Online Banks a Cautious Retreat for Most

By Marina Bidoli

Published in Business Day, Johannesburg on May 24, 2002

SA banks have wasted a fortune in time and money on Internet service provision and other online initiatives. Consider that Standard Bank scaled back from a discounted online retailer to a pure financial services site; Absa rethought its free Internet service; and 20Twenty, Saambou’s aggressively marketed online banking arm, has not been acquired by FirstRand, which has its own offering,

“Like many of the leading banks in the US and Europe, SA institutions fell for the Internet hype without carefully thinking through the suitability or sustainability of their offerings,” says management consulting firm Bain & Co vice-president Jon Huggett. He says he has “done a lot of work” on banking and the Internet worldwide, but declines to name clients.

Key to the success is sound strategy, execution of the business plan, moderate spending on technology and customer acquisition. The winning banks have done this by integrating their Web offerings tightly with their branch and telephone channels. The initial offerings by SA banks failed to meet most of these criteria, Huggett says. Twenty failed all tests.

But lessons have been learnt and customers are likely to see benefits from improved strategies, where Internet offerings are integrated with traditional banking services.

One bank that seems to be making strides is FirstRand. It recently launched a new Internet dial-up service under its “customer appreciation programme”.

Customers can sign up for R55/month (or use 550 eBucks, the “currency” accumulated by using a range of FirstRand products).

This makes it one of the cheapest Internet access providers, coming in at less than half that of M-Web and World Online – though these firms provide additional portal services.

Users can sign up online or through the call centre, says CEO Sandy Yates. The Internet software they require is then delivered to them. eBucks has teamed up with ICL, Absa’s former technology partner.

Absa is now offering free Internet access only to banking clients who got in before its change in strategy. New banking customers now pay R39; nonbanking customers pay R65.