Executing a Competitive Internet Banking...

Page 1 Asian Banker Research Executing a Competitive Internet Banking Proposition 23 May 2011

Research Repor t

Asian Banker Research

www.theasianbanker.com/bankmetrics

23 May 2011

Executing a Competitive Internet Banking PropositionDriving Information Integration and Usability

Table of Contents

1. Core Principles and Building Blocks in Executing a Competitive Internet

Banking Proposition

2. Key Challenges to be Aware of

3. Key Action Points to Consider in 2011

4. Key Initiatives by Leading Banks in the area of Usability and Functionality

in 2010/2011

5. Managing Online Security

6. Creating Revenue Streams

7. Straight Through Processing for Products and Services

8. Cross Selling to Internet Banking Customers

9. Strengthening the Bill Payment Function

10. Achieving Critical Mass

11. Evaluation Criteria and Scorecard

12. Case Studies: HSBC Hong Kong ABSA South Africa


Survey Profi le:

Asian Banker Research is pleased to present this research

report based on the fi ndings from the regional Excellence in

Retail Financial Services Programme, an evaluation exercise

that covers more than 130 commercial banks in Asia Pa-

cifi c, the Middle East and Africa. The survey covered mature

markets such as Australia, Singapore, Hong Kong, Korea,

Japan, Taiwan and emerging markets such as China, India,

Philippines, Indonesia, Thailand and Malaysia. The respondents

represent 17 fi nancial institutions that were identifi ed as key

nominees in the Excellence Programme 2011 in the category

internet banking.

Survey Mechanics:

• Regional survey of 9 mature and 8 emerging market play-

ers across Asia Pacifi c, the Middle East and Africa

• Survey Period: January –February 2011

• In-depth discussions with key executives of fi rst tier local

and international banks

• In addition, the discussions were combined with a quantita-

tive questionnaire to standardise response sets

RESEARCH METHODOLOGY

• Connectivity, convenience, control are core principles in executing a winning online banking proposition.

• Internet banking adoption rates have stalled in the last two years as banks struggled to create advanced usability. Active internet

banking user rates range between 8 and 15% in mature markets.

• Though small, benchmark banks generate between 2%–8% of total retail banking income from internet banking.

• In 2010, the cost of an online banking transaction in retail fi nancial services was less than 10% of the cost of a branch transac-

tion. Some banks achieved a relational cost ratio between 1–2%.

• Banks increasingly monitor transactions and customer behaviour for fraud prevention, looking to biometrics and out of band

verifi cation for additional protection over and above 2FA.

• Best banks use integration of online banking and analytics to achieve real-time approvals and targeted cross-sell leads.

EXECUTIVE SUMMARY

Driving Information Integration and Usability

Given the evolution of technology and the equally rapid change in consumer behaviour, the trend is clearly set towards more

powerful, interactive and personalized services such as personalized web pages, widgets, real time information on their desktop

in order to improve the user experience. Banks aim to generate more revenue from this channel and enhance the stickiness of

its customers.

Internet banking has gradually moved from the role of an online information brochure to a capable fi nancial supermarket hub.

Yet, despite the advances made in this fi eld, and 10 years after its introduction in Asia Pacifi c, internet banking continues to

be challenged by poor adoption rates in emerging markets and customer activities limited to information seeking and low

value added services. This in turn has forced banks to align functionality and usability better with client’s needs over the last

12 months.

A major survey by Asian Banker Research indicates that a growing pool of banks have begun to improve the user interface and

navigation in order to drive usage, loyalty and revenue opportunities. The new wave of internet banking projects addresses con-

nectivity, control and convenience as an integrated concept in executing a better internet banking proposition.


Banks are working toward improving the integration of information with system interface. Today, a fully integrat-

ed online environment, where customers can manage both transactional and investment portfolio using a single

sign-on log in, is not only necessary but expected.

Connectivity, convenience and control are core principles in executing a winning online banking proposition.

1. Core Principles and Building Blocks in Executing a Competitive Internet Banking Proposition

Connectivity

ControlConvenience

Source: Asian Banker Research

Figure 1.0 Core Principles

InternetBanking

DirectBanking

RelationshipFocus

DifferentiatedOfferings

NewRevenueStreams

End to endprocess

integration

• Lower transaction fees for online transactions• Chargeable services like e-cheques, payment of any credit card etc• Third party earnings through value added services e.g. prepaid airtime

• High levels of STP in products except mortgage and life insurance• Channel integration for security to achieve STP, real time analytics integration• Data upload and imaging technology for process integration

• Very few brick and mortar branches• More than 50 percent transactions done online

• Integrated CRM and Analytics with internet banking• Personalized interaction and user interface• High product cross holding• Consolidated single view across globe, single logon

• Product innovation • Differentiated asset and money management tools• Lifestyle products• Customer advisory, budgeting, spending trends• Real time offerings


Figure 1.1 Key Operational Building Blocks


2. Key Challenges to Be Aware Of

AchievingImprovedSTP levels

OnlineSecurity

Real TimeAssistance

ManageSpeed

Migration andCriticalMass

Bandwith andServer

Capacity


Figure 2 Current Key Challenges in Internet Banking

Banks added an additional authentication level, besides a ‘sure phrase’ on its websites as an anti-phishing

measure. Best banks have also implemented 24* 7 monitoring systems that analyse the logon and customer

behaviour to identify any fraudulent activity. ‘Man in the middle’ and cross channel thefts, wherein a fraudster

could use the weakness of one channel to conduct theft through another channel, has become another security

concern for banks.

Continuous efforts of customer education have borne fruit for a few. Selected banks expanded their

efforts by deploying specifi c executives in branches to explain, give demos and promote online usage

among customers. Internet penetration is an issue in emerging countries like Indonesia, India, South

Africa, Malaysia, Thailand.

Managing speed, real time transactions and response time particularly during peak traffi c hours has been

another challenge. These banks have added web acceleration tools and server capacity to manage traffi c times.

Banks claim that evenings and holidays are the peak period for online and mobile transactions. In many develop-

ing countries the lack of ready availability of high speed internet and bandwidth to masses are still an issue that

hinders the growth of online banking.


Create superior website response time and loading speed, for example with internal monitoring sys-

tems which, when triggered by abnormal readings, will lead to immediate corrective action by a round-the-

clock technical team. Accelerated website page download and response to provide faster response time to

users’ / visitors’ webpage requests.

Easy customised registration process, for example for fi rst time users to create a log-in user-id via a

simplifi ed registration process (e.g. credit card number) with a maximum of only three data fi elds and one-

time password verifi cation via SMS.

Create clear communication hierarchies, for example create clear visual hierarchies pre and post

log-on to communicate what matters most and link those with a “call to action”. They can also be used to

minimise time to completion of a task or process, such as fi rst time registration.

Address customer break points, for example straight-through business account and credit card ap-

plications, turning off paper statements for credit cards, full STP for conditional credit card and home loan

approval, a three-click process for new product applications which pre-populates customer information, etc.

Except for transactions where regulatory requirements force face to face interaction or require signatures,

leading banks are looking at 100% STP. For example in credit card applications, Citibank allows document

upload and end-to-end application online. Real time end-to-end loan application and disbursement for existing

online customers for personal loans and approval can be achieved within minutes.

Improve customer communication, for example via a consolidated landing page to all banking relation-

ships in transaction, borrowing and investment or a consolidated rewards/loyalty programme page. The

introduction of a client inbox, which allows customers to sort bank messages by category and choose

which messages they would like to receive via email; implementation of account alerts, including via SMS.

Full details of relationship managers and their picture contact details including rating their relationship

managers captured by CRM/workfl ow system. Improved communication visually with video material. Global

consolidation of accounts is also emerging as a trend in online banking. Leading multinational banks allow

customers to view and transact their accounts in any country under a single sign-in to manage transactional

and investment portfolios. An advanced key-word based search facility for bank products, services and any

other bank information on site.

Provide personal planning and budgeting tools, for example expense tracking and budgeting, en-

hanced payments and transfers, advance search tools, the ability to change home loan repayments, request

fi nancial assistance from the bank, change card withdrawal limits online, etc.

Create an integrated payment portal, for example; besides having a comprehensive biller list, the ability

to pay other banks’ credit card bills or cheque issuance online.

Open new revenue streams, for example online shopping, third party content and value added services

such as proof of payments, notifi cations, interactive alerts, remittances (account to cash).

3. Key Action Points to Consider in 2011


Improve security, for example besides the standard 128 bit encryption, secure sockets layer, ex-

tended validation SSL certifi cates working in conjunction with anti-phishing and malware protection on

browsers, the introduction of password strength indicator, a “Transaction Signing” token that enhances

online security by effectively counteracting the “man-in-the-middle” attack, demilitarised zoning of

Internet Banking and Website systems, electronic numeric and qwerty keypads during logon to mitigate

keystroke logging.

Link online banking with analytical capabilities to achieve contextual marketing and higher cross

sell rates.

The trend is clearly set towards more powerful, interactive and personalised services such as per-

sonalised web page, Widget (real time information on desktop on FX rates, net asset value, invest-

ment news) in order to improve the user experience, revenue generation and enhance stickiness

of customers

The identifi cation of new revenue streams in online banking beyond fund transfer, utility bill payments and a

monthly account fee has turned the attention to e-commerce and integrated online portals that have increasingly

caught the attention of executives. For example SHB (Vietnam) allows its customers to purchase online goods at

popular websites by making non cash payment through online or SMS banking.

Another example is Rakuten Bank (Japan) that has introduced a settlement service at a Japan’s online shopping

mall, to enable users to transfer money from their accounts to participating shops when purchasing goods at

the mall.

ABSA, a South African bank earns a signifi cant portion of its online revenue through third party content that it

provides as one of its online banking value added services.

Relationship-centric Internet banking targeted at improving customer satisfaction and retention rates is another

key focus for the banks. Leading banks integrate usability with personalised services to achieve a higher migra-

tion and retention rate. Live interaction features have been introduced by Australian, Taiwanese and Hong Kong

banks in the last two years. While still restricted to premium customer segments, some have enabled mass

customers with a real time call back service through integration with call centres.

Best banks target end-to-end processing in Internet banking. A large percentage of revenue for most banks

continues to come from low value transactions. However best banks are now adding higher value products such

as loans and insurance to online banking. ABSA South Africa for example offers end-to-end completion of loans

and travel insurance to online banking. To achieve this it has integrated the channel with analytics that can profi le

customers and process applications for STP.


Usability

Key issue: How to increase personal interaction?

Banks continue to launch live interaction online, even though the service is often restricted to wealth manage-

ment customers or suffers from low usage rates. HSBC Hong Kong launched ”live connect and click back” facil-

ity wherein a customer can directly interact with relationship managers over internet. It also allows customers to

give their phone details for immediate call back by a call centre. These executives even complete applications

for customers if required.

On a smaller scale, banks show details of a customer’s dedicated relationship manager at the fi rst page after

logon. The information includes name, photo, email and phone number for the customer to get in touch with

their relationship manager more easily and conveniently

Key issue: How to strengthen fi nancial management tools?

Citibank implemented a new project called “Leapfrog” which provides calendar view of payments, transfers and

personal budgeting options. This allows customers to quickly view their future account activity and differentiate

between reoccurring, upcoming and scheduled payments or transfers and also sets out their spending patterns

and trends.

Key issue: How to improve online navigation?

Banks such as Citibank Korea, HSBC and ICICI revamped their websites to reduce the number of clicks required

per transaction. The objective of revamp was to achieve better navigation, placement of icons, easier transac-

tion and minimise the steps needed for completion of transactions. Best banks target a high level of interaction

and engagement through these measures.

One bank utilised business optimisation tools to monitor customer click-through rates through different ap-

proaches e.g. copywriting, colour and banner positioning, etc and analysed the click-through rates. This allowed

it to develop a website that minimised clicks for any function. This bank also launched a quick navigation menu

as well as a context sensitive function displaying the three most likely events the customer will need based on

his behaviour patterns.

4. Key Initiatives by Leading Banks in the area of Usability and Functionality in 2010/2011


Functionality

Several banks took innovative measures to improve online functions in 2010/2011.

Key issue: How to manage multiple accounts of a customer in different countries

Most multinational banks operating in Asia have implemented complete account consolidation of all products

under a single log-in. Banks allow global account aggregation for transactions in any account allowing custom-

ers to transact in any country.

Most banks in the region allow for real time domestic and cross border transfers online.

Key issue: How to enhance service and product offerings in online banking?

In 2010 many banks enhanced their functional offerings and fi nancial tools for customers in online banking.

Bank A in Japan periodically collected the usage patterns of internet banking users via relationship managers

and decided that trading functions should be enhanced. In 2010 it launched Online FX and plans to launch Online

UT and Dual Currency Deposits in 2011.

An international bank enhanced its investment services to include investment advisory functions on ideal portfo-

lio weight, given a customer’s returns expectations and risk tolerance.

Bank B enriched its offering by adding the Western Union Money Transfer cross-border remittance service

across both online and mobile channels.

Bank C (Hong Kong) added online wealth management solutions to their internet banking services. These include

stocks, bonds and funds. Along with quick execution features, the bank also provides market news and product

comparisons for informed decision making.

Bank D (India) revamped its transactional site, launched a global link functionality, Payment Gateway, and credit

card as a source of funds for bill payment. Standard Chartered Bank, Singapore initiated its “pay any credit card

bill” facility for its customers and initiated lifestyle products such as restaurant guides, promotion guides, and an

ATM and branch locator to product offerings on the net.

Key issue: How to improve performance monitoring of online banking?

Banks also invested in direct channel monitoring to understand usage and penetration, assess the competitive

scenario, and garner customer feedback. These are then used to enhance online banking service to customers.

Others have expanded their customer surveys and feedback mechanisms to improve online performance.


Countering “man in the middle attack”—For higher risk transactions like the addition of new payees or

transaction values above certain thresholds, banks are adding an additional security layer to the existing 2FA.

HSBC initiated a transaction signing token device in 2010 which is a thin device that can be carried in wallet and

is used for third party high risk transactions.

Shorten time window for tokens—To further tighten security, banks are shortening the window period of one

time pins to 100 seconds while being mindful of reasonable time periods.

Login and transaction behavior analysis and out-of-band verifi cation for higher risk transactions are currently

used among international banks that use out-of-band verifi cation for overseas transfers. Others are planning for

out-of-band verifi cation by integration with call centres. Hence if any aberration or abnormal activity is noticed

the transaction can be reconfi rmed by the call centre on a real time basis before it is processed.

Biometric applications like mobile device verifi cation (fi nger printing) and voice biometrics for additional online

security are piloted but they are only being used at this point in time in conjunction with call centres.

Best banks are forced to develop multilayer security dimensions to stay ahead of fraudsters

These features are implemented in less than 50% of our sample banks: virtual keyboard, periodic vulnerability

scans and penetration testing, challenge response question, real time fraud monitoring tools, tracking and

identifying of brand abuse 24x7, secure benefi ciary confi rmation for fund transfer, verifi cation image, SQL/

JavaScript Injection prevention, authentication using debit card number and pin, IPIN request based on 4 authen-

tication, block overseas IP, register a PC for banking transactions, mouse click enabled number pad, TAC black

listing mobile number, disable registration of TAC Mobile number at ATM and Phone Banking, logon alerts.

5. Managing Online Security

10%

Biometric usage

52%

Fraud loss

62%

Login behaviour analysis

55%

12.5%

19%

Deployment of alert features

XXXXXXXXXXXX

0

10

20

30

40

50

60

70

80

90

100

< 10 alert features

More than 10 alert features

More than 20 alert features

Source: Asian Banker Research, N=17

Figure 3 Key Initiatives to Manage Online Security


Security Roadmap

Adv

ance

d s

ecur

ity

feat

ures

ActiveProtection

InteractiveProtection

High RiskProtection

AdvancedProtection

OTP + token

Security token device

2 factor authentication

Mandatory alerts on high risk transactions

Shorter 2FA window to 100 seconds

Unique pin at ATM used online

Behavior monitoring

Transaction limits

Unique pin, auto logout

‘Sure phrase’/ ‘secure image’ on website

Daily limits for interbank transfers

Account blocked on 3 failure to login

SMS and email alerts on transactions

Cross channel monitoring

Pilot testing of biometrics

Out of band verification

Real time messaging

Dynamic key boards

Regular customer education

Channel monitoring systems, monitor logon

Firewall, ‘need to know’ only basis

Dynamic policy of double checks

Intrusion detection systems

128 bit SSL encryption


Figure 4.1 Advancing Security Features

Figure 4.2 Most Important Security Measures Deployed


Security Features Availability

One-time Authorization Code (OAC)/One Time Password 100%

Login Password and Transaction Password 100%

Session Time out 100%

SMS & Email Alerts on Transactions 94%

Daily Limits on Bill Payment Transactions 94%

2 Factor Authentication 94%

Firewalls 94%

Secured Browser 94%

Account Blocking 88%

Security Monitoring Systems 88%

Enhanced SMS Alerts for Payments 88%

Online Security Guides 88%

E-monitoring Account 88%

128-bit Secure Socket Layer (SSL) 82%

Session Security 82%

Online Security Demos 76%

Prominent display of Security Risks and preventive Steps/Tips on the Pre-login Pages 71%

Anti Phishing 65%

Sensitive customer information only with authorized bank personnel and on a need-to-know basis 65%

Foreign Telegraphic Transfer (FTT) Filtering 65%

Extended Validation VeriSign SSL Certificate and VeriSign Logo 53%

Hot Listing of Accounts 53%


Trading, transactional services and selective mutual fund sales are the most common revenue sources for

banks in mature markets, while in some instances banks are able to generate more than 50% from loan sales.

Those banks are characterised by high STP levels, strong data analytics and CRM links.

6. Creating Revenue Streams

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bank A Bank B Bank C Bank D Bank E Bank F Bank G Bank H

Reve

nue

com

posi

tion

for

inte

rnet

ban

king

in a

dev

elop

ed m

arke

t

Loan Sales

Others

Insurance Sales

Mutual Funds Sales

Transactional Services

Trading

Source: The Asian Banker, N=17

Figure 6.1 Online Revenue Structure for Banks in Mature Markets

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bank A Bank B Bank C Bank D Bank E Bank F Bank G

Reve

nue

com

posi

tion

for

inte

rnet

ban

king

in a

dev

elop

ing

mar

ket

Loan Sales

Others

Insurance Sales

Mutual Funds Sales

Transactional Services

Trading

Source: The Asian Banker

Figure 6.2 Online Revenue Structure for Banks in Emerging Markets

In emerging markets transactions continue to be the biggest contributor of revenue in online banking.

Our research shows that for more than half the banks in the region 80% of online revenue is generated by fee

income. And for 30% of banks, fee income is the only source of income in online banking, coming primarily from

transactions, monthly subscription fees (if applicable), and fee income from investments and trading.


With transaction still the bread and butter of online banking, banks are strengthening their service and payments

applications, such as adding cross border remittance through third party remitters in its transaction services

profi le. Increasingly, third party services are tapped as new sources of income through third party revenue

sharing. Standard Chartered Bank Singapore has further innovated its bill payment service by adding payment of

all credit card bills online via its Visa network. A notable innovation has been from ABSA and Permata Bank that

allows customers to transfer funds online from their account to anyone, even a person without a bank account.

The recipient can retrieve the funds from any ATM using a one-time password without the use of an ATM card.

Bill payment solutions have proven to be the most recurrent fee income source and some banks have billers in

excess of 1,000.

0

50

100

150

200

250

Bank A Bank B Bank C Bank D Bank E Bank A Bank B Bank C Bank D Bank E Bank F Bank G Bank H Bank I

Ann

ual r

even

ue p

er r

egis

tere

d in

tern

et b

anki

ng u

se ($,

20

10

)

Mature Markets Emerging Markets


Figure 7 Annual revenue per registered online banking customer ($, 2010)

Rakuten Bank, an internet online bank in Japan, generates $239 per year per registered customer and an active

online banking rate (one positive log in within three months) of 41%. The Rakuten Bank case study can be ac-

cessed here.

A bank in Hong Kong generates close to $174 in online sales per registered customer with an active rate

of 48%.

The mid segment in retail fi nancial services in Asia Pacifi c generates between $15 and $33 revenue per regis-

tered online customer.


7. Straight Through Processing for Products and Services

Providing higher levels of STP in transactions is increasingly becoming a key competitive factor. Banks integrate

analytics and CRM with online product offerings for seamless product sales of loans, credit cards and insurance.

For example, ABSA does real time approval of loans for its customers. Other banks offer pre-approved loans

online by profi ling and analysing customer suitability through analytics Only banks in Japan have so far leveraged

on full STP due to the regulatory environment.

Banks are looking at 100% STP for applications. For example Citibank Hong Kong allows credit card application

online with upload of supporting documents and mobile verifi cation to speed up the application process.

Best banks have moved more than 40% of transactions (in value) to online banking and achieve greater than 70% STP.

This is achieved with increasing application of end-to-end processes. ABSA for example has a simple three-step

process for opening savings accounts, checking accounts, mutual funds, personal loan and investment ac-

counts through STP. A customer can log on, apply for a personal loan, get scored and a credit check verifi -

cation, and if successful, have the approval within minutes. Maybank Malaysia offers home loans, personal

accident insurance and travel insurance on a STP basis.

HSBC is focusing on investments—trading, funds and bonds—for future growth of transaction volumes. Besides

offering STP in its products, HSBC also provides an interactive service where a representative can fi ll the forms

and submit them for processing.

It is online account opening which presents the biggest impact on customer experience. Approval processes

and face-to-face interaction requires maximum time and can take between three to fi ve working days. Some

international banks such as Standard Chartered Singapore do not offer in general instant issuance of debit cards

which is required to self-administer the opening of an online banking account

59.9%

Full STP

17.7%22.4%

Semi STP (Application)

Semi STP (for leads generation only)

Per

cent

age

0

10

20

30

40

50

60

70

80

90

100


Figure 8 Straight-Through Processing Levels


8. Cross Selling to Internet Banking Customers

Cross-sell rates to online customers are signifi cantly higher than non online banking customers. On the average,

for the top fi ve banks in our survey, online customers hold 5.3 products as compared to 2.6 products by non-

internet banking customers.

For higher cross-sell rates, leading international banks have integrated their online banking with analytical insight and

CRM. For 2011/12 these banks are looking toward real time lead deployment. To drive higher sales online, best banks

also fi ne-tuned its customer value proposition beyond transactional banking to fi nancial management and analysis.

For the top fi ve banks in the survey, the average product cross-sell ratio was 2.3 times higher than for the rest.

We observed that winners in this fi eld focus on a few key requirements to realise online sales

Usability and navigation of website with strong and clearly communicated security levels

Comprehensive functionality, including unique propositions through value-added services (e.g. proof of pay-

ments, notifi cations with call for action, prepaid airtime, registered billing organisations, pay any credit card,

real-time market news for trading, differentiated remittance services)

Differentiated pricing packages and online transaction fees

High level of STP for products (>90%)

CRM and analytics integration for customer-centric cross-selling

Dedicated staff in branches to educate/walk customers through its online banking capabilities

Banks in emerging countries such as ICICI, ABSA and Maybank have added low value added services like

prepaid recharge, purchase of airlines tickets, donations, utilities payments, etc to their product profi le. Some

banks offer these services to its customers at no cost but earn from the third party revenue share.

We believe that higher value added products to online banking such as loans and insurance, in combination with

pre-arranged branch visits, is an emerging new fi eld banks are taking advantage of.

5.3

2.42.6

1.5

Top 5 Banks Rest (12)

Num

ber

of Pro

duct

s

0

1

2

3

4

5

6

Internet Banking Customers

Non-internet banking customers


Figure 9 Product Holdings for Internet and Non-Internet Banking Customers


We observed that banks in the Saudi Arabia and the UAE in particular had higher levels of active customers—

defi ned by one positive transaction within three months—than its peers in Asia Pacifi c. However there is no

direct correlation between the number of billers and the level of active customers. The number of active billers

however does infl uence the amount of revenue generated to a certain degree.

Bill payments have been a steady source of income for most banks in online banking. Leading banks have thus

expanded their billing organisations in recent years. Current practice requires customers to complete every bill

payment transaction, which is cumbersome. However, the trend is to create a system that can simultaneously

synchronise account information and update the most recent payment.

High number of billers though is not a signifi cant driver to build active users rates.

Average biller numbers were 592 among 17 banks, the lowest had 9 while the highest had 2,903.

9. Strengthening the Bill Payment Function

Three key practices we observed to encourage higher bill payments usage levels include:

Intuitive bill payment set up—the fewer instructions needed the better

Extensive FAQs which are integrate with help tools

High usability with immediate bill payment (e.g. analytics pre-populating a set of frequently used transactions)

Rewards schemes (e.g. earned credits that can be redeemed in the retail sector)

Banks have predefi ned benefi ciaries that are often local governments or corporate entities. With pre-registration, pay-

ments become streamlined and require a fewer number of fi elds to be fi lled in the transaction. In selected banks, custom-

ers can request the presentation of the bill before payment is made in certain situations, like traffi c fi nes or tax returns.

Bank X, International

Bank Z, Internationanl

Bank X Malaysia

Bank Y, International

0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Mature Market Average

Emerging Market Average

% o

f Act

ive

Bill

Pay

men

t C

usto

mer

s

% of Active Internet Banking Customers


Figure 10 High Numbers of Billers and Active Customers


Growth of the registered user base for domestic banks in mature markets (e.g. Hong Kong, South Korea,

Singapore, Taiwan, Australia) with a registered user base of above 500,000 ranges between 8% and 15%. On

average, the active user base as defi ned by one positive transaction within three months remains for the best

banks at 38%. Notably, the largest retail banks in the region have breached the two million registered internet

banking customer mark in 2010.

Growth of the registered user base for domestic banks in emerging markets (e.g. Malaysia, Thailand, Indonesia,

China, India) with a registered user base of above 500,000 ranges between 15% and 35%. On average, the

active user base as defi ned by one positive transaction within three months remains for the best banks at 52%.

Notably, the largest retail banks in the region have breached the fi ve million registered internet banking cus-

tomer mark in 2010.

Major cost effi ciencies can be achieved in migrating customers online. The cost per transaction is less than

10% and the cost of origination is less than 30% of the cost at the branch.

To achieve easier migration leading banks introduced simpler registration procedures. Instant registration for

online bank during account opening or self-registered online activation with debit/credit cards are examples.

Banks provide alternative registration processes which use a combination of card / personal information and a

one-time password to register for the internet services. This is supported by a dedicated online helpdesk that

can address customer issues in real time and has “live chat” solution which allows “co-browsing” for trouble

shooting. A few banks have deployed representatives at branches for online banking demos and promotion.

28%

63%

23%

41%30%

32% 48%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Bank A Bank B Bank C Bank D Bank E Bank F Bank G

0%

10%

20%

30%

40%

50%

60%

% Y

oY c

hang

e

Tota

l Reg

iste

red

Use

r B

ase

3.9%

28.7%25.4%

52.7%

Lowest

AverageMedian

Highest

Inactive user base Active user base* % YoY Growth

Active Customers per Bank (%)


Figure 11 Growth in Registered Users and % of Active Users in Mature Markets (2010)

10. Achieving Critical Mass


The evaluation scorecard evaluates a bank’s internet banking platform and its product, process and technol-

ogy capabilities. It assesses a bank’s ability to extract revenue, increase stickiness and enhance the customer

experience of its customers

Strength of Usage

• Number of registered users• Active users (one transaction within < 3 months)

• Active bill payment customers• Number of billing institutions• Financial tools • Participation rate of real time online support

• Customer interface• Usability

Operations and Technology

• Straight through processing of product applications and account opening

• Level of consolidated view of all customer holdings

• Analytics and segmentation• CRM connectivity

Security

• Security standards and systems• Security features deployed• Authentication model and processes• Alert features

Financial Performance

• Revenue generated• Revenue per registered customer• Revenue structure• Fee income• Fully loaded cost per transaction• Cost of an internet banking transaction to branch transaction

Transactional Strength

• Value and volume of transaction (annually)

• % contribution to total value and volume of retail transactions

• YoY growth of users• Number of transactional services deployed

Sales

• Number of products offered online

• Average product holding for internet banking users compared to non internet banking users

• Internal revenue sharing model


Figure 12.1 Internet Banking Evaluation Criteria


Figure 12.2 Internet Banking Scorecard

Country Rank Bank Financial Performance

Transactional Strength Sales Strength

of UsageOperations & Technology Security TOTAL

SCORE

8.0 6.0 8.0 8.0 5.0 5.0 40.0

Hong Kong 1 HSBC 6.8 1.8 5.7 3.3 4.5 3.1 25.2

South Africa 2 ABSA Bank 6.3 2.6 3.8 4.3 4.4 2.9 24.3

Malaysia 3 Maybank 3.1 2.9 3.1 4.7 3.4 1.9 19.1

Japan 4 Rakuten Bank 7.8 2.6 2.8 1.6 2.5 1.7 19.0

Australia 5 Citibank 3.9 0.6 2.6 3.4 4.5 1.7 16.7

UAE 6 Abu Dhabi Commercial Bank 2.7 0.9 2.5 2.5 3.8 3.6 16.0

Taiwan 7 Taishin International Bank 3.7 1.0 2.6 3.2 2.7 2.4 15.6

Korea 8 Citibank 1.7 0.7 4.3 2.7 4.3 1.6 15.3

India 9 Citibank 3.2 1.9 2.0 1.6 3.8 2.4 14.9

Saudi Arabia 10 Samba 3.9 1.5 2.2 4.0 2.1 0.9 14.6

Hong Kong 11 Citibank 5.1 1.0 2.2 3.1 0.5 1.7 13.6

Philippines 12 Bank of the Philippine Islands 1.9 2.1 2.8 3.2 2.5 0.6 13.1

India 13 ICICI Bank 0.3 1.5 2.6 3.8 2.9 1.5 12.6

Japan 14 HSBC 2.9 0.0 1.8 2.7 3.6 1.3 12.3

India 15 Standard Chartered Bank 0.8 0.8 2.1 2.2 2.0 2.8 10.7

Singapore 16 Standard Chartered Bank 0.0 0.3 2.6 0.6 3.8 3.0 10.3

Taiwan 17 Taipei Fubon Bank 3.7 0.6 1.9 1.1 0.7 1.5 9.5

Thailand 18 Citibank 1.0 0.6 2.2 0.1 3.4 1.0 8.3

Indonesia 19 HSBC 0.8 0.7 1.5 1.3 2.5 1.2 8.0

Brunei 20 Baiduri 1.7 0.2 0.9 2.4 2.1 0.6 7.9

Jordan 21 Arab Bank 0.0 0.4 1.5 2.1 0.0 1.7 5.7

11. Evaluation Criteria and Scorecard


Developing strong functional service and product offers

ABSA (South Africa) has 1.2 million registered customers (2010) of which over 70% are active users. Its success

comes from its steady investment in product development, enhancement of user interface and security measures

in online banking. Its key strengths are its comprehensive product functionality and innovative products.

The bank provides a single view of all products and allows real time fund transfers and payments. Further it has

added a few innovative products in its online functions. In 2009 it launched ”Cashsend” which enables custom-

ers to transfer funds from their account to recipients without bank accounts. The funds can be retrieved from

ATMs using a one time password without an ATM card. In 2010, it was one few banks across the globe to offer

cross border remittance via Western Union through online banking.

Other innovative transaction services include payment of prepaid airtime, payment of traffi c fi nes and load ”pay

pass” which allow transfer of money to credit card for low value payments.

Strategically there is increasing focus on using online platform for sales of savings and investment products

within the bank. ABSA offers an integrated online environment where the customer can seamlessly manage

the transactional and investment portfolio using a single sign-in log. It also supports investment decisions with

updated fi nancial news and research.

ABSA also has strong end-to-end processing capabilities. It has introduced a three-click process for new product

applications that pre-populates customer information enabling real time straight-through application processing.

This includes real time personal loan applications where a logged-in customer can apply for a personal loan, get

scored and a credit check verifi cation, and if successful, have the approval within minutes.

The banks has differentiated pricing model for internet banking. It charges subscription fees which contributes

almost one-fourth its online revenue. However it offers transactions at much lower cost (less than half the cost

at branch). Effectively therefore online transactions are cheaper for customers, particularly active users.

A substantial share of its revenue also comes from third party share in value-added services. These services are

offered free to the customers.

ABSA has a multi factor authentication process that entails Logon (Access Account, PIN,) and three random

characters of customer created alpha-numeric password. Logon alerts are sent to customers. Customers

require a one-time password known as the Random Verifi cation Number for user-verifi cation when adding benefi -

ciaries or performing profi le maintenance. The process also requires OTPs known as the Transaction Verifi cation

Number for authorisation of transactions in accordance with confi gurable risk-based rules.

To combat phishing a ”Sure Phrase“ customisable logon greeting is used as an anti-phishing measure. The bank

has also been educating customers extensively on security measures and prevention of phishing incidents.

Additionally it has launched a 24/7 monitoring and response team. This is supported with behaviour analysis to

identify fraudulent activities and blocking of transactions in real time.

12. Case Study I—ABSA (South Africa)


Strong user friendly interface and personalised services

HSBC was one of the fi rst international banks in Asia Pacifi c that created clear information hierarchies to com-

municate relevant call-to-action messages at its retail banking website. By integrating its branch and call centre

channels with internet banking, it also allowed face-to-face fi nancial consultation with the relationship manager

from the branch network via online banking. This service is being piloted for premium customers only and also

allows for end-to-end sales process completion with interactive tools. While a few other banks offer real time

interaction online, accessing relationship managers directly is a novelty in the industry. For its mass customers

it is offering an instantaneous call back service for product information and queries. It also allows service repre-

sentatives to complete the application form if required.

In 2010, HSBC launched an additional security measure on top of one time passwords through a token device.

This security measure known as the ”transaction signing” token enhances online security by counteracting man

in the middle attacks. With this additional security feature it obtained approval from HKMA to allow online setting

up new registered account and increase in transfer limit. This token is used for high risk third party transactions.

The bank also has a strong integrated backend monitoring system, real time monitoring, rules and protocols to

manage cross channel fraud.

HSBC introduced stock market highlights and trade-in-3-clicks feature for both HK and US stocks. Secondly, it

added tools for market and stock analyses and pre-categorised comparison of funds for investment. Thirdly, it

introduced bond analyses and pre-categorised bond comparison for customer convenience. HSBC also added

investment commentary videos for fi nancial news and information.

Besides these additional measures undertaken recently, the bank also offers end-to-end, straight-through

transactions on a wide range of investment and insurance products, including life insurance, unit trusts, bonds

and structured products. It offers 100% STP in transactions and 97% in online sales with exceptions being life

insurance and mortgage transactions.

It has shown double digit growth in online banking customers by integrating internet banking as a key proposi-

tion during the account opening process, a feature which is lacking in many other banks. Together with integrat-

ed analytics and CRM for cross-selling leads and driving online sales, it considerably strengthened its cross-sell

product holding for online customers and achieved an active user rate of above 50%.

13. Case Study II—HSBC (Hong Kong)


About Us

The Asian Banker is a leading provider of strategic intelligence on the fi nancial services industry,

established since 1996. We are in the business of helping decision makers develop creative solutions around

research and intelligence to achieve tangible business goals. We help organisations understand the markets

they serve through B2B surveys, fi eld research, data and forward-looking research and intelligence,

benchmark their operations and competitiveness against industry best practices and create communities for

the industry to respond to global trends in the most creative ways possible.

For more information, please contact:

The Asian Banker, Christian Kapfer, Associate Director and Head of Research, [email protected].

www.theasianbanker.com

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