A regulatory framework is clearly needed only if the present situation, or the outlook, requires it. E-banking is a rather generic term and we need to be clear what we are talking about. In the HKMA, we tend to separate e-banking into two streams: electronic money products, mainly in the form of stored value cards, and electronic delivery channel products. As regards electronic money, I think that it is fair to say that the progress so far has been somewhat disappointing as far as banks are concerned. There are two main stored value card schemes operated by banks, Mondex and Visa Cash. Both have been in the market place for some time now. However, it seems that these products have not yet gained wide acceptance. This is not unique to Hong Kong. In fact, the reaction to these products around the world has been lukewarm so far. It appears that the product is, for the present time at least, ahead of customer demand. This may change when the electronic purse function provided by a stored value card is integrated into a chip card and combined with credit and debit card functions. The other route to success is to link the electronic purse function more specifically to a particular type of purchase which people have to make in their everyday lives. That has been demonstrated in Hong Kong by the success of the Octopus card. As at end-September, 5.6 million Octopus cards have been issued, recording 3.8 million transactions per day.
The second challenge is maintaining high standards of credit underwriting and risk management in the face of more intense competition. It may be tempting for service  2  BIS Review 64/2008  providers to lower underwriting standards in order to compete for market share in the face of greater competitive pressures. In view of the severe consequences of the current global market turmoil that originated from poor underwriting standards in the US subprime market; this temptation should be resisted at all costs. Let me assure you that the Bank of Thailand, as prudential supervisor of banks, will remain vigilant to ensure that similar problems will not happen here. The third challenge is managing security risks associated with the use of new technology. Advances in IT and communications technology have enabled banks to provide faster, cheaper, and safer electronic banking services to an increasingly larger group of customers. However, proliferation of internet banking, mobile banking, and e-payment also increases the risks of IT fraud, network security breach, and identity theft, etc. If these risks are not properly managed, they could have severe financial and reputational consequences for the banks. In this regard, I urge banks to pay close attention to the best-practice guidance on IT and e-banking security risk management that we issued some time ago.