the           Bill payment is the next most popular      the data over time.
     time of our August survey. In this update,    function, noted in 86 percent of products,
     Shanghai Commercial Bank comes from           followed by transaction records reporting      Fusion Banking
     nowhere to claim the top spot in our retail   in 76 percent. Apart from fund transfers           One such trend is the increasing fusion
     rankings with 28 separate functions.          to third party accounts (in 69 percent), all   of banking and investing. In the ancient
     Wing Lung Bank‘s new NET Banking              other functions are present in less than       days of banking, say ten years ago,
     product also appears here for the first       two thirds of the products.                    banking and share trading were entirely
     time, entering the ranks at fourth place          In addition to these five most             separate experiences performed by
     with 22 functions.                            prevalent functions, which appear in           entirely separate entities. Banks and
          And this quarter‚s winner? In the last   more than two thirds of the products,          customers are coming to view both
     survey, the 22 functions of Overseas          another five functions are found in more       activities as merely separate ends of the
     Union Bank‘s (OUB) e-banking product          than half the products. These are:             same monetary spectrum. In response,
     were enough to place it comfortably in        ordering account statements (63 percent),      retail-banking products are morphing into
     first place. This time, OUB measures up       ordering cheque books and viewing              online share trading products as well.
     to only 82 percent of the functionality of    credit card balances (61 percent), viewing         One of the functions considered in
     top-ranked Shanghai Commercial‘s              loan balances (59 percent) and                 our rankings is Access to Share Trading
     product, i-banking.                           transferring funds to credit card balances     Product, which covers the following:
          While the rankings allow us to           (53 percent). All other functions are          electronic payment for shares, IPO
     identify outstanding banks, looking at the    present in fewer than half of the products.    applications, share trading account
     data collectively reveals a picture of the        It would appear that our ...typical‚       balance reporting or reporting of
     ...typical‚ retail product. The average       product consists of the following five         securities/unit trust portfolios. In our
     number of functions for all products is       functions:                                     current update, access functions are still
     13.6, fairly evenly distributed (median 13)   • Reporting chequing and savings               found in only a minority of products - 17
     over a range of four to 28 functions.           account balances                             out of 51, or 33 percent. Nevertheless, the
     Discounting the most basic products and       • Fund transfers between own                   trend is unmistakable.
     focusing only on products with more             chequing and savings accounts                    Three out of the four (75 percent) new
     than ten functions raises the average to      • Fund transfers to third party accounts       products introduced since last quarter
     16.5 and median to 16.                        • Bill payments                                offers some kind of share trading access
          However, there is a great deal of        • Viewing transaction records                  function. Our 47 existing products saw
     heterogeneity in these 13 average                                                            functionality enhancements across the
     functions; very few functions appear in all   More than half of the products would           spectrum, but the most frequently added
     or even most products across the board.       also have these five functions:                feature - added to five of the existing
          Besides the reporting of account         • Ordering account statements                  47 - was some form of share trading
     balances (our minimum requirement to          • Ordering cheque books                        account access.
     be included in the tables), the only          • Viewing credit card balances                     One illustration of this unique

MM     The Asian Banker Journal
                                                                                                 INTERNET BANKING

convergence is HSBC‘s brand new                the bank‘s separate BNZ Bond Direct to       of fund transfer - bill payment - is the
product, online@hsbc. While logged on          buy and sell a wide variety of               third most prevalent function, but is
to this banking (not share trading)            government and corporate bonds in a          present in only half of the products.
product, customers have access to              range of grades.                             This is in stark contrast to Internet
real time stock quotes and market                   Another way to satisfy sophisticated    banking, where 86 percent of products
information.                                   investors is with new tools such as the      offer bill payment.
     At present, the Gilboa Report             search functions of finatiQ and ANZ              Half the products also offer credit
classifies online share trading and online     E*Trade. Choosing a unit trust can be as     card balance reporting, but all other
banking into two separate categories.          complex as choosing individual stocks.       remaining features are in only one fourth
This may change with current trends.           Although the online investor can usually     or fewer products. The one area where
     While an examination of online retail     find company reports and analyst             mobile phone banking is more robust
banking products illustrates a                 recommendations, there are far fewer         than online banking is in share trading.
convergence with share trading, a look         tools devoted to investments.                A full 35 percent of products reports share
at the online share trading products                Customers of finatiQ can conduct        trading account balances and no less than
themselves reveals another trend: the          searches on unit trusts based on various     30 percent allows actual trading of shares.
increasing sophistication of investors,        criteria and then sort these by                  Only 10 percent of products allow
and that of the products that satisfy          performance. They can also track funds       viewing of transaction records although
these investors.                               through fund watch-lists, and go             this feature is in over 75 percent of
     Gone are the days when investment‚ for funds using the same        Internet banking products. Just four
meant a long-term fixed deposit. Share         grocery-cart interface seen on e-            products (or 20 percent) of the 20 mobile
trading used to interest only the wealthy,     commerce        websites      such     as    phone banking products allow fund
but today, no newscast is complete    The search function of           transfers to third party accounts, as
without a rundown of the financial             ANZ E*Trade is another powerful tool for     opposed to two thirds on the Internet.
markets. As investing becomes more of          investors, allowing them to search for       Only five products allow fund transfers
a mass-market phenomenon and as                shares based on criteria such as price       to credit cards and only one allows
mass market investors become more              earnings ratio or earnings growth rate.      placement of fixed deposit as compared
sophisticated, they will demand                     The average investor is no longer       to 52 percent and 48 percent for Internet
greater choice from their online share         afraid to jump into new markets and new      banking, respectively.
trading products.                              investment products, and shoppers are            Mobile banking products clearly
     One way to increase choice is to          looking for powerful tools to assist in      have some catching up to do to reach the
provide access to different markets. For       the selection of investment options.         functionality of online banking products,
most products, online share trading refers     Online share trading products are            but they are more advanced in terms of
to local markets only. However, this is        catching up to match the sophistication      converging banking and share trading
beginning to change.                           of their customers.                          functions into a single product.
     Singapore‘s Keppel TatLee Bank                                                             In the course of updating product
recently added online trading in (Kuala        New Mobile Phone Banking Category            functionality tables for this quarter, we
Lumpur Stock Exchange-listed) Malaysian             With this update, the Gilboa Report     found many products with new features
stocks. Dao Heng Bank in Hong Kong has         has added coverage of an entirely new        “in development“ or “coming soon“. The
linked up with non-bank online broker          product category: mobile phone banking.      e-banking avalanche is in full flow, and to offer its customers               We detailed only products that, at      future updates will see our tables
online trading in the enormously               minimum, allowed customers to check          increasingly filled with new products
capitalised and highly liquid New York         their account balances. This means that      and enhanced functionalities, and we
Stock Exchange and NASDAQ markets.             alert services and the like were not         look forward to additional reports on
POEMS, a Singapore based non-bank              included. The 20 products in our             these developments.
online broker, already offers online trading   database possess an average (and
on three regional exchanges - Singapore,       median) functionality of seven in a range
Kuala Lumpur and Hong Kong.                    of two to 12 functions.
     Examining offline products shows us            Bank of East Asia‘s Mobile Phone
the shape of the future for online trading.    Cyberbanking clinched the top spot with
Customers of United Overseas Bank in           its 12 functions, followed closely by Wing   The Asian Banker Gilboa Report
Singapore and users of HSBC‚s Hexagon          Hang Bank‘s Mobile Phone Banking and         is Asian Banker Journal‘s quarterly
can buy shares (although not online in real    OUB‘s MobileNet which both tied for          survey of e-banking in South-east Asia,
time) in 14 markets spanning the globe.        second with 11 functions each.               South Asia and Oceania. The report
     While stocks are by now considered             After chequing and savings account      ranks products based on the number of
commonplace, bonds remain somewhat             balance reporting, the next most popular     distinct features they offer. Collating
...exotic‚. Yet, we are already seeing the     function (present in 86 percent of           information from many different
emergence of bond trading products for         products) is fund transfers between own      products into a single database and
the retail market. For example, individual     accounts. This is broadly comparable to      comparing the data over time provides
investors can log on to Bank of New            the 94 percent of Internet banking           a picture of the state of e-banking today
Zealand‘s Securities Trading product or        products with this feature. Another form     and tracks trends of the future.

                                                                                                             The Asian Banker Journal     MM

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