New Zealanders are taking to online banking, but only if offered by traditional banks and used to get better deals from existing institutions.
KPMG banking and finance group chairman Andrew Dinsdale says standalone internet financial institutions are not enjoying the same success, with all reviewing their operations. However, New Zealand institutions have avoided the closures of their overseas counterparts.
“Banks around the world are abandoning or cancelling internet banking projects. In recent months, Onebank in Australia, Alliance & Leicester, Allied Irish Bank and Sanwa Bank have all pulled back from such projects. Banks are coming to the consensus that the internet must be integrated with other channels for distributing financial services,” he says in a KPMG banking survey.
Dinsdale says New Zealand has three high-profile entities as standalone internet or direct banking operations: BankDirect, AMP Banking and E-Loan. “During 2000, each has reassessed part or all of their activities and made significant changes to their operations,” he says.
BankDirect is now more “closely aligned” with its ASB parent, AMP Banking is still losing money, and E-Loan has been absorbed into the Warehouse group.
Customer inertia prevents many people from changing to online banking, which appeals to a niche market and generally volumes are small. Despite high set-up costs for the technology and marketing, internet banking is cheaper than a “bricks and mortar” service.
Internet banking in New Zealand has only grown rapidly when combined with traditional banking. Customers tend to look on the web to compare offers, then return to their traditional bank and demand the same or better deal.
Dinsdale sees better opportunities in B2B banking as institutions introduce new services such as online foreign exchange rates, derivatives purchasing, treasury functions and allowing customers to move funds around. All four major New Zealand banks have introduced similar services, he says.
KPMG’s 15th Annual Financial Institutions Performance Survey says technology still plays a major role in banking investment and how banks act with customers. But for now, banks “must work at excelling in the “clicks and mortar” environment,” Dinsdale says.
However, ASB says its group, including Bank Direct and ASB Securities, now does more than a million online transactions a month from 100,000 online customers. One-eighth of its customers go online, with online uptake across the group 130% up on a year ago. Group general manager of technology and operations Clayton Wakefield says the bank is not slowing down in offering more online services.
The ASB Bank had looked at its online operations, he says, but did not changed course.
The KPMG survey also reveals Eftpos continues to be the most popular means of payment, with 483.8 million transactions in 2000, up from 450.3 million in 1999.