Online Financial Services in Australia 2008

Australian online financial services is a rapidly growing and evolving market segment. There have been changes to consumer attitudes, regulatory environment, technology and security. Going forward, the online channel is expected to become yet more important for financial services providers.

Report Highlights
Australian broadband subscription numbers have grown from around one million in 2004 to almost five million in 2007. This rise in broadband is especially important for financial institutions, as broadband strongly increases consumer propensity for using the internet for financial services.

Some experts believe that specific regulation for the online channel would be good for both providers and consumers, as there are issues and challenges that are unique to the channel. In their view, lack of specific regulation leads insufficient consumer protection which can hinder uptake.

Concerns can be assuaged by a highly accessible and transparent service, and by open communication between the institution and its customers. Personalization of accounts, where customers can change the look of the online banking site and customize its features, increases the sense of control.
[Studien Infos ausblenden]

Overview 1
Catalyst 1
Summary 1
Executive summary 2
Market context 2
Internet access has grown in Australia 2
The internet has grown in importance as a channel for financial products 2
Consumer focus 3
Some products are more readily embraced by online consumers 3
More consumers would like to arrange financial products online than actually do 4
Online customers are younger, have higher income and are better educated 4
Online financial services customers are more active consumers 5
The regulatory environment of online financial services 5
There is little specific regulation of online financial services in Australia 5
Some observers feel that channel-specific regulation would be beneficial 5
There are a number of regulatory changes on the cards 5
Technology infrastructure 6
Financial institutions spend an increasing but insufficient amount on online platforms 6
Several banks recently announced major investments in online financial services 6
Integrating platforms constitutes an expensive venture 6
Security and online financial services 6
Fraud is estimated to cost Australians A$1 billion a year 6
Real and perceived security are two different issues 7
Security impacts before, during and after a transaction 7
Future focus and recommendations 8
The internet will become even more important 8
Providers must help consumers progress through the three tiers of functionality 8
Demonstration tours can be extremely useful in building consumer confidence 8
Communication with customers will increasingly be conducted online 8
Platform quality does not guarantee customer satisfaction 9
Integrated platforms for all products will eventually be introduced by large banks 9
Online applications must be even simpler than offline applications 9
Mobile banking will rise eventually 9
Both real and perceived security must be improved 10
Table of Contents 11
Table of figures 12
Table of tables 13
Market context 14
Internet access has grown strongly in Australia over the last decade 14
The internet is a burgeoning channel for financial products 16
The internet has grown in importance as a channel for financial products 16
There are theoretical reasons why financial products are suited for online distribution 17
The internet is used for researching, managing and arranging financial products 17
Researching financial products on the internet has become commonplace 17
Accounts are frequently managed online 18
Arranging products online is the final step for consumers 18
Consumer focus 20
Some products are more readily embraced by online consumers 20
Credit cards and savings accounts are often arranged online 20
Commitment, complexity and commodity levels determine a product's affinity for the online channel 21
The level of commitment of a product is inversely related to its suitability for the online channel 21
Complexity makes online distribution less attractive 22
Higher commodity level facilitates the online channel 22
More consumers would like to arrange financial products online than actually do 22
Online customers are younger, have higher income and are better educated 23
Credit cards are often arranged online by the younger demographic 24
Educational levels strongly differ between online mortgagors and other mortgagors 25
Income differences are strong for online savings account holders 25
Online financial services customers are more active consumers 26
Online customers are more likely to be heavy users of the financial product in question 26
Online customers may be more likely to switch provider 28
Security concerns constitute the most important hurdle for consumers 30
Security concerns are by far the most significant hurdle for consumers 30
A sizeable proportion of the population would never consider arranging financial products online 31
Purely internet-based financial services providers are viewed with skepticism 34
Regulatory environment of online financial services 36
Online financial services regulation is still in its infancy 36
There is little specific regulation of online financial services in Australia 36
Some observers feel that channel-specific regulation would be beneficial 36
Cybercrime is seldom punished 37
There are a number of regulatory changes on the cards 37
ASIC recently released new guidelines concerning online communications with customers 37
New data breach disclosure laws have been recommended 38
The government is reviewing its e-security framework 38
In New Zealand banking guidelines have been criticized as unfair to consumers 38
More detailed credit reporting could benefit online financial services providers 39
Technology infrastructure 40
Financial institutions spend an increasing but insufficient amount on online platforms 40
There have been difficulties assessing the correct level of investment 40
Several banks recently announced major investments in online financial services 40
Integrating platforms constitutes an expensive venture 41
Rapid development increases uncertainty 41
New technology will require new investments 41
Unsuccessful technology overhauls can be costly mistakes 42
IT projects can falter due to problems with implementation 42
Insufficient planning can cause failure 42
Even successfully completed projects can be mooted by changes in the market 42
Sometimes technology choice is driven by consumer perceptions 43
Security and online financial services 44
The online channel provides new methods for perpetrating old forms of crime 44
Online financial services security has strengths and weaknesses 44
There are four main kinds of consumer fraud 44
Advance fee schemes have thrived on the internet 45
Online auction sites can attract scammers 45
Nine out of every ten emails is now spam 45
Identity fraud is more feared than terrorism and unemployment 45
Fraud is estimated to cost Australians A$1 billion a year 46
Tools for conducting online fraud have become cheaper 47
Security is a top concern for both providers and consumers of online financial services 48
Real and perceived security are two different issues 48
Online banking is afflicted by security concerns because of a perceived lack of control 48
Time, knowledge and empowerment can assuage concerns 49
Security can be split into three phases 49
Security impacts before, during and after a transaction 49
Australian banks commonly offer discounted security software 50
Two-factor authentication has been implemented in different ways 51
Hardware tokens are falling out of favor 52
SMS notifications eliminate the need for a separate device 53
Mobile phone software can allow mobiles to function as hardware tokens 53
Digital certificates use encryption technology to vouch for the identity of the customer 53
Different solutions have different advantages 54
Alert services and account monitoring may become more important security solutions 54
Notifications can alert customers of fraud in progress 54
Major banks have fraud-detection software 55
Financial institutions must protect consumers' personal information 55
Future focus and recommendations 56
The internet will become even more important 56
A variety of factors will result in expanding online financial services 56
Broadband penetration will drive growth in online financial services in the short term 56
A domino effect of satisfaction will drive growth in the medium term 56
Demographic changes will drive online financial services uptake in the long term 57
Providers must help consumers progress through the three tiers of functionality 58
Integrated platforms would encourage online customers 58
Demonstration tours can be extremely useful in building consumer confidence 58
Communication with customers will increasingly be conducted online 58
Online platforms should be integrated and improved 59
Platform quality varies by provider 59
Platform quality does not guarantee customer satisfaction 60
Integrated platform for all products will eventually be introduced by large banks 61
Financial tools enhance the online experience for consumers 62
Online financial planning will become more important 62
Account aggregation has yet to catch on 62
Online applications must be simplified 62
Online applications must be even simpler than offline applications 62
ING have launched a ""paperless"" account opening 63
Mobile banking will rise eventually 63
Mobile phone banking has recently been introduced in Australia 63
Mobile phone banking is forecast to reach 600 million customers globally by 2011 64
Mobile banking will follow the same trajectory as online banking 64
New and prospective customers are mainly interested in basic mobile banking services 64
Security concerns must be targeted head-on 65
Both real and perceived security must be improved 65
New security solutions may rewrite the rules again 66
APPENDIX 67
Supplementary data 67
Methodology 76
Further reading 76
Ask the analyst 76
Datamonitor consulting 76
Disclaimer 76
[Inhaltsverzeichnis ausblenden]

Table 1: Security efforts vary among Australian online banking providers, 2008 52
Table 2: Pros and cons of different 2FA solutions 54
Table 3: Selected features of major Australian online banking websites 59
Table 4: NAB is the highest rated online bank in Australia, 2008 60
Table 5: Australian internet subscriptions and usage over time, 2001-07 67
Table 6: Internet users per 100 inhabitants for selected Asia Pacific countries, 2007 67
Table 7: E-readiness scores of selected countries, 2006-07 68
Table 8: Sources of information for Australian mortgagors, 2007 68
Table 9: How Australian consumers have arranged different products, 2007 69
Table 10: Australian attitudes towards arranging financial products online, 2007 69
Table 11: Demographics of customers who arrange online, 2007 70
Table 12: Proportion of Australians that arranged credit card online by age group, 2007 70
Table 13: Account behavior of online Australian savings account holders, 2007 71
Table 14: Card behavior of Australian cardholders who arrange online, 2007 71
Table 15: Whether credit card was arranged online or not by card tenure, 2007 72
Table 16: Account behavior of online Australian savings account holders, 2007 72
Table 17: Unisys internet security index for Australia, June 2006-May 2008 72
Table 18: Australian attitudes towards arranging financial products online, 2007 73
Table 19: Australian attitudes towards arranging financial products online, 2007 73
Table 20: Australian attitudes towards arranging financial products online, 2007 74
Table 21: Australian attitudes towards internet-based companies, 2007 74
Table 22: How personal information was obtained for identity theft in the United States, 2008 74
Table 23: Fraud reporting for different kinds of fraud, 2008 75
Table 24: PC Authority ratings of online banking providers, 2008 75
Table 25: Satisfaction with different aspects of banking, 2007 75
Table 26: Online savings account holders satisfaction ratings, 2007 76
Figure 1: Broadband penetration has grown strongly in Australia since 2001, 2001-07 2
Figure 2: Commitment, complexity and commodity govern online adoption rates of a financial product 3
Figure 3: More people would like to arrange products online, 2007 4
Figure 4: There are three phases of security for online financial products 7
Figure 5: Broadband penetration has grown strongly in Australia since 2001, 2001-07 14
Figure 6: There are several Asia Pacific countries with higher internet usage than Australia, 2007 15
Figure 7: Australia ranked ninth in terms of e-readiness, 2007 16
Figure 8: The internet is the fourth most common source of information for mortgagors, 2007 18
Figure 9: There are three tiers of internet functionality for online financial services consumers 19
Figure 10: Credit cards and savings accounts are frequently arranged online, 2007 20
Figure 11: Commitment, complexity and commodity govern online adoption rates of a financial product 21
Figure 12: More people would like to arrange products online, 2007 23
Figure 13: Online customers are younger, better educated and have higher income, 2007 24
Figure 14: Higher age group makes online arranging of credit cards less likely, 2007 25
Figure 15: Savings account holders who arranged online have higher household incomes, 2007 26
Figure 16: Online-only savings account holders are heavier users of their account, 2007 27
Figure 17: Cardholders who arrange online are more active customers, 2007 28
Figure 18: Cardholders with a newly acquired card are more likely to have applied online, 2007 29
Figure 19: Online-only savings account holders are more likely to switch provider, 2007 30
Figure 20: Internet concerns have remained relatively stable over the last years, June 2006-May 2008 31
Figure 21: Many Australians would never consider arranging financial products via the internet, 2007 32
Figure 22: Some Australians would like to arrange all financial products online, 2007 33
Figure 23: Older generations are more skeptical toward the internet, 2007 34
Figure 24: Many Australians would never consider internet-based companies for financial products, 2007 35
Figure 25: Most identity theft is committed through traditional methods, 2008 46
Figure 26: Many victims of fraud do not report fraud and do not change their subsequent behavior, 2008 47
Figure 27: There are three phases of security for online financial products 50
Figure 28: Internet banking is appreciated by Australian consumers, 2007 57
Figure 29: BankWest has the highest proportion of very satisfied online savings account holders, 2007 61
Figure 30: Online financial services providers must improve both real and perceived security 65
[Tabellenverzeichnis ausblenden]