Banks bring brand to bear on e-commerce

SHOWWEI CHU, The Globe and Mail

2001-03-01 - Canada's biggest banks are charging into the market for e-commerce services, betting that their brand power can overcome consumers' persistent wariness of on-line transactions.

Analysts say the banks have an edge over pure-play dot-coms, but a new survey shows that the large financial institutions have a big job ahead of them, even among their most tech-friendly clients.

In an IDC Canada Ltd. study, 64 per cent of 408 Canadian households surveyed who currently bank on-line believed that e-payments were less secure than traditional paper methods such as cheques. The study was commissioned by CertaPay Inc., a Toronto-based software company that is working with three big banks to create an e-chequing system for consumers.

"Obviously the banks will have some work to do to mollify that fear," says Joe Greene, IDC Canada's vice-president of Internet solutions research.

They will get their chance soon when Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Nova Scotia begin offering electronic chequing for their on-line customers later this year.

E-chequing is expected to attract one million users and process $2.2 billion worth of payments in the first 12 months alone, says Harry Enchin, CertaPay's president.

In the same IDC survey, 55 per cent of participants said they saw the benefits of on-line banking because of the speed with which they can do financial transactions. As well, 65 per cent of current users of on-line banking indicated they were somewhat or very likely to adopt this kind of consumer-to-consumer payment system.

Some experts agree that it will be natural for current users of Web banking -- an estimated four million Canadians last year, according to IDC Canada -- to adopt e-cheques. "It just seems to be another logical extension of providing a full on-line package," says Peggy Cunningham, an associate professor at Queen's University in Kingston. "What they're trying to do is bundle a bunch of products and services together so that consumers can have the choice of interacting at their convenience with any channel they chose."

It's also much easier for banks to extend their brand to the Web because on-line and traditional banking services are closely related. On the contrary, it's more difficult for a company, such as clothing retailer Roots Canada, to extend its brand into Roots Air because it isn't associated with airlines in consumers' minds, Ms. Cunningham says.

But on-line chequing will be a harder sell for the banks' most valuable customers -- those aged 55 and over who also happen to control the majority of assets in this country -- mainly because they aren't comfortable in a virtual environment, Ms. Cunningham adds.

That demographic group has been slower to adopt on-line services because of their fear of losing control of their information and their assets, and that someone is capable of breaching the integrity of the electronic systems, she says.

A recent survey by ACNielsen Canada, which underscores consumer wariness, indicated that 45 per cent of all Canadian Web users were very concerned about making on-line credit card payments.

Banks are "going to have to work very hard at convincing the end users or the public that they're networks are in fact secure, and maybe even introduce policies like they've done with credit cards," IDC's Mr. Greene says.

The bankers agree, adding that they've always used the highest security standards both in the on-line and off-line worlds. "When you really look at what banking is, it's really based on the business of trust and integrity, and that's sort of what banking's all about," says Bob Grant, senior vice-president of e-banking at Scotiabank, which launched its on-line banking service in December 1997. Mr. Grant says the bank has more than one million on-line and telephone banking customers.

Even if security and privacy issues are resolved, it's still uncertain whether e-chequing will take off, some experts say. Its success will also depend on what the banks charge for the service. Many consumers were annoyed by the expense of e-banking when it was first offered, Ms. Cunningham says.

As well, consumers may not believe there's an advantage to e-chequing, and might not want their chequing accounts to be immediately debited, says Tom Vassos, a University of Toronto instructor specializing in Internet marketing and e-commerce strategies.