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Corporate Customers

As with the above mentioned, corporate customers would enjoy lower cost when they access and use the various banking products. Access to information As corporations usually have multiple accounts, it would be easier for them to access information as they can check the transactions of the various accounts at the click of the button instead of having to read through huge volumes of accounts books. Efficiency As mentioned before, the speed of the Internet allows users to transact swiftly. Therefore, corporations can move cash between accounts to pay bills while they earn as much interest as possible form their cash reserves.

Also, they could monitor markets changes at minute intervals and make investments at the most profitable timings. Factors affecting the Usage of Internet Banking in Singapore Despite its massive potential, Internet banking had been slow to take off in Singapore. In 1999, only 3. 4% of Singapore’s households3 with internet access made used of Internet banking4. However, by end-2003, Singapore had slightly over one million active online customers, defined as those who have logged into their Internet account in the previous three months.

In terms of registered users, or those with pin numbers, the number is higher, at 1. 4 million.

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This shows that almost 25 per cent of Singapore’s population actually makes use of internet banking5. This paper had identified the following factors that would affect the usage of Internet banking in Singapore: 1) Internet Access, 2) Role of Government 3) Internet Security, 4) Capabilities of Internet Banking, 5) Alternatives to Internet Banking & 6) Network Effects Internet Access To make use of internet trading, the basic criteria would be the availability of internet access.

However, this factor should not undermine the usage of internet banking in Singapore as Singapore has one of the highest internet access rates in Asia with internet penetration standing at 55%6. Role of Government Technology is a double-edged sword. The Monetary Authority of Singapore (MAS) has been careful in implementing its policies with regard to Internet banking. On one hand, MAS knows about the potential conveniences that Internet banking can bring about. On the other hand, it is also cautious about its potential pitfalls.

MAS first released a consultative paper on security guidelines for mobile banking and payments in Feb 2002, and subsequently released the Internet banking technology risk management guidelines in Jun 2003. 7 The detailed guidelines demonstrate that MAS is fully committed to the liberalization of the local banking scene. This catalyze the local banks into adopting and mastering the new banking technology that will eventually threaten the protective barriers that the local banks have long enjoyed. By in effect forcing the local banks to focus on their IT capabilities as it would secure their competitive edge in the future banking landscape.

Internet Banking Security Internet banking security, like all other forms of security, is about identifying and managing the risks involved. The fact that one in four Singaporeans uses Internet Banking is an encouraging sign that e-banking is indeed taking off locally. Nonetheless, the same figure also reveals that there is much potential for further growth. One of the main reasons behind some people’s aversion to Internet banking has got to do with the issue of Internet banking security. In a report carried by the Business Times in Mar 2002, one of the main obstructions of e-banking was security.

Most people were still wary about giving their personal financial information over the Internet, given scary stories about credit card information floating freely in cyberspace. The Bank of Singapore also announced that it would phase out finatiQ as a brand name, and just use Bank of Singapore. ‘People feel more secure knowing it is a bank and regulated by the MAS,’ Mr. Spencer said. ‘New customers think dotcoms are not safe. ‘ Until e-banks can sufficiently assure customers about the security of their transactions, this fear will not die.

8 A Mckinsey & Co survey done in 2002 further reinforces this perceived fear, with half of the respondents listing Internet security as one of the main reasons for not doing transactions online. The local e-banking scene has been also hit by a spate of Internet fraud cases in the past few years. The most notable case was that of the Chinese national who hacked into 21 DBS accounts and made off across the causeway with S$62,000. The culprit used a Trojan horse to systematically hack into the computers of the 21 victims and stole their passwords.

This incident initially eroded some consumers’ confidence in DBS’s online banking system. Nevertheless, investigations by both the bank and the police revealed that the fault lay with the vulnerability of the victims’ computers and not with the banks. Many IT professionals also agreed that the recent cases were just waiting to happen and that DBS Bank, which was one of the first to offer Internet banking locally and which dominates 70 per cent of the e-banking market, was just the unfortunate ‘fall guy’. DBS eventually returned the siphoned amounts of between S$200 and S$4999 to all the victims as a gesture of goodwill9.

Today, the crisis has all but faded in people’s memories. DBS and the other local banks have all implemented further security measures to prevent a repeat of the hacking incidents. Nevertheless the lesson that has emerged is that no matter how advanced the technology is, it’s the bad habits of users that compromise the whole system. IT experts say the most effective solution is educating the users, and not banks throwing more money at authentication hardware or getting their customers discounts on anti-virus software.

Banks can always add more security features to their online systems, such as additional layers of passwords, smart-card readers, longer lag times and approval processes, and requiring written authorization for fund transfers. But these would erode the very appeal of e-banking, which is its ‘instantaneous’ appeal. Internet banking looks set to stay as Singapore becomes more wired, PCs more affordable and more users recognizing the conveniences of e-banking. At the end of the day, practicing good online habits like clearing the cache after use is still the key.

Capabilities of Online Banking The online banking products, services and functional capabilities have improved tremendously over the past few years. In the past, only basic banking functions like account information, cheque services, fund transfer and bill payment facilities were available. However, in order to expand their online customer base, banks came out with new strategies for attracting and servicing online customers. Today, the breadth of products offerings increased by a great length and more services tailored to customers’ needs are introduced.

For example, beside the basic banking functions, individual customers can now have the privileges of a wide variety of online investment services, and credit card management services. The Internet platform is not the only way people can fulfill their banking needs. There are various channels of banking like brick-and-mortar bank branches, e-lobbies and ATMs, phone banking and mobile/ wireless banking which will be further described. Banks branches are the most traditional channel of banking. In the past, limited investment related services were provided. However, it’s all history now.

Nowadays, bank branches provide customers not only with banking services, but also a whole wide range of investment related services. Though, people may have to travel to the bank branches, till today, it remains the only channel where people can perform all their banking and investing functions together. The only other weakness of bank branches besides long queues and traveling time is that the services can’t be provided 24 hours a day. ATMs are a popular choice with banking customers when it comes to withdrawing money. The ATMs are well-distributed across Singapore and are operating 24 hours every day.

With the increase of e-lobbies (where Cash Deposit machines, ATMs and Passbook Update machines are located together), ATMs become an even more important banking channel for people. People can save the time of queuing up in bank branches and in the same time perform their basic banking functions with ease. However, there are limitations to what ATMs can perform. ATMs and e-lobbies can perform most of the banking functions but they cannot fulfill the investing needs of the people. And that can be a crucial missing factor in the times when people are getting financial savvy today.

Phone banking is another channel that allows people to do their banking at anytime and anywhere with a push button telephone. Although it’s convenient, the services provided are far lagging behind internet banking and bank branches. Only limited banking functions can be performed and almost negligible investment services are provided through phone banking. Mobile or wireless banking is a new concept that has yet to fully take off today. Essentially, wireless banking is a Mobile Internet service that gives users with WAP-enabled mobile phones or other wireless devices access to banking and financial services.

As its name suggests, it provides great convenience and ease for customers with WAP-enabled mobile phones. However, like phone banking, its banking services provided are very limited and investment services are almost non-existence. The usage of internet banking would be dependent on whether banks consider Internet banking as a substitute or complement to other delivery channels. If Internet banking is a substitute to other banking channels, the adoption of internet banking among consumers would depend on whether the benefits of Internet banking outweigh the benefits of other banking channels.

Banks may reduce the availability of other banking channels since internet banking can substitute the functions of other delivery channels. On the other hand, if internet banking is a complement to other banking channels, Internet trading merely complements other traditional delivery channels. However, as seen in table2 below, the number of ATMs and bank branches has fallen sharply over the last few years. However, while local banks have decreased the number of ATMs and bank branches, the foreign banks (QFBs) have increased the number of ATMs and bank branches in Singapore.

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