Thursday, May 1, 2003

An increase in online transactions is a blessing in disguise for Asia

Thursday, May 1, 2003. By RAYMOND MA

Some bankers foresee a silver lining from the Sars outbreak in the form of cost savings. They predict that stay-at-home customers will prefer online transactions rather than return to branches after the crisis ends.

"I think we can call it a blessing in disguise, especially for banking sites," said Peter Steyn, the marketing and sales director for Nielsen/NetRatings.

HSBC chief David Eldon had said that online transaction volumes for the bank and its subsidiary Hang Seng Bank had risen 40 per cent since the Sars outbreak began.

Bank of East Asia said that consumer banking transactions rose 22 per cent last month, peaking at 90,000 a day during the worst of the outbreak and dropping to about 80,000 since.

Bank of China (Hong Kong) said online banking usage had risen 60 per cent in March, compared with the same period last year, but suggested this could be due to promotional efforts.

Bankers and analysts said the surge in online banking could also lead to a push in the banks' evolution towards wealth management services in branches, which have also seen much rationalisation in recent years.

Vincent Hui, the head of the e-distribution department at Bank of East Asia, said: "It's not a good way to grow the business, but this has definitely helped out.

"This will definitely act as a push, we hope, [towards wealth management]."

UBS Warburg banking analyst Tracy Yu said: "Whether it will lead to a cutback in branches or staff forces . . . it will be decided by management.

"[Banks] can also redeploy resources into the development of some other products like wealth management."

Internet banking cuts costs significantly.

After the initial capital investment in technology, services provided through Web browsers are relatively cheap compared with labour intensive counter-based services.

This is good news for Hong Kong's lenders who have been searching for ways to cut costs as the operating environment for banks has worsened.

Bank of East Asia said Internet banking was 15 to 20 times cheaper than comparable services done over-the-counter.

Paul To Kei-to, Hang Seng Bank head of information technology and e-banking, said in the short term, variable costs savings from each transaction were outweighed by the heavy upfront investment.

But he said that the more people who shifted their banking online, "the better use we could have on our fixed investment".

Bankers and industry experts agree that once online, bank customers are likely to stick with their keyboards instead of returning to the branches in force.

Mr Hui said: "The most difficult thing for us is to get them to try it out for the first time.

"After that first time, they usually won't go back to more traditional methods."

Mr Steyn agreed that customers were not likely to return to branches after learning to bank online.

"I would think that this increase [in online banking] due to Sars is likely to stay." he said.

"Maybe it won't stay at as high a level as it is now, but I think we are going to see a much higher reach of online banking in the next few months."

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