Fsharp takes offshore Internet banking to a new dimension

Telecomworldwire, July 30, 1999

TELECOMWORLDWIRE-(C) 1994-9 M2 COMMUNICATIONS LTD

Fsharp, the Internet offshore banking operation of the Bank of Ireland, is set to launch its new offshore expatriate banking service on 4 September.

The service is presently operating in a 'pilot test' with live customers in readiness for the full commercial launch. Being an Internet-based bank the bank shall never close, with call centre staff being able to resolve all and any problems being experienced.

However the service will not be available to everyone - British and Irish residents are not 'welcomed' as customers because of internal company regulations and American customers will not be accepted due to the lack of a federal banking licence. The service shall also be restricted to English-speaking users with no plans afoot to introduce linguistic customisation or support.

Bank executives remain confident that despite these exclusions they will be able to tap a very large pool of business with a potential market size of 1.7m accounts with combined yearly deposits of GBP25bn. Tony O'Shea, general manager responsible for offshore banking at Bank of Ireland, said that the bank's target is to have up to 10,000 customers by the end of the first year and 50,000 customers by the end of the third year.

Research carried out for the bank by Mercer Management Consulting Group claims that 60% of English-speaking expatriates would prefer to use the Internet for their banking needs over any other service.

Fsharp officials did not seem unduly worried about the typically high-levels of churn on traditional expatriate accounts. Industry sources suggest the degree of churn could be as much as 20-25% per year, although much of this can be cushioned by the fact that many expatriates operate multiple accounts.

O'Shea said that the expatriate community is an important market to operate within and that most expatriates perceive that offshore banks are somewhat of an unnecessary evil because they do not really service the expatriate's needs. With the advanced services on offer by Fsharp, such as an instant valuation of an account holder's complete holding, in any of 24 currencies, this will turn the tide of opinion on the real effectiveness and ease- of-use for offshore banks.

Services promised by Fsharp include account tracking, accepting deposits, standing order creation, offshore fund management, foreign exchange, electronic payments, credit and debit cards and tax advice. Some of the services are being offered by partners, such as fund management by Mercury Asset Management and tax advice by KPMG.

Other providers and partners may be introduced under the Fsharp 'family name' after commercial launch to meet customers needs.

It is understood that there are no 'exclusive' partnership arrangements, leaving the field open for other firms to provide complementary, yet, competing services to customers. Fidelity Investments and the Bank of Ireland's own asset management unit are viewed as possible future partners for fund management services.

Services promised by Fsharp include account tracking, accepting deposits, standing order creation, offshore fund management, foreign exchange, electronic payments, credit and debit cards and tax advice. Some of the services are being offered by partners, such as fund management by Mercury Asset Management and tax advice by KPMG.

Other providers and partners may be introduced under the Fsharp 'family' after commercial launch to meet customers needs. It is understood that there are no 'exclusive' partnership arrangements, leaving the field open for other firms to provide complementary, yet, competing services to customers. Fidelity Investments and the Bank of Ireland's own asset management unit are viewed as possible future partners for fund management services.

Fsharp is operating as a 'standalone' unit from Bank of Ireland and has its own banking licence and regulatory requirements. All of Fsharp's activities, however, are being 'underwritten' by the Bank of Ireland. Fsharp has been regulated and approved as a domestic bank by the Isle of Man Financial Services Commission and it is a participant member of the FSC's compensation scheme.

Company officials said that they worked with the FSC and Ireland's Central Bank to fully explain the basis behind their bank and that this extra involvement may go some way towards determining the future regulations of electronic commerce and electronic banking services.

Launching a new bank effectively from scratch is a huge undertaking that requires a high degree of capital. While declining to state the level of investment being made into Fsharp, O'Shea suggested that if all goes according to plan, the venture could be 'in the black' within a couple of years. Clodagh Hughes, head of marketing for offshore banking at Bank of Ireland, declined to be drawn on the exact budget but some observers suggested that the figure could be between GBP250,000 and GBP500,000 in a mixture of online and offline (traditional) medias.

Resilience is also key for Fsharp as unlike other banks it does not have a huge 'offline' infrastructure it can fall back on when the technology stops working. Hardware has been provided by Sun Microsystems with an Oracle 8 relational database being used for the custom-written applications. Every six minutes a 'hot copy' of the data is sent to an off-site facility. Twin ISP hosting is used with diverse routing as standard. However there is no VSAT backup to provide for the unlikely event of all communications links being lost to the Isle of Man.