Cyberbanking cashes in on Internet
Cyberbanking cashes in on Internet
By Riyadi
JAKARTA (JP): Domestic banking competition is already fierce and will get fiercer in the near future as the cyberbanking industry looks set to become a reality in Indonesia.
The flood of foreign banks onto the Internet is unstoppable. Every day, a new bank enters the Internet to promote its services. They will soon offer cyberbanking services here.
Cyberbanking, doing banking in an open network environment, is a matter of time as a lot of multi-national banks are preparing to enter the cyberbanking industry.
In two to three years time, cyberbanking will be commonplace in Indonesia, John Doggett, a director at the Bank of Boston said in an interview with The Jakarta Post last week.
Cyberbanking services are already in place. Security First Network Bank and Wells Fargo, both of the United States, offer cyberbanking. Most transactions with the two banks can be done over the Internet via www.sfnb.com and www.wellsfargo.com respectively.
Following their example, Deutsche Bank of Germany plans to enter the cyberbanking businesses later this year.
The market is already there but security has been the major headache for banks wanting to start cyberbanking, Doggett said.
To start cyberbanking, banks first open a home page on the Internet to announce, promote and market their products.
The next step is account opening, and tight security on customer authentication is needed so that the bank knows who its customers are. For customers the provider's authentication is also important to make sure that the customer deals with the bank he or she really means to.
Other transactions then follow, such as withdrawing, writing a check, transferring money and so forth, all of which need a high level of security.
"We don't want a hole there. We don't want a fortune transaction. We want to make sure that everything is secured. All these things require tight security measures," Doggett said.
One suggestion is to use pass words to secure cyberbanking transactions. Another is to use chip cards. Using pass words, however, is not very secure, so chip cards will probably prove the more popular choice.
Even so, security remains a tricky matter in cyberbanking. Two students from Berkeley cracked the code at Wells Fargo's Netscape last November. It forced Wells Fargo to stop its cyberbanking services for two or three weeks.
The security breach at Wells Fargo shocked everybody interested in cyberbanking. However, it sent a good sign to those engaged in research on electronic checking systems, said David Littlewood, financial services sales manager of Sun Microsystems Computer Company. His company provides the Java server for the Internet.
Sun and Bank of Boston are members of a consortium of some 80 companies, which undertake and sponsor research on the cyberbanking industry, including the security aspects.
Even when a security system has been developed, it still needs to be integrated into a bank's existing operation, Doggett said.
"That's important because you have many different pieces of operation. And each piece is potential to create a hole in the whole security system," Doggett said.
Even when the security system can be integrated into the banks' operation, cyberbanking still needs to be adapted to the banking regulations in individual countries, which often vary widely.
"So, make sure that you are introducing a form of cyberbanking which is consistent with the prevailing banking regulations. Cyberbanking in some countries will be more difficult than other countries. It depends on the nature of the regulations," he said.
Computers
The next problem is computers. Not everybody has a computer, not every body wants a computer and not all computers have modems.
In the United States, for example, 35 percent of homes have computers, half of them have modems and access to the Internet. So, only 15 to 17 percent of homes in the United States are equipped to do cyberbanking.
In Indonesia the figure is much lower. According to the Bandung Institute of Technology's Computer Network Research Group, there are presently about 10,500 Internet users in Indonesia, compared to 20,000 users in Singapore and 30,000 in Malaysia.
The Internet is currently estimated to reach over 32 million people globally and is growing at a rate of 10 percent a month.
Another problem is that conventional banking habits have to be changed. This is the major challenge test to see if people really want to do cyberbanking; whether individuals, corporations and businesses want to make transactions over the Internet. However, it very much depends on how banks market their cyberbanking services.
"It takes a lot of time to change habits. There is a long way to go before we are really comfortable with cyberbanking," said Doggett, who was here to promote cyberbanking sponsored by Sun Microsystems.
Automated teller machines in the United States took 20 years to reach popularity, while credit cards took 25 years. And now, shopping over the Internet through cybermalls and cybercash or electronic commerce is becoming increasingly popular in the United States.
The total value of electronic commerce reached US$100 million last year. It is projected that electronic commerce will reach $7 billion by the year 2000.
Banking follows commerce. Therefore, it is expected that cyberbanking will follow the success of the cybershopping industry.