Australia and New Zealand Banking Group (ANZ) and Oversea-Chinese Banking Corporation (OCBC) have pulled the plug on a joint venture to develop a Web-only bank in Asia.
Executives at the banks say the decision follows six months of detailed work on the stand-alone business model which indicated the financial returns were "not sufficiently compelling" given the market entry costs and the softer economic environment. It is the latest in a series of high-profile bank withdrawals from Internet-only business ventures.
The purported pan-Asian Internet bank was to target the 40 million ‘wired affluent’ consumers that are expected in Asia by 2005. The business model had been developed after extensive study of existing pure Internet banks in North America and the United Kingdom and was expected to be earnings positive by 2002.
Alex Lau, chairman of the joint venture, and vice-chairman and chief executive officer of OCBC Bank, now says: "Entry costs in key Asian markets and the up-front investment in technology associated with a stand-alone entity are significant when assessed against the required returns.
"Although it is disappointing for everyone not to proceed, we are pleased to have reached an early understanding on the project’s viability before sizeable expenditures were incurred."
Together, the two banks had planned to invest a total of US$100 million (S$170 million) over three years in the venture, including investments in strategic partner companies and start up development costs.
ANZ group managing director of strategy and international, Elmer Funke Kupper, says: "Both banks will benefit from the market and technology research undertaken, as well as the technical skills and knowledge acquired during the planning phase."