- Australia and New Zealand Banking Group (ANZ Bank) and Singapore's Overseas Chinese Banking Corporation (OCBC Bank) have withdrawn from their joint venture to develop a web-led bank in Asia, after investing $US10 million each and six months of detailed work developing the business model.
Claiming financial returns were "not sufficiently compelling given the market entry costs and the softer economic environment" both banks withdrew from the joint venture which was going to be a $US100 million venture under the original plan.
Joint venture chairman and CEO of OCBC Bank, Alex Au says, "Although it is disappointing for everyone not to proceed, we are pleased to have reached an early understanding on the project's viability before sizeable expenditures were incurred."
ANZ Bank spokesman Paul Edwards echoes Au's sentiments, adding that had the venture gone ahead, a lot of money would have been "burned," and gave warning to others considering the e-commerce approach.
"You have to take a disciplined approach to these e-commerce ventures. It is better to have made the decision early, before you burn a lot of cash, which would have happened had we kept on going," Edwards told Computerworld Today.
Referring to the $US20 million combined investment, Edwards says he hopes it won't end up down the drain.
"We still have some of the technology we purchased in the technology phase, and we hope we can use it, as well as the intellectual capital we gained, which we hope to use in our operations," he says.
Under the initial plan the project was going to be launched in the second half of this year but Edwards says it is permanently "on the shelf" as ANZ Bank is not interested in pursuing the concept alone.
Initially, he says, the joint venture was going to use the banking licences they already had in those markets, but it became obvious as they went on that it was not feasible. To keep a stand-alone bank, they needed a stand-alone licence, which neither of the companies was prepared to pay for.
"As we progressed, the cost for banking licences was more than we had anticipated and that was requiring us to make acquisitions of existing banks to operate. It began to make the joint venture economically questionable.
"In order to deliver a viable business model, we needed a three-country launch, and would have had to bring forward the technology to year one. It was a combination of factors - it wasn't viable so we took the decision to exit early," Edwards says.
As for the recently appointed chief executive of the joint venture, Edmund Koh, it was the business discipline that he brought to the project, which in fact has now put him out of employment.
"He was an exceptional operator, and there may be more opportunities for him. He is a very employable person in Singapore, where he is based," Edwards says.
Au also praises the work of Koh.
"Edmund contributed greatly to the venture's review and helped it reach its appropriate conclusion," Au says.
ANZ Group managing director of strategy and international, Elmer Funke Kupper, says ANZ Bank and OCBC Bank will continue to build on the experience and the working relationship which has been established.