Is there a scope now for pure play Internet Banks?
a. Having a pure play Internet Bank as against Internet Banking as a channel?
b. Most of these banks have failed, why?
c. Is there any report on the same?
Answers (5)
Johan K.
MapleTel (johan.h.c.kok .at. gmail dot com
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Most of internet commerce is B2B and not B2C
Most of the offshore banks have a b&m hq but for the rest are pure play internet banks. Although most of HSBC is is B&M, it's offshore division is just internet banking.
The banks using internet banking as a channel, has a ready customer base, similarly, did the offshore banks, thus both of them could survive easier. Most of the pure play internet banks tried to become retail banks but did not have the "street" branding value. - Also there is only a few countries where one can draw money at any ATM, thus also diluting the card usage. Branded credit cards also tend to fulfill much of that market, with so-called "pure play banks" running on top of normal banks. There's plenty of examples of that. "Pre-paid" credit cards is also a new market, with massive branding possibilities.
Thus for an pure play electronic bank to survive, it will have to replace the physical card with something else, in this case most likely mobile phones.
I believe that mobile commerce is the real B2C tool and not internet, thus mobile (Cellular) banking, like that implemented in Spain and some other places, will become the channel where pure play e/m banking will survive. The market is now ready for the implementation of that. Pilots proved the viability, banks are also more prone to accept than in the past. This is the next "banking" revolution.
I am involved in the implementation of such a mobile payment environment. The aim is to roll that out in a number of countries. We have a mobile operators linked to all banks in one country and a central bank (also the regulator) in another that form part of this implementation
There's quite a number of business possibilities surrounding such an implementation, varying from bank involvement, through to pure play e/m banking, branded "business" banking (operated by a bank of some sort), and even franchises driving the technology into the market.
Clarification added December 26, 2007:
I disagree with Joseph Wang on every reason for face-to-face transactions. Just to clarify - I've been using offshore banking for years.
1. I've never opened an offshore banking account face-to-face. In fact I opened (out of a number) only one private bank account face-to-face. I have several credit cards where I have never been into the brick-and-mortar branch of a bank, some of them don't have such.
2. Large transactions - used to manage them electronically - prefer that because then there is not a teller associating you with large transactions. On occasion I did withdraw cash of up to EUR 10K, but not even that was the norm.
3. Dispute resolution: That purely depends on the banks' processes. I had some huge problems in that regard with a B&M bank due to authority limits, and the personnel having to refer to the back office. Some call centers are atrocious and you end-up nowhere as well. However, internet "only" banks tends to be much better on their Customer Relationship, because that is their only communication medium with the customer.
Branches sprouting up everywhere - In the US I can understand, especially since the restrictions in having cross state banks were lifted. - Branding is a big part in that. - On China I cannot comment, but for most of the far east, middle east, Europe and Africa branch sprouting is certainly not the case.
Internet banking is attractive because it has a lower cost structure. Online transactions cost a fraction of what a face-to-face transaction costs. While the variables costs are relatively lower, you still need anough customers to cover your fixed costs.
You're going to need to get enough customers at an attractive cost/customer and keep them with you for long enough to make it work.
You need to be able to:
1. Gain trust and get creditibility
2. Offer convenient ways to deposit and receive money
3. Have a reason for them to switch to you and for them to stay with you
Harsh P.
Principal Technology Consultant @ SAP Americas
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I keep most of my free cash in internet only banks like INGDirect, HSBC Direct.
The reason is that these banks provide interest rates > 4% p.a. whilst regular banks give < 1% in their savings a/c.
The above is the picture for US. So, on the customer side, I except them to only gain in popularity than decline. I am not aware of any internet only banks' failure in US, but the scenarion may be different elsewhere.
Cheers, Harsh
Joseph W.
Quantitative Finance Research / Astrophysics
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I don't think pure internet banking is going to work. There are some transactions that people would much rather do face to face, and these include crucially opening accounts, dispute resolution, and doing high value transactions. If I'm going to deposit or withdraw $5000 in cash, I really want to look face to face at another human being (and the same is true for the bank).
The other thing is that people talk about the "overhead" of physical location, but branch locations really aren't that expensive, and internet infrastructure to support banking really isn't that cheap. When banks have done P&L, they've found branch locations to be extremely profitable which is why banks are spouting up all over the place.
Internet Banking is undergoing a major change with majority of global players and infact i am working on 4 engagements which involves banks setting up seperate organisations to attract more customers and to do more from Internet Banking.. like
- Have Banking, eBay(Buy/Sell), Gumtree (ads), Blogs under one domain
- Imagine u selling you stuff and buyer confirms and money is transfered internally
- 360 Degree customer views to banks for cross-sells. This is a big issue with technology gap and most banks would be addressing it by 08-09 as they expand to provide more products.. say savings, insurance, mortgage, etc
- Global remittances is next investment area for banks in coming years..
dont think many banks have failed but its emerging and last few years have been to establish themselves with moving thier customers to web-based processing, tech upgrades.. and now its time to move to Web 2.0 for banks
Hope this helps..
Cheers, Sid
