By Julian Matthews
August 01, 2000
Phileo Allied: Leading Malaysia's e-Banking Charge
When PhileoAllied Bank opened its doors for business on Aug 31, 1994, it immediately began designing its e-banking strategy even though electronic transactions over the Internet had not been sanctioned by the central bank, Bank Negara Malaysia.
Back in 1994, the Internet was, after all, the domain of nerds and tech-savvy Malaysians. Hardly a playground for the often conservative and careful bankers to be banking their future and fortunes upon.
But PhileoAllied was not your traditional banker and did not hesitate to allow the rest of the world to take a peek into its vault of ideas. From the outset, the bank used technology to develop alternative delivery channels to make its banking and investing products more accessible to customers.
Its objectives are reiterated by the prevalent lifestyle trends that demand convenience and timely information. According to PhileoAllied's executive director Lean Meng Seong, information technology was positioned as a strategic implementation tool from the very beginning to enact the role as a serious provider of integrated financial services and to create a strong market presence--as opposed to just being a conventional commercial bank.
"We carefully defined our target customers and their needs. Traditionally, customers are only offered services in brick-and-mortar branches. We changed that. We offer products and services through branches and electronic channels. We do our utmost to provide a high level of convenience, speed and lower transaction costs, with savings passed back to the customer."
The headstart created by PhileoAllied has earned it a reputation as an innovator and pioneer of IT banking. Not having a legacy system was a plus point as the bank was able to place its computing infrastructure on a single platform. "This allowed us to plan exactly what we wanted to do, and to execute our plans at the appropriate times. Our record has been that we established new innovations every year since our establishment," said Lean.
Proof is certainly in the pudding as the bank pioneered the concept of e-banking in PALWORLD, an Intranet-based banking and investing online system based on Internet-type technology, including browser-based "point-and-click" technology in 1996.
The success of its direct access banking services from the home with PALDIRECT prompted the bank to introduce Intranet banking with PALWORLD that allows customers to check balances, pay bills, obtain other services related to travel, insurance, travel and shop online.
Other Intranet products introduced since then include kiosk banking with PALVIRTUAL KIOSK and a self service touch screen banking with two way video conferencing facility with PALTELLER.
In March 1999, PhileoAllied allowed its customers to carry out all banking transactions at any of its 30 branches nationwide instead of restricting it to the domicile branch. Other products introduced also served to test customer receptiveness to technology.
Lean pointed out that PhileoAllied was fully alive to the potential that the Internet could offer. "We have no doubt that the Internet would enhance the customer relationship and with that knowledge, we enable our customers to make well-reasoned decisions, be it in banking, investment or even merchandising."
"Culturally, we are quite change-driven and open, and are pleased to take fresh and unconventional views for value-creation. These qualities, I guess, make us Internet-ready," he added.
After all, it was only a matter of time before the Malaysian government would approve Internet banking. "And we wanted to be ready to go once the approval was given," said Lean.
Spreading the Net
Approval did arrive when the central bank issued a directive earlier this year to allow local bankers, financial institutions and insurers to offer electronic
transactions over the Internet beginning June 2000.
Less than a week of Bank Negara's announcement, the home-grown bank launched the e.one account. "We opened 3000 accounts within six weeks of our launch of the e.one account. Given that new products, particularly electronic banking-based ones, do take some time to gain the appreciation of consumers, this, I would say, is an encouraging sign of customers' acceptance," said Lean.
He added that it was an imperative to make Internet banking a part of its pleasurable lifestyle banking. "It is all about reaching out to our customers."
However, Lean concurred that the potential of the Internet is not yet being capitalised on to the fullest. While he believes that consumers' acceptance of electronic banking is on the upward trend, albeit at a slower rate than expected, he reckons that this will change very quickly in the near term.
"We are still at a stage where people, especially those above 35, are wary of electronic channels and systems. Although, Internet banking has not taken off yet, we believe that the initial phase of consumers' hesitation can be quickly overcome through the confidence that the banks instill in their customers as well as the growth of computer literacy. This has been our own experience when we launched and marketed our first product, PALWORLD."
Lean is quietly confident that a critical mass of Malaysians will be moving onto e-banking bandwagon before long.
He said that the key obstacle to embracing electronic banking is a lack of appreciation and understanding among consumers of what it really can do and how it can make life more convenient, fast and cost-effective for them.
"We are actively playing a part to educate and convert our existing and potential customers to electronic banking. Our branches and kiosks are configured to provide customers with a wide and comprehensive range of electronic banking channels, and we are beginning to see a good rate of migration of customers from counter transactions to e-banking services," he added.
For instance, the e.one account, is a service that actually pays its customers to stay away from branches spread across the country. The service provides customers with a cheque book, a savings scheme, fixed deposit rates on a daily basis from RM1 (US$0.26) onwards, as well as easy access to overdrafts and loans. In addition, customers get better borrowing terms and reward points that may be redeemed or converted to cash, savings and discounts.
In return for all these benefits, e.one account customers are determined from going to any PhileoAllied Bank branch counters to perform their banking and investing activities. If they do so, they will be charged a flat rate of RM3 (US$0.79) for every transaction.
Lean noted that e.one account holders accumulate savings in the form of reward points, gifts and cash. "We are pleased with the achievement and expect to garner a greater response over the next six months with Internet banking having taken off. We expect to be at the forefront of this."
As an integrated financial services provider, PhileoAllied views Intranet banking playing a significant role as one of its multiple alternative online delivery channels, through which the bank can creatively reach out to customers.
"We have set a good pace in the execution of our strategies and will continue to exploit opportunities as and when they are identified or when the conditions and environment factors are conducive. The products and services that we have provided so far will give a good gauge of how we are dealing with customers' needs," said Lean.
Providing electronic channels for banking and investing is only part of the equation. "The services offered within the channels finally determine the competitive edge. Many banks today offer electronic banking services. However, the quality and breadth of these services vary. We believe we have addressed this matter pretty well as should any integrated financial services provider."
"Given that almost every bank will offer electronic banking in due course, it is not a question of whether you have it or not. Rather, it will be a question of how good you are in anticipating and meeting customers' needs," he added.
While Lean refused to divulge the annual budget set aside for pushing the technology envelope, he said that the bank certainly takes IT investments seriously and have set aside an adequate budget with emphasis on effective utilisation.
Last year, the bank reported RM212 million (US$55.7 million) in profit before tax for the year ended Jan 31, 2000. The group, PhileoAllied Berhad turned in a RM211 million (US$55.5 million) profit before tax, marking a three-fold increase over its previous record high of RM74 million (US$19.5 million).
Its move into e-banking is in tandem with its impending merger with Malayan Banking Berhad, by the end of this year. Maybank, the nation's largest banking group, also introduced its online banking services on June 9 with the launch of its financial Web portal.
In this brave new electronic market, PhileoAllied certainly does not see itself reduced to a "clearing house" function. "Seriously, I don't think any bank can stand still. The financial landscape is going to be much more competitive, and success and even survival will depend on the extent to which the individual banks can value-add," concluded Lean.