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subject: E-banking And Online Payment, Based On The Case Of China [print this page]

E-banking and online payment, based on the case of China

What is e-banking?

E-banking includes familiar and relatively mature electronically-based products in

developing markets, such as telephone banking, credit cards, ATMs, and direct deposit.

It also includes electronic bill payments and products mostly in the developing

stage, including stored-value cards (e.g., smart cards/smart money) and Internetbased

stored value products.

Payment Methods and Security Concerns: The Case of China

In China, while banks issue credit cards and while many use debit cards to draw directly

from their respective bank accounts, very few people use their credit cards for online

payment. Cash-on-delivery is still the most popular mode of e-commerce payment. Nonetheless,

online payment is gaining popularity because of the emergence of Chinapay and Cyber

Beijing, which offer a city-wide online payment system.

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What is the status of e-banking in developing countries?

E-banking in developing countries is in the early stages of development. Most banking

in developing countries is still done the conventional way. However, there is an

increasing growth of online banking, indicating a promising future for online banking

in these countries. Below is a broad picture of e-banking in three ASEAN countries.

The Philippine Experience

In the Philippines, Citibank, Bank of the Philippine Islands (BPI), Philippine National

Bank, and other large banks pioneered e-banking in the early 1980s. Interbank

networks in the country like Megalink, Bancnet, and BPI Expressnet were among

the earliest and biggest starters of ATM (Automated Teller Machines) technology.

BPI launched its BPI Express Online in January 2000. The most common online

financial services include deposits, fund transfers, applications for new accounts,

Stop Payment on issued checks, housing and auto loans, credit cards, and remittances.

The Singapore Experience

In Singapore, more than 28% of Internet users visited e-banking sites in May 2001.36

Research by NetValue (an Internet measurement company) shows that while the

number of people engaging in online banking in Singapore has increased, the average

time spent at sites decreased by approximately four minutes from March

2001 to May 2001. This decline can be attributed to the fact that more visitors

spend time completing transactions, which take less time than browsing different

sites. According to the survey, two out of three visitors make a transaction.

All major banks in Singapore have an Internet presence. They offer a wide range of

products directly to consumers through proprietary Internet sites. These banks have

shifted from an initial focus on retail-banking to SME and corporate banking products

and services.

Among the products offered are:

Fund transfer and payment systems;

Integrated B2B e-commerce product, involving product selection, purchase

order, invoice generation and payment;

Securities placement and underwriting and capital market activities;

Securities trading; and

Retail banking.

The Malaysian Experience

E-banking in Malaysia emerged in 1981 with the introduction of ATMs. This was

followed by tele-banking in the early 1990s where telecommunications devices were

connected to an automated system through the use of Automated Voice Response

(AVR) technology. Then came PC banking or desktop banking using proprietary

software, which was more popular among corporate customers than retail customers.

On June 1, 2000, the Malaysian Bank formally allowed local commercial banks to

offer Internet banking services. On June 15, 2000, Maybank (www.maybank2U.com),

one of the largest banks in Malaysia, launched the countrys first Internet banking

services. The bank employs 128-bit encryption technology to secure its transactions.

Other local banks in Malaysia offering e-banking services are Southern Bank,

Hong Leong Bank, HSBC Bank, Multi-Purpose Bank, Phileo Allied Bank and RHB

Bank. Banks that offer WAP or Mobile banking are OCBC Bank, Phileo Allied Bank

and United Overseas Bank.

The most common e-banking services include banking inquiry functions, bill payments,

credit card payments, fund transfers, share investing, insurance, travel, electronic

shopping, and other basic banking services.37

What market factors, obstacles, problems and issues are affecting the growth of ebanking

in developing countries?

Human tellers and automated teller machines continue to be the banking channels

of choice in developing countries. Only a small number of banks employ

Internet banking. Among the middle- and high-income people in Asia questioned

in a McKinsey survey, only 2.6% reported banking over the Internet in 2000. In

India, Indonesia, and Thailand, the figure was as low as 1%; in Singapore and

South Korea, it ranged from 5% to 6%. In general, Internet banking accounted for

less than 0.1% of these customers banking transactions, as it did in 1999. The

Internet is more commonly used for opening new accounts but the numbers are

negligible as less than 0.3% of respondents used it for that purpose, except in

China and the Philippines where the figures climbed to 0.7 and 1.0%, respectively.

This slow uptake cannot be attributed to limited access to the Internet since 42% of

respondents said they had access to computers and 7% said they had access to

the Internet. The chief obstacle in Asia and throughout emerging markets is security.

This is the main reason for not opening online banking or investment accounts.

Apparently, there is also a preference for personal contact with banks.

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