Online banking: where the money is?

SYNOPSIS: Online banking services, from everyday checking and savings account transactions to advanced services like mortgages and online trading, are increasingly becoming a hot prospect for Internet portal sites and even cellular operators. However, the enthusiasm has yet to catch on with banking customers, who have been slow to adopt such services.

THEN: The lackluster growth of online banking customers comes down to several factors, with the most obvious and understandable factors being the narrow market base (Internet penetration even in developed markets in Asia being under 35%) and security concerns. Banking customers also fee more comfortable with brick-and-mortar banks (including ATMs), and many aren't even sure if their bank even has online services. There are also regulatory obstacles--online banking is illegal in some markets, while others are just developing the legal framework to deal with online transactions.

NOW: Online banking is by most accounts a mainstream phenomenon in most wired markets. In Asia, growth in online banking in markets like Australia, Hong Kong, Korea. Malaysia, Singapore, Taiwan and Thailand has been rising steadily, according to IDC subsidiary Financial Insights. In many such markets, the online banking population now numbers in the millions--Korea for example boast 16 million--while markets like India and China should see online banking usage grow into the tens of millions in the next few years at a growth rate of 300%. Douglas Jaffe, senior research manager of financial services for Financial Insights Asia/Pacific, goes so far as to say that online banking has become a powerful enough force to shift the shape of the future retail banking landscape as banks increasingly find themselves in a position where the bulk of their costs are tied up in offline channels that serve a shrinking and less profitable customer base. Even so, challenges remain, with security still the chief worry, particularly these days with the rise of "phishing" schemes designed to scam online banking and retail customers out of personal information.