Preference of traditional channels of service provision over e-banking In terms of service distribution channel, brick banks still have competitive edge over click banks as consumers still prefer to conduct banking transaction with human contact at bank branches or sub-branches. E-banking is not yet well-accepted by consumers on account of: •  uncertainty surrounding accuracy of the services;  •  lack of transaction evidence that might be useful in case of dispute settlement; and  •  lack of knowledge among some retail customers. The use of automated teller machines is quite well-spread while the use of phone banking and Internet banking is still limited to a small fraction of customers. According to the survey, high-income retail customers tend to make use of phone banking and Internet banking more often than do low income customers. Usage of phone banking and Internet banking by corporate customers is still low, though  2  BIS Review 22/2004  large and medium corporate tend to use phone banking and Internet banking more often than do small corporate. Financial service needs expected in the next few years Due to the current low return on savings with commercial banks, both individual and corporate consumers revealed preference towards alternative saving instruments such as saving bonds and government bonds. As for financing, the needs expected by individual customers are those for the purposes of working capital, residential, education and business expansion, while those of corporate customers remain financing for long-term investment for business expansion and short-term working capital requirements.

Mindful of the importance of consumer protection, the Bank of Thailand already issued a regulation requiring financial institutions to disclose information, especially on effective interest rate and fee charged, financial position and operating results, so that customers can make well-informed decisions. Additionally, financial institutions will be required to have in place clear procedures for handling customer complaints. On a system-wide scale, the authorities will introduce a deposit insurance scheme in place of the existing blanket guarantee to ensure protection of retail consumers. BIS Review 22/2004  3  3. Supervisory concerns and challenges  I have already touched on regulators’ concerns that directly affect consumer benefits. Now allow me to go through the concerns and challenges of retail banking from a wider perspective. First, we are concerned for those considering jumping onto the booming retail credit bandwagon without having sufficient skills and resources to capitalize on the key drivers of this market segment. Second, the risks inherent in credit extension, which have to be adequately monitored and managed. Third, the one that directly concerns us, regulators, - how to achieve a balanced objective of financial institution stability and fostering development, competition and level playing field. Drivers of retail banking business The gaps of financial services provided by financial institutions in Thailand reflect untapped opportunities in the retail sector awaiting those having the capability to fill in these gaps. The opportunities are open to banks with the right business models for the identified niche markets.