Virtual banking needs new regulations: Analysts

Virtual banking needs new regulations: Analysts

JAKARTA (JP): The rapid development of information technology
in the banking sector means changes are required in its
regulation, analysts said yesterday.

"The existing banking regulations have to be adjusted,
especially to anticipate developments in electronic banking
transactions," Chandra Sugiono, chief consultant at PT Sentra
Konsultama, declared.

He noted that with the increasing popularity of the Internet,
more and more local banks are using the information superhighway
to promote their products.

A number of them, including PT Bank Internasional Indonesia,
have even offered banking services through the Internet, although
these are still limited to "safe" practices such as account
opening.

He predicted that real cyberbanking practices -- banking
transactions through the Internet -- will be commonplace globally
by the end of this year.

Such virtual banking has been initiated by a number of
institutions, including Visa International and Worlds Inc.,
Intuit Services Corp. and Securities First Network Bank -- all in
the United States.

Visa International and Worlds Inc. has created virtual banks
and stores on the Internet through an electronic courtyard, a
three-dimensional bank with "real" tellers. Visa does the bank-
end processing of information and passes it to its member banks.

Securities First Network Bank has conducted a large number of
transactions on the Internet, ranging from travel agents to oil
drillers, with the help of Netchex which does the encryption,
authorization, and authentication through hardware keys which can
identify the computer source of any transaction.

Intuit, the largest online banking and bill-paying network in
the United States, is the hub where banks and their customers
conduct transactions such as fund transfers, electronic bill
payments and balance information -- all with fees.

"Sooner or later, those virtual banking practices will spread
throughout Indonesia. However, we will face serious challenges in
terms of the legal infrastructure," Chandra said at a seminar
hosted by STIMIK Perbanas, an institute of information management
and computer.

He noted that internationally there is no single regulation
which governs virtual individual transactions across countries.
However, there are efforts to establish common rules to guarantee
safe virtual banking practices.

He predicted that traditional banks which do not anticipate
such virtual banking practices will surely suffer when virtual
banking becomes more popular.

Currently, information and transactions have become real
banking products. Therefore, bankers have to tie themselves to
information.

Meanwhile, Richardus Eko Indrajit, an information technology
consultant at PT Price Waterhouse Indonesia Konsultan, said banks
will need more funds to invest in information technology to
improve their competitiveness.

"Information technology is offering opportunities to gain a
competitive advantage. This should be understood by the
management at the corporate level," Richard said.

He warned, however, that before acquiring the most advanced
information technology, banks must ensure that the technology is
reliable and compatible with their existing systems.

He noted that information technology must be embedded in
banks' information system, which is supported by enough human
resources, and be aligned with their business strategy to support
their business objectives. (rid)