Security ranks high on the list of concerns among banks offering online banking services, followed by building a large enough online customer base to justify the huge investments they must make to facilitate these new virtual services.

"It is vital that banks build the volume to ensure they recoup their investment," Derek Wong (right), managing director, Dah Sing Bank, told the audience at the Chamber's Oct. 13 roundtable luncheon.

"We will probably be able to migrate some customers from using branches to going online. But even if we can migrate some customers from branches, it won't bring us much savings unless a large percentage of our customers use our Internet banking services," he said.

Compounding this problem is the issue of security, which requires large, regular investments to maintain, and at the same time banks need to keep the cost of online services low to encourage the migration and also attract new customers, which are often price sensitive.

But Mr Wong said he feels there is more to online banking than just the technology or it being a new channel for banks to promote services.

"It is a new lifestyle and the day will come when those people now in secondary school probably won't want to use any banks as we know them today," he said. "So we have to think beyond financial services. We have to think of adding value to our current services."

M Ramaswami (right), vice president, e-commerce director, Asia Pacific Region, Citibank, also speaking at the luncheon, said the Internet is transforming the way banks do business by giving greater value services to customers.

Soon, people will be able to e-mail money at the click of a mouse around the world. The receiver will also be able to spend the money online instantly. The issue with emailing money is when you want to take it out of the virtual world and use it as physical money. Users will still have to wait one to two days to clear the email, as a cheque is cleared today.

Another service that will bring direct cost savings to customers will be bill settlement. Three to four years ago, many companies used to pay their bills through cheques. By transferring this chore to the Internet the cost of paying bills drops from about $8 per cheque to about 20 cents, he said.

"So essentially, we've taken over the role of mailman, the stamp licker and so on," Mr Ramaswami said.

But banks are also concerned that just as they will render redundant many traditional services, they themselves may be a causality of the Internet.

"One of the worries of banks is the large number of new virtual entries, which are not traditional banks, but they offer a whole set of extremely attractive financial services," he said.

The trust traditional banks' enjoy gives them an advantage, at least for now, over virtual banks. Also, no one is sure how long these new financial service companies will be operating, but they are forcing banks to rethink their services.

Bloomberg's Robert Stewart (right), the third speaker at the luncheon, echoed a question Hong Kong Monetary Authority Deputy Chief Executive David Carse raised. What would happen if 25 per cent of customers online suddenly decided they wanted to move their funds?

"Instead of the traditional run ... you have the virtual run," Mr Stewart said. "How do you deal with that kind of thing?"

He also pointed out that while banks may claim to have an impressive numbers of registered users, the number of people actually using a bank's online services could be substantially lower.

"People will have a lot more mobility. Initially they may take one online account to test the waters, but why not take 10? There is no difference," he said.

Customers having multiple accounts will increasingly make it difficult for banks to build and measure their critical mass to make their investments in online banking worthwhile, Mr Stewart said.