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Hong Kong Wary Of Internet Banking

Mary Swire, Tax-news.com, Hong Kong

18 January 2001

In a speech made yesterday, David Carse, deputy chief executive of the HKMA, detailed the concerns of Hong Kong banks and their customers regarding online banking, and offered suggestions as to a way forward, stating that: 'The role of the HKMA as regulator is to help minimise the risks of internet banking while not standing in the way of progress.'

Despite initial enthusiasm, only about 20 banks offer online services, and there are no pure virtual banks based in Hong Kong, with fewer than 5% of clients using online services at present.

Mr Carse suggested that the mood change stemmed from the period of the dotcoms' rapid fall from grace last year. Cost savings in the sector have been difficult to realise due to the high initial investment costs, and many banks fear that the need for customer support may actually increase with the introduction of fully online services. Customers, he suggested, are reassured by the human touch offered by offline banks, and this needs to be addressed by any future online ventures, possibly by offering a range of delivery channels (for example kiosks, branches, and telephone banking in addition to internet banking facilities).

However, the internet is particularly well suited to the distribution of financial services and products, and in general, internet users are an attractive target audience in financial terms. As Hong Kong already has a pretty much ideal technological infrastructure in place, with over 50% of households owning a PC, and 36% having access to the internet, Mr Carse's message was one of cautious optimism for those banks wishing to retain their high-street cred, and defend their existing customer base by forging ahead with the online revolution.

He advised institutions to remain focussed on the needs and desires of their target market, and to compete on quality as well as price (making the point that aggressive pricing strategies can always be matched by the competition, and do little to encourage customer loyalty), and to pursue corporate as well as retail initiatives.

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