IT Implementation

The survey requested for information on the state of IT infrastructure, IT implementation in general, and IT implementation by banks. The first significant finding was presented at the early stage of the research project. This is related to the level of IT implementation across the SEACEN member countries. In terms of communication infrastructure, various networks (phone, satellite, fiber optic) have been developed in all countries. Although they are not very widespread in some countries, the use of cellular phones and the internet are common in the region. The widespread use of the internet and cellular phones is a separate issue in itself. For countries with many islands like Fiji, Indonesia and the Philippines, establishing standard communication infrastructures for the entire region of the country is a challenge in itself. With the exception of Brunei Darussalam, a national payment system exists in all countries in the region. However, Cambodia, Myanmar and Nepal still rely on a manual payment system, using tickets representing banking transactions. From the countries in observation, the ASEAN big five (Indonesia, Malaysia, the Philippines, Singapore and Thailand) and the Republic of China (Taiwan) – the latter from here onward will be mentioned as Taiwan – are the countries with more advanced infrastructures. These countries are equipped with national payment systems – including the real time gross settlement (RTGS) – and national securities settlement systems. The level of IT implementation in the SEACEN member countries is then subject to the availability of technology infrastructure, the support of the payment system, and demand-driven financial service development. The latter also depends on how widespread the use of high technology gadgets is in a particular country. Singapore – already regarded as one of the most IT literate society in the region – certainly has a high level of IT implementation, comparable to international standards, while the Central Bank of Myanmar still disallows the usage of IT in their banking system after many cases of illegal financial operations by general service enterprises in 2003, and has since then not permitted banks to implement IT to support their operations up to the conclusion of this project. Table 3.1 provides the survey result on the IT infrastructure of the countries under observation.

The survey also reveals the state of e-banking implementation in SEACEN member countries. With the exception of Myanmar, all survey respondents participating in the research indicated that some to all of the e-banking products in questions exist in their countries. The products in questions include credit card, debit card, ATM, Electronic Fund Transfer (EFT), EFT at Point of Sale, Remittance Service, Phone Banking, Mobile/SMS Banking, Internet Banking, and Pre-paid card with the Credit card, Debit card, ATM and EFT being the most popular products. In the case of ATM services, banks in Brunei and Cambodia still maintain

provision of individual bank ATM services. Internet banking is surprisingly more available than phone banking and mobile/SMS banking. Cambodia, for example, has internet banking service, but does not have mobile/SMS and phone banking services. In Myanmar, the absence of an EFT system in the banking system is covered by remittance services from a domestic company. Myanmar also relies on the SWIFT (Society Worldwide Inter-bank Financial Telecommunication) system provided by the Central Bank of Myanmar and state-owned banks to carry out international payment and settlement transactions. Stating not to have widespread use of mobile phones outside the two main islands, Fiji does not have mobile/SMS banking service. However, this could also be the result of the convenience of internet banking that already provides the means for doing remote transactions. Although phone, mobile/SMS or internet banking are implemented, interbank transaction services are not provided in Brunei, Cambodia, Mongolia, Sri Lanka and Vietnam. Malaysia also does not provide the interbank transaction feature in its mobile/ SMS banking. All in all, the survey results show that SEACEN countries do not shy away from e-banking products. Given the population of approximately 575 million people5_{, the SEACEN region is a potential market for banks to implement} e-banking to increase their fee-based income. Table 3.2 provides the survey results of the e-banking products implemented in SEACEN countries.

19 Table 3.1 IT Infrastructur e Survey Notes: Y

refers to the reply “Y

es” in the question: “Are the following IT

infrastructure installed in the country?”

If a country reply “Y

es” to both No. 5 and 6, it means the national payment system is run by both government agency / central bank and private

companies. BRU: Brunei Darussalam, CAM: Cambodia, FIJ: Fiji, INA: Indonesia, MAL: Malaysia, MON: Mongolia, MY

A: Myanmar

, NEP: Nepal, PHI:

the Philippines, SIN: Singapore, SRI: Sri Lanka,

TAI: Republic of China (T

aiwan), THA: Thailand, VIE: V ietnam.

Table 3.2

E-Banking Pr

oducts

Y

refers to the reply “Y

es” to the question: “Are the following IT

-related products implemented in the country?”.

A: Myanmar

, NEP: Nepal, PHI:

TAI: Republic of China (T

aiwan), THA: Thailand, VIE: V ietnam.

21

The Republic of China (Taiwan) country paper in this research project provides an interesting way of categorising the IT implementation by banks. They are: Category A – Banking Business Applications; Category B – E-banking systems; and Category C – Management Information System. Category B is self explanatory as it was just discussed in the previous paragraph. Category A refers to computerised system for the banking business, which includes all the applications for deposit, loan, foreign exchange, treasury, trustee, credit cards, remittance, ATM, etc. However, the extent of this category is only for what affects the internal process in the bank. IT applications become part of category B when they are built to allow access through electronic channels by outside parties. When the applications are built to support the decision making process within the bank management, they fall into category C. Many banks implement IT only for the purpose of automation and provision of better services. Modern banks would manage the information that they have in hand to aid them in the research and development of products and services as well as in making informed decisions for the benefit of the bank. This is why decisions on IT implementation will generate a certain IT risk as part of the strategic risk. For this reason, the standards of IT implementation require IT decisions to be made by the top management.

In addition to the e-banking applications, with the exception of Cambodia and Myanmar, SEACEN member countries implement other applications to support banking business. Brunei, Fiji, Indonesia, Malaysia, Nepal, the Philippines, Singapore, Sri Lanka, Taiwan, and Thailand implement all the applications for core banking (general ledger, deposit, loan, and consumer information), treasury, remittance, trade finance, and corporate online service. Mongolia does not have corporate online services, while Vietnam only has the computerised core banking and remittance processes. This shows that there is a large potential for managing information to support the decision making process. If the information generated by the IT implementation in banks is used for the development of financial products and services, then this is where IT plays the first role discussed in the first Section. Table 3.3 provides the survey results on the banking application excluding e-banking.

Table 3.3

Banking

Applications Excluding E-Banking

Y

refers to the reply “Y

es” to the question: “Regarding IT

-related applications in addition to IT

-related products, are the following

A) reply “No” to all questions

A: Myanmar

, NEP: Nepal, PHI:

TAI: Republic of China (T

aiwan), THA: Thailand, VIE: V ietnam.

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