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-------------------------------------------------------------- This story was printed from ZDNet Australia. --------------------------------------------------------------
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Bank to the future By Jeanne-Vida Douglas, ZDNet Australia January 25, 2002 URL: http://www.zdnet.com.au/news/business/soa/Bank-to-the-future/0,139023166,120263096,00.htm
Australian banks of all shapes and sizes are ramping up their online offerings throughout 2002. ZDNet Australia uncovers some of the choices on offer to local Net users and delves into the future directions for an industry in flux. Online Banking: Who's logging on? In September 2001, a Nielsen NetRatings report placed Australia at the forefront of the global race for online banking acceptance. According to the research, Australia topped the world when it came to online banking adoption rates, with take-up increasing by 50 percent across the market. While this is good news for banks still waiting to see a return on their investments in online infrastructure, it is even better news for customers, as the increased competition drives continual improvements in online offerings and service levels. Adir Shiffman, founding director of commercial Web site analysts Global Reviews, points out that the last 12 months have seen a dramatic increase in functionality offered by most online banks. "Most of the banks have made significant improvements to their online services, and as a result we are seeing a wider demographic of users," Shiffman says. "What we have seen proves that as they make services more usable, the uptake of customers improves." Improved it has, with banks across the spectrum reporting significant increases in the sheer size and level of activity of their online customer base. Whilst scaling up its services throughout 2001, St George experienced a three-fold increase in its user base. Similarly, Suncorp Metway is reporting a 25 percent increase in users since the launch of its latest version in September of the same year. Detailing Westpac's online experience, Kevin Powell, head of personal banking for e-business, sums up how the industry has changed through the last year. "Twelve months ago, all you could do was see your balances, but now we offer an entire branch online," Powell says. "In fact [customers] now have far more access to our investment products." It is this diversification of services that is leading to a shift in terms of the online customer base. According to many in the industry, the initial trend of high-value customers migrating online has been overtaken by a wave of high-volume customers seeking highly functional sites. Alexandra Harry, personal bank Internet manager with St George, points out that although online banking was initially marketed towards a younger audience, increasingly functional sites are attracting 'mum and dad' customers. "Young people, students and so forth, only really need an ATM machine, because their banking requirements are not very complex - they don't need to log on to do very much," Harry explains. "We are finding a big increase in the 'nesters' - people who have just moved out of home, or have just bought a house and have bills to pay." While many suggest an increasing incidence of branch closures and staff cuts by most Australian banks is forcing customers to use alternative mediums - such as the telephone and Internet - to conduct their banking, Andrew Watts, head of remote banking at Bendigo bank, has witnessed a diversification of online customers, saying that functionality and flexibility are encouraging people online. "I couldn't pin down a particular demographic," Watts says. "We have a whole range of customers using services. Eighty-four percent of our transactions are now done outside of our branches and a growing amount of those are going on online." Who's winning the race?While many of the retail banks have seen their user base increase in line with increased flexibility on their sites, others are targeting Web customers with high interest, or fee-free investment accounts, focussing their energies on high value customers. The slimmed-down functionality of the Internet has allowed new players such as HSBC and ING Direct to take highly attractive or fee-free investment products directly to market. In fact, the Internet has facilitated entry into the usually highly competitive retail-banking sector, with commercial banks using it to capture the cream of the retail customer base. Patrick Kelly, e-commerce marketing manager for HSBC, suggests that its slimmed-down online offering had won the bank double-digit growth, with more than 80 per cent of new customers signing up online. "This is a whole new demographic for us. We are talking forty-plus double income with kids, a mortgage and no time to waste in bank queues," Kelly says. -We have tried to aim at the middle ground, offering a savings product which earns real interest, but also enables clients to use it to do all the things they normally would in a branch." In a similar vein, AMP BankNet provides a complete suite of bank products and services, dangling a carrot of higher interest rates and minimal service fees in front of wary consumers. -We are somewhere in the middle of the traditional retail approach and the specific online savings accounts," explained e-commerce manager of banking for AMP, Michael Conner. Not to be out done by the new kids on the block, retail banks are proving that two can play at that game. In an effort to keep up with their new rivals, traditional retail banks are also offering high-interest, online-only accounts such as St George's "DragonDirect". However, feature-rich sites have come at a high cost for most banks, and even with the significant increases in active customers over the last 12 months, most are reporting losses due to escalating infrastructure costs. This has put the newcomers in the retail market at an advantage, as they receive the kudos that comes from being first movers in the high interest products set. -The most important thing I can tell you is that we only do business direct, either online or over the phone," toned Craig Kennedy, head of direct banking for ING Direct. -We have only been around for a short period of time and we are already profitable." According to Kennedy, ING Direct savings accounts are attracting up to ten thousand new clients per month, and have already seen Australian's stow AU$5.2 billion in the Netherlands-based bank. While the bank also services clients over the phone, Kennedy says that more than 40 percent of its new listings are generated by the Internet. While Kennedy concedes the product was first trialed in Canada, and that the bank locally had been able to leverage from its experience overseas, he pointed out that most of the technology was developed locally. -We picked up a little from ING's experience in other countries, but out expenditure in terms of the initial development was high, so we weren't placed at any particular advantage," Kennedy says. All of this is good news for the online banking consumer, as the industry eyes the success of high interest online accounts, plotting and planning their own offerings.
Online Banking: What's on the way?With retail banks rolling up their sleeves and heading for a battle of the savings accounts, their Web developers and systems integrators are similarly preparing for the ultimate holy grail of online banking: account aggregation. Arab Bank's manager for e-commerce support, Gino Ferraro, says that while the bank entered the online arena later than most, it aims to soon be at the forefront of account aggregations offerings. -Basically you will be able to see all your account information from the Arab Bank site," says Ferraro. While shying away from nominating specific launch dates, Westpac, St George, Suncorp Metway, and Bendigo Bank are among the industry players signalling 2002 as the year they introduce their aggregated account offerings. As a result any imminent launch may be spoilt by a serious case of 'too many cooks'. AMP already offers an early version of account aggregation through its Account Minder product. Kevin Powell, head of personal banking in e-business for Westpac, pointed out that there is still a lot of work to be done in terms of developing standards for data transfer within in the global banking industry. -There is a lot of synergy to be gained from having a common standard, so we can share information with one another," Powell says. -As an industry, we haven't cracked online collaboration yet. We are looking at one online voice for transactions, so as to provide high quality of services throughout the industry." However, according to Global Reviews' Shiffman, online banks would do well to focus less on rolling out new technology, and spend more time and money looking to the functionality and service levels of their sites. -As a wider demographic takes to online banking, customers will begin to make decisions based on the service levels provided by the banks," Shiffman says. -They have made significant improvements in the last three years, but as things stand they could all improve their service and support levels." Shiffman says the banks should be more focussed on the nature of their service and the usability of their site. -Often simple things like offering products to the end users in terms the user understands," Shiffman says. -If I want to buy a car I want to see a button which says 'car loan', not 'secured personal loan'. Secured personal loan doesn't mean anything to me." Shiffman also bills more immediate access to service and support as fundamental to the development of online banking. -We should start to see secured chat, and phone queries linked directly into the account," Shiffman says. -Most banks still take 24 hours to respond to an e-mail, and that is really quite poor." In this respect, HSBC believes it is leading the way, as it trials live online support on some pages. -If you get stuck at any stage you can signal for help, and have our support centre take control of your cursor and basically complete the transaction while you watch," explained HSBC's Kelly, stressing that the service was limited at this stage to only a small part of the overall site. -We are still trialing it at this point, so we have it on a few pages on the site." With most banks in Australia making the switch from a traditional OS2 platform to a Windows-based system sometime in 2002, users can also look forward to tighter integration between branches, ATMs, online services and phone banking. According to Paul Mitchell, Asia Pacific retail marketing director at leading banking technology vendor NCR, Internet-integrated ATM technology already exists, and is waiting for the banks to catch up. -Clearly we are looking at ways the ATMs will be integrated into Web banking, but we are not going to offer solutions which will leave people standing in queues," Mitchell says. -We are talking about a more personalised service, where your online user profile can be read as you are using the machine - and provide you with relevant information." While the commercial implications of higher ATM and Internet integration smell suspiciously like yet another spam channel, Mitchell insists that it will be in the banks interests to provide information relevant to the user. -It won't just be commercial information at all, it could be anything from share prices, to surf conditions," Mitchell says. The Internet is also paving the way for mobile solutions, but the early indications are that service will vary significantly from bank to bank. Having already dabbled in WAP technology, some of the banks are more cautious about mobile phone-based information delivery, whereas others are already providing balances via SMS. Lawrence Sank, marketing manager for Wireless application service provider iTouch, says banks were playing it safe when it comes to location-based services, however he expects services to continue to be rolled out gradually. -[Banks] have to be very careful about security," Sank says. -So they are a lot more cautious than other industries. However relevant systems are currently being developed and will probably play a much greater role in the next generation of mobile access." AMPTraditionally focussed on insurance, AMP's online banking offerings form a key part of its banking services, so it is clearly in their interests to get it right. "We are basically focussing on the type of customer who is happy to do everything online, for those people who don't need, or want, face-to-face contact," explains Michael Conner, e-commerce Manager at AMP. AMP's BankNet is backed up with card services, phone based support, four AMP ATMs (although many other ATM's accept AMP cards), and some over-the-counter service via a relationship with Australia Post. Drawing on its extensive presence in the finance sector, AMP also uses the site to provide information covering everything from superannuation to the housing market. While Conner shied away from revealing service levels, he pointed out that e-mail queries can be answered in a number of ways. He also explained that although the financial institution was interested in expanding services to include SMS alerts and secure messaging, AMP's BankNet will act cautiously in 2002, erring on the side of security. "We have to protect the interests of our customers, first and foremost, so before we implement anything new we have to make sure it is totally secure and fully tested," Conner says.
Technology: A browser-based offering, which uses both Java and Java script, as well as 128 bit encryption Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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ANZLaunched in April 1999, the ANZ site has picked up a series of awards for its online banking services. According to ANZ, its online service now boasts over one million customers in Australia and New Zealand, and its transactions have exceeded those of the bank's phone banking service. Account servicing fees apply to transactions and transaction fees are also charged, as applicable. Technology: Browser-based offering, no extra software required to run the service, security through a firewall and 128-bit SSL encryption technology. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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Arab BankLeveraging its current customer base, Arab Bank Australia launched its online banking service in August 2001, marketing it to young, existing members. "Basically we were looking at the kids of our current customers, and people who were interested in online banking," explains Arab Bank Australia's manager of ecommerce support, Gino Ferraro. In an unusual move, the Arab Bank of Australia has implemented an ASP model to provide the infrastructure required to run the service. According to Ferraro the ASP model allowed it to provide online services akin to those provided by major banks, while keeping costs and roll-out time to a minimum. "Initially the online banking was a separate unit to the rest of the bank," Ferraro says. "However, we found it better to integrate it into the rest of the banking services." The service includes a full suite of account information and transaction functionalities as well as so-called 'smart alerts', which notify customers by email when accounts have dropped below specified limits. "Our approach to online banking is to integrate it into the rest of our services," Ferraro says. "It provides our customers with another channel through which to conduct their banking."
Technology: A browser based offering, which Java script, as well as security through a 128 SSL. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
Company Services: Focus on consumer services Extras: Loans and investment calculators Web site:
Bendigo BankIn keeping with Bendigo Bank's customer service, this bank mixes the functionality of some of the larger banks' sites with a rapid turn-around on queries. "We benchmark ourselves at about an hour," says Andrew Watts, head of remote banking for Bendigo Bank. "Our business is essentially built around customer choice, we don't have a deliberate strategy to get people online, we are just letting our customers deal with us the way they want to." With a suite of services targeted at SMEs, and a focus on remote banking rather than e-commerce, Bendigo's online service is designed as an extension of, rather than a substitute for, its branch service. "Our motto is successful customer service in a successful community will create a successful bank," Watts says. "So we are looking at ways to bring more of that online, including developing e-commerce marketplaces, creating a financial service portal with information on everything from tax advice, wills and estate planning, to superannuation, and share management." According to Watts, the complimentary model of banking services, which allows consumers to take up different services as required, has lead to 84 percent of transactions occurring outside branch offices. "We are seeing a big uptake in rural areas where it just dosn't make sense to come all the way into a branch if you can do everything online anyway," Watts says.
Technology: Browser based, running 128-bit SSL encryption, online banking built on an 'Edify' platform, currently the bank users java quite extensively, and plans are in place to consolidate functionality around Java and Websphere over the next 12 months. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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Extras: Specific rural services rolled out through a joint venture with Elders Web site:
Commonwealth Bank of Australia (CBA)CBA's online presence was originally established in 1995, and revamped in May 1999 to provide both online banking and other financial services. According to the bank's Web site, its online presence now provides more than 28 different services to 1,178,029 customers. The bank's services are divided into separate areas targeting consumer, business and youth markets. Its share trading service currently represents approx nine percent of all transactions on the Australian Stock Exchange (ASX). Technology: Information not provided Compatibility: Web site is both Mac and PC compatible Consumer Services:
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HSBC Bank AustraliaLike AMP and ING Direct, the HSBC online banking model is focussed on high-return, low-maintenance customers who are happy to do the bulk of their banking online. Attracting customers through high-return online savings accounts and fee-free banking, HSBC online banking now attracts 80 percent of new customers to the bank. "We have only recently come into retail banking, so it is still a new area for us," explains Patrick Kelly, marketing manager for e-commerce. "Online banking is going through a massive growth phase, and we are dealing with a whole new demographic for the bank." HSBC currently provides insurance quotes through an agreement with Royal SunAlliance, and according to Kelly, the bank plans to continue to ramp-up the provision of third-party information via its Web site. "We have teamed up with Merrill Lynch to offer share trading on the site at some stage," Kelly says. "And we will gradually be increasing the functionality associated with the site in line with the needs of our target demographic." However, drawing on its legacy as a predominantly business bank, HSBC offer extensive business services online.
Technology: Browser-based offering, covered with 128-bit SSL encryption. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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ING DirectING Direct launched its services in the Australian market in August 1999, as a streamlined, product-specific offering. The ING Direct model consists of attractive savings offerings, aimed at a customer-base content to monitor accounts via either Internet or phone banking. "We don't have any other branches or any other means of contacting the bank," explains Craig Kennedy. "Rather than trying to provide a myriad of different products in a range of categories, we are focussing our energies on one product which aims to be the best of breed." Armed with research regarding consumer banking practices, ING Direct settled on an aggressively targeted savings account, rather than a range of services, enabling it to clearly differentiate its services. "Changing banks is difficult when customers need to change where their salary is being banked, as well as the direct withdrawals and so fourth," Kennedy says. "We are not offering to replace all of that, we are simply offering an attractive savings plan." While the Australian model was first trialed in Canada in 1997, Kennedy points out that the technology behind the system had to be created specifically for the Australian market. "We learn from our experience in different countries, but each product is built and supported locally," Kennedy says. "We are very narrow in terms of our offerings, but that narrow environment lets us control our cost environment, our key advantage is that we don't have to maintain branches."
Technology: Browser based, 128-Byte encryption with digital certificates issued by verisign. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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National Australia BankAs with many of the larger banks, National Australia Bank's (NAB) online services are designed to mirror tasks usually carried out within the branch itself. According to Peter Bottomley, manager Internet banking with NAB, the Web site is designed to encourage the bank's existing customer base to take-up Internet-based services at their convenience. "At this stage we have a general Web site, with all the functionality you would usually have to go into a bank for, as well as applications for personal loans and a range of financial information," Bottomley says. In an attempt to provide high service levels, NAB has created a dedicated online team to respond to service-queries, however, it still sets a benchmark of 24 hours to respond to e-mail queries. "Online banking is not an industry driver, it is more a customer retention strategy," Bottomly says. "It is about providing our current customers with a service they expect, we are not expecting it to attract new customers." When it comes to adopting new functionality, NAB is keenly aware of its market position. As a result, it has adopted a more careful route. "We are dealing with a customer base of four million people," explains Stephen Johnson, the NAB's head of Internet and E-Solutions. "We can't afford to launch a new technology before it has been fully proven, so when it comes to mobile banking and other areas, we are keeping a careful eye on market developments rather than rushing into things."
Technology: Browser-based offering, covered with 128-bit SSL encryption. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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Extras: Secure messaging support service Web site: St George BankAccording to Alexandra Harry, personal bank Internet manager with St George, the bank has introduced over 25 new features over the past 12 months--leading to a threefold increase in active users. "It has been a feature-driven year," explains Harry. "We have been working in the branches to introduce people to the Internet channel." The bank's online offering consists of a hybrid of online-specific accounts and features designed to support its branch offerings. Online customers are able to use the service as a complement to their branch offerings while also having access to low-cost eAccounts and high-interest 'dragondirect' savings accounts. "When it comes to demographics we have found that high-volume customers are more likely to use the Internet. Once someone buys a home and has bills to pay they want to gain easy access to the bank," Harry explains. "Our approach to online banking is really features-rich." While such an approach certainly provides customers with attractive online options, St George lags behind the other banks when it comes to support services, benchmarking a 48 hour response time to service e-mails, rather than the 24 claimed by the majority of other sites. "Most queries are answered a lot faster, however we want to be honest with our customers about what delays might be when we get a sudden increase in queries," Harry explains. Technology: Browser-based, offering 128-bit encryption supported by a range of Microsoft Internet Explorer version 4--and above--and Netscape version 4.74. Excludes Netscape 6.0. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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Suncorp MetwayCurrently focussed on the Queensland market, Suncorp Metway's online banking is a key component of its growth into the markets in other states. Lawrence Scott, manager for online services at Suncorp Metway, says that although the service is primarily designed to work in conjunction with its branches, the bank is interested in maximising the Web site's functionality to minimise the need for customers to physically enter the bank. "We are using the Web site to open up our services to people who might be a little out of reach of a branch," says Scott. "For this reason we are focussing on the site's speed and usability so customers can use the site as efficiently as possible." However, Scott stresses that the online banking facility is designed as a complementary channel, designed to work in conjunction with the branch services. Like most online banking services, Suncorp Metway responds to e-mail queries within 24 hours, and offers a secure e-mail service to protect sensitive information that may need to be exchanged. "We are also really focussing on training our staff at all levels, so they are familiar with the online offering," Scott says. "Bank customers these days expect to have access to their account information online, the differentiator is how easy it is to access that information." Technology: Browser-based offering, covered with 128-bit SSL encryption. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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WestpacSimple in design, but extensive in terms of services, the Westpac Web site offers users a nice balance of usability and functionality. With its services divided into consumer, business and corporate areas, the bank manages to service vastly different client requirements from a single site. According to Kevin Powell, head of personal banking e-business, the site was designed to offer a product-based view of the bank aimed at the three specific customer groups. "The structure was designed several years ago to tailor the offering to the three specific groups," Powell says. "In the last 12 months we have seen a dramatic rise in the number of users in all groups." Given this increase in users, Westpac is focussing on improving the scalability and flexibility of the service. "Indications are people become more familiar with the service, and we are seeing a large increase of people doing things like applying for loans online," Powell says. However, Powell says the online service is not designed to replace the branch service, but rather provide a complement to it. "We are not focussing on signing up customers, we are trying to provide them with a service that they want to sign up to," Powell says. Technology: Flash technologies used for demonstration services, and Java used for error messaging, Aptrix used for non-secure site information updates. The Westpac site is protected by 128-bit encryption. Dedicated security staff, and digital certificates issued by VeriSign. Compatibility: Web site is both Mac and PC compatible. Consumer Services:
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