Report on the internet economy – In focus: The financial sector (Summary for the press) 18 thousand new online banking customers in three months

2003. 11. 19.

In association with Westel Telecommunications Co. and Sun Microsystems Hungary, GKIeNET Internet Research and Consulting Inc. conducts quarterly surveys on corporate internet usage and the development of the electronic economy in Hungary. The present report outlines the position of the financial sector in the internet economy.
I. Summary

• In the second quarter of 2003 the GKI-Westel e-Finance Index, an indicator reflecting the expectations of financial institutions, dropped to 16.7, but the decline is relatively insignificant.
• On June 30, 2003, credit institutions in Hungary had 282 thousand individual customers and 49 thousand corporate clients.
• The number of customers with online banking agreements increased by 55% in the household segment and by 90% in the corporate segment over the past year.
• Both corporations and households will continue to use online banking services to initiate transfers and check account information.
• The online sales of insurance companies remained insignificant in the first half of 2003, and no breakthrough is expected for the rest of the year.

II. Survey findings

The internet usage index of financial service providers is the mathematical average of the above subindexes. In the second quarter of 2003 the GKIeNET-Westel e-Finance Index was at 16.7, reflecting a decline from the previous quarter. The index, which represents  the anticipations of financial institutions regarding web applications, has been fluctuating in the lowest quartile of the positive range, reflecting modest expectations, which, compared with other sectors, project the most upbeat outlook.

GKIeNET-Westel e-Finance Index

On a scale between -100 and +100

Online banking customers

At June 30, 2003, banks offering checking account services had approximately 282 thousand individual internet banking customers, reflecting a 6.7% increase over the period of three months and a 55% rise over the past twelve months. At the same time, online banking customers in the corporate segment totaled 49 thousand, up 20% from the previous quarter and 90% year-on-year.

Number and percentage of online individual banking customers at banks providing internet banking services*

* Since March 31, 2003, including savings cooperatives offering online banking services

In the category of banks providing online services,  internet banking customers accounted for approximately 7.5% of all customers on average in the household segment and for some 12% in the corporate segment on June 30, 2003.

Online banking transactions

Banks predict that transfers account inquiries will continue to be the fastest growing services in the household and corporate segments alike. Respondents also expect increasing demand for online securities transactions (other than equities) in the household segment.

Expected changes in the rate of transactions initiated online over the next twelve months, as predicted by banks

– balances on a scale of , Q2 2003 –

Online sales of insurance companies

In the first half of 2003, mandatory liability insurance for drivers  was the only category in which premium revenues from online sales accounted for more than 1% of total sales at one insurance company. Premium revenues from all other online products remained at a marginal level, below 1%.

Insurance companies expect the most substantial growth in the online sales of mandatory liability insurance policies as well as home insurance and travel insurance products over the next twelve months.

A somewhat less substantial but still significant growth potential is attributed to collision insurance, while companies expect limited success in the online sales of casco indemnity insurance and health insurance.

The online sales of life insurance products are not expected until later.

Expected growth in the online sales of insurance products over the next twelve months
– balances on a scale of , Q2 2003 –

III. About the research methodology

The survey was carried out in August 2003 by means of questionnaires, covering all credit institutions, online savings cooperatives and insurance companies. Banks were represented at 69%  in terms of total assets, and  insurance companies were represented at 45% in terms of premium revenues.

If you have any questions, please contact GKIeNET at 373-0779.  10-18-2003