Aspidex targets e-banking in Middle East

Aspidex targets its ASP e-banking offering at those Middle East banks that are yet to get online.

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By  Matthew Southwell Published  December 11, 2001

|~||~||~|While the region's larger financial institutions forge ahead with e-banking initiatives a number of the Middle East's small-to-medium sized banks are struggling to create an online presence. As a result, only 18 of the region's top 100 banks have online transactional capabilities.

Despite the disappointing commitment to Internet banking thus far, there appears to be a high level of demand from the region's users. Recent research from the Institute of Banking Studies in Kuwait suggests that almost 20% of customers are willing to move to another financial institution if their current bank fails to offer online services.

"Banks must introduce a mix of services," says Jasem Safar, head of automation services at Al Ahli Bank in Kuwait. "Banks must re-engineer their systems and staff [to] be ready for e-banking."

However, while the larger banks have both the resources, capital and customer bases to make the move to e-banking, a number of the smaller institutions do not. Aspidex Technologies is aiming to step into this gap as it touts its application service provider (ASP) role for e-banking applications throughout the region.

"With the growing use of the Internet as an essential business tool and with increasing focus on deregulation policies, the implementation of reliable e-banking solutions is becoming a top priority for the financial industry throughout the region," says Izzat Dajani, CEO, Aspidex Technologies.

"To retain competitive advantage, banks and financial institutions in the region need Internet banking solutions that not only automate internal work processes and sustain long-term relationships with their clients, but also enable them to grow their customer base with a minimal total cost of ownership," he adds.

The Aspidex offering is based on solutions provided by relationship and equity partner, Corillian International. Corillian's Voyager ASP Internet banking platform delivers the e-banking component, as well as the middleware layer between a bank’s back-end and the actual e-banking platform.

Dajani explains that in addition to being able to offer e-banking services to their customer base, banks that take the ASP route will gain other competitive advantages, such as the ability to focus on their core business and the avoidance of upgrade costs.

The cost of transacting with a customer will also come down, he adds, as US-research shows that an over-the-desk transaction in a branch costs $1.07 whereas its online equivalent comes in at just $0.01.

While certainly offering a way into the online services market for the region's smaller banks, the ASP delivery model raises important questions, especially over data protection, reliability and whether the region's financial institutions have the correct mindset with which to embrace it.
Ibrahim Metwally, head of marketing, Aspidex Technologies, explains that concerns over data security are redundant when it comes to the Aspidex offering, as a bank's data will remain within its own back-end.

Those involved with the Gulf's banking and ASP communities concur. R. Seetharaman, CEO, Cashswitch, explains that "there is no compromise at the database or security level." Duncan Watson, CEO of ASP Gulf, says that "security is a critical issue but it is also one of the core competencies of any ASP."

Both parties explain that any associated risk has to be judged against the potential benefits of the ASP delivery model, especially if the bank can get the buy in of senior management and staff alike.

Seetharaman explains that with the setting up of an e-banking operation typically costing a minimum of $750,000, an ASP’s economies of scale become extremely attractive. Watson agrees, although he does point out that Aspidex could be limited in its market appeal and it needs a significant market base before economies of scale can be achieved.

"If you go to the large banks then they have already invested in this sort of thing. However, there are a lot of small-and-mid size banks in the region so there is a market. However, they [Aspidex] have to offer services that don't make sense for the banks to do individually," he says.

The litmus test is undoubtedly at the end-user level and while Aspidex claims to be in the final stages of negotiation with a number of the region's banks, none were made available for comment. However, Mussallam Al Shukairy, assistant general manager, trade finance & overseas credit at Bank Muscat, explains that, for smaller institutions at least, the ASP model is something that should be considered due to its inherent benefits.

"We always try to look for opportunity and if we felt that something like outsourcing would be much more effective [in terms of] cost and the elimination of routine staff then we would consider it," he says.||**||

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