Overview:

Introduction

The Singaporean online banking market is among the most advanced in the world, with a high proportion of the population using the online channel. However, there remains several issues for online banking providers. Singaporeans show a high level of security concern and are hesitant to apply for financial products online.

Scope

*Includes a comprehensive overview of the Singaporean online banking market.
*Provides online banking customer numbers, forecasts and market share of top competitors.
*Discusses security issues and two-factor authentication.
*Based on a global consumer survey covering 9,000 respondents.

Highlights

Consumer trepidation about buying more complex financial products online exists in all countries, not just Singapore, but there is data to suggest that the aversion toward online applications is stronger in Singapore than in comparable countries, especially when it comes to loan products.

Security concerns still constitute a potent barrier for online banking customers, and with new threats as well as solutions for two-factor authentication emerging, providers need to constantly reassess their security solutions and communications with users.

The number of online banking customers is forecasted to increase over the next three years, although growth in the market is gradually slowing down as it becomes more saturated. As an example, customer numbers grew by 49% between 2004 and 2005, but grew by less than 6% between 2009 and 2010.

Reasons to Purchase

*Improve your strategic position using Datamonitor's in-depth analysis of the Singaporean online banking market.
*Understand the unique challenges the online banking market is facing, and benefit from forecasts of future product trends.
*Plan for the future by learning from one of the most innovative financial markets in the world.

Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Consolidating online adoption and usage 2
Late adopters, especially the older generations, should be aided through the adoption process 2
Older customers are more likely to be late adopters 2
Older online banking customers are more active and advanced than their younger counterparts 2
There are a number of different strategies for reaching late adopters 2
Providers need to expand the tasks performed online and improve cross-selling 3
Consumers should be encouraged to climb the three tiers of online usage 3
Singaporeans hesitate to take the step from researching to applying for products 3
The emergence of price comparison sites in Singapore may spur online applications 3
Selling financial products over the internet in Singapore will become more important 4
Security and online banking 4
Security concerns and lacking interactivity are the biggest hurdles for non-adopters of online banking 4
Concerns over security is the most common reason for Singaporeans not using online banking 4
A maturing online banking market will see abating levels of security concerns 5
Two-factor authentication has been a success in Singapore but is facing rising threats 5
Hardware tokens are falling out of favor as compared to other two-factor authentication solutions 5
SMS OTP 2FA solutions are slightly less vulnerable to man-in-the-middle type attacks 5
3FA is being considered by Australian banks 6
PassWindow is a new alternative form of 2FA solution with promise 6
Novel ways of easing consumer security concerns have been introduced in Singapore 6
Both real and perceived security must be improved 6
DBS has introduced an online banking guarantee 6
Customer numbers, market shares and forecasts 7
The number of online banking customers in Singapore will grow to almost four million by 2013 7
There has recently been a renewed interest in the mobile channel 8
DBS has a dominant market share of Singaporean online banking customers 8
Table of Contents 9
Table of figures 10
Table of tables 11
Consolidating Online Adoption and Usage 12
Late adopters should be aided through the adoption process 12
Only late adopters remain to be converted to online banking in Singapore 12
Older customers are more likely to be late adopters 14
Lack of interactivity rather than security concerns discourage older consumers from online banking 15
Lack of computer access and literacy are potent hurdles for older Singaporeans 16
Older online banking customers are more active and advanced than their younger counterparts 18
There are a number of different strategies for reaching late adopters 19
Late adopter characteristics have implications for targeting strategies 20
Adoption curves may shift as innovations come and mature quicker 21
Providers need to expand the tasks performed online and improve cross-selling 23
Consumers should be encouraged to climb the three tiers of online usage 23
The level of commitment of a product is inversely related to its suitability for the online channel 26
Complexity makes online distribution less attractive 26
Higher commodity level facilitates the online channel 27
Singaporeans hesitate to take the step from researching to applying for products 27
Interaction and safety concerns are common reasons in Singapore for not borrowing online 29
The emergence of price comparison sites in Singapore may spur online applications 31
Selling financial products over the internet in Singapore will become more important 34
Security and Online Banking 37
Singaporeans' high levels of security concern impact on online adoption and usage 37
Singaporeans have significant security concerns 37
Concern over security is the most common reason for Singaporeans not using online banking 38
A maturing online banking market will see abating levels of security concerns 39
Two-factor authentication has been a success in Singapore but is facing rising threats 40
Online security may be increased with two-factor authentication 40
Two-factor authentication was mandated in 2005 by MAS and was welcomed by Singaporean consumers 41
Banks in Singapore have employed different strategies for 2FA 41
Properly designed SMS OTP 2FA solutions can offer better protection against fraud 43
Hardware tokens are falling out of favor as compared to other 2FA solutions 43
SMS OTP 2FA solutions are slightly less vulnerable to man-in-the-middle type attacks 43
SMS OTPs eliminate the need for a separate device and are preferred by consumers given a choice 45
Mobile phone software eliminates the need for network access 45
Australian bank NAB is considering introducing voice-based 3FA for online banking 46
PassWindow is a new alternative form of 2FA solution with promise 46
Novel ways of easing consumer security concerns have been introduced in Singapore 48
Both real and perceived security must be improved 48
DBS has introduced an online banking guarantee 49
There are a number of restrictions to the DBS guarantee 49
The DBS guarantee is an astute initiative that increases both real and perceived security 50
Customer Numbers, Market Shares and Forecasts 51
The number of online banking customers in Singapore will grow to almost four million by 2013 51
Growth in online customer numbers is slowing as the market becomes more saturated 51
Mobile banking customer numbers are set to increase 52
There has recently been a renewed interest in the mobile channel 52
More advanced mobile phone technology drives growth in mobile banking 53
DBS has a dominant market share of Singaporean online banking customers 53
There are six major online banking sites in Singapore 53
Many customers of Singaporean online banking connect from other countries 54
DBS has a dominant share of online banking customers 55
APPENDIX 58
Data tables 58
Methodology 65
Further reading 65
Ask the analyst 65
Datamonitor consulting 66
Disclaimer 66

List of Tables
Table 1: Later adopters vary from earlier adopters in many ways 20
Table 2: Singaporean banks use different 2FA options 42
Table 3: Advantages and disadvantages of different 2FA solutions 43
Table 4: Singaporean online banking customer numbers and forecasts 52
Table 5: Singaporean online banking sites and traffic rankings, April 2010 54
Table 6: Top recent non-Singaporean locations for visitors of Singaporean online banking sites, April 2010 55
Table 7: Number of customers regarding bank as main online banking institution 56
Table 8: Broadband household penetration in Singapore 58
Table 9: Proportion who have bought financial services online, by country and age group 58
Table 10: Reasons for not banking online, by age group 59
Table 11: Computer access and online banking in Singapore 59
Table 12: Proportion of online banking users that check their balance daily by age group 59
Table 13: Tasks performed online by online banking customers by age group 60
Table 14: Online purchases in Singapore by product 60
Table 15: Online research and applications for loans by country 60
Table 16: Proportion that agrees or strongly agrees with attitude statements by country 61
Table 17: Proportion that agrees or strongly agrees with attitude statements by country 61
Table 18: Proportion that agrees or strongly agrees with attitude statements by country 61
Table 19: Financial product comparison site awareness and usage by country 62
Table 20: Financial product comparison site purchases by country 62
Table 21: Financial product comparison site trust by country 62
Table 22: Online purchases by customer group 63
Table 23: Proportion that agrees or strongly agrees with attitude statements by country 63
Table 24: Reasons for Singaporeans not using online banking 63
Table 25: Reasons for not using online banking by country 64
Table 26: Singaporean online banking customers 64
Table 27: Online banking customer numbers and market shares by bank in Singapore in 2010 65

List of Figures
Figure 1: Singaporean online banking customer numbers are forecasted to reach almost four million by 2013 7
Figure 2: Rapid broadband penetration has provided a boon for online banking adoption 12
Figure 3: Singaporean online banking providers now have to reach late adopters 13
Figure 4: Older Singaporeans are less likely to have bought financial services online 14
Figure 5: Lack of interactivity disproportionately discourages older customers from online banking 15
Figure 6: Lack of computer access and literacy are hurdles for adoption of online banking by older Singaporeans 17
Figure 7: Older online banking customers are more likely to check their balance daily 18
Figure 8: Older online banking customers are more likely to have performed a range of tasks 19
Figure 9: Innovations come more frequently and reach saturation quicker 22
Figure 10: There are three tiers of online usage 24
Figure 11: More than half of Singaporean credit cardholders have bought a card online 25
Figure 12: Commitment, complexity and commodity govern online adoption rates of a financial product 26
Figure 13: Singaporeans research loans online but are less likely to apply online 28
Figure 14: Singaporean consumers are averse to applying for loans online 29
Figure 15: Lack of face-to-face interaction deters Singaporeans from online borrowing 30
Figure 16: Security concerns are higher in Singapore regarding online loan applications 31
Figure 17: Financial product price comparison site usage and awareness is relatively low in Singapore 32
Figure 18: Singaporeans have a relatively low level of trust in online price comparison sites 33
Figure 19: Few Singaporeans have purchased financial products through price comparison sites 34
Figure 20: Consumers who have bought credit cards online are much more likely to have bought other financial products online 35
Figure 21: Singaporeans are especially likely to have concerns over the security of online banking 37
Figure 22: Security concern is the most common reason for Singaporeans not using online banking 38
Figure 23: Countries differ in the importance of interactivity and security concerns 40
Figure 24: SMS OTP 2FA solutions can offer extra protection against man-in-the-middle attacks 44
Figure 25: PassWindow uses pattern recognition to generate OTPs 47
Figure 26: Both real and perceived security must be developed 49
Figure 27: Singaporean online banking customer numbers are forecasted to reach almost four million by 2013 51
Figure 28: DBS has a dominant market share of online banking customers in Singapore, 2010 56